Two key lifelines for battered auto makers - growing sales in emerging markets and $25-billion (U.S.) in loan guarantees from the U.S. government - could be yanked from their grasp.
Sales in China and India are slowing and those key markets, plus Brazil and Russia, might not offset the collapses in North America and Europe, forecasting firm Global Insight said yesterday.
The U.S. government loan guarantees might not arrive in time to help the Detroit Three battle through the cash crisis and U.S. market slump, Citibank analyst Itay Michaeli said in a report on Ford Motor Co. and General Motors Corp.
Those separate analyses were made yesterday as Ford's Volvo Car Corp. unit underlined the despair in the auto industry by cutting 3,300 jobs worldwide.
"The unstable economic environment has resulted in a very unpredictable situation, and the downturn in the global car industry is more drastic than expected," Volvo president Stephen Odell said.
That view was supported by Nigel Griffiths, managing director of global forecasting for Global Insight's automotive group, who described car buyers as "caught like rabbits in the headlights."
Global vehicle sales are expected to fall this year, he said, for the first time since 2001 and the aftermath of the 911 terrorist attacks in the United States.
In the U.S. market, "we know people have just deserted the showrooms," added George Magliano, the firm's director of automotive research for the Americas.
Global Insight now has cut its forecast for 2009 U.S. sales to 13.4 million vehicles, compared with a forecast of 13.6 million this year and actual sales of 16.1 million last year.
Another automotive consulting firm, J.D. Power and Associates, is revising its forecast down to the 13.2 million to 13.4 million range.
Global Insight has also cut its outlook for production next year, which is bad news for auto makers and suppliers in Canada. Four of the five auto makers in Canada have closed plants, cut jobs or delayed startups at new factories.
"We're going to touch new lows in this business," Mr. Magliano said during a webcast presentation yesterday.
Citibank's Mr. Michaeli also cut his sales outlook, downgraded Ford and GM to sell from hold and warned that the environment may deteriorate.
"If conditions continue to worsen as we saw in late September, U.S. auto makers might be forced to consider pursuing either drastic spending cuts and/or broader workout scenarios sooner than previously contemplated."
But one big concern, he noted, is how quickly the loan guarantee will be available to Ford and GM, which are losing tens of billions of dollars and looking for ways to hang on to their cash. It may take six to 18 months for the U.S. Department of Energy to develop the rules for the program, he said.
FORD MOTOR (F)
Close: $2.66, down 26 cents
GENERAL MOTORS (GM)
Close: $6.91, down 65 cents
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