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Cosmic Joy and Local Pain (in Detroit)

Posted by: Jim Henry on January 15, 2008

DETROIT — Thanks to emerging markets, the global auto industry is a lot healthier than it feels in the United States, according to economists for the struggling Detroit 3 automakers.

Worldwide auto sales should hit a record of about 75 million in 2008, said Ellen Hughes-Cromwick, Ford Motor Co. chief economist. Sales of just over 70 million in 2007 were the sixth record year in a row for global sales, she said.

In a Jan. 15 presentation to the Society of Automotive Analysts, Hughes-Cromwick predicted global auto sales will hit 85 million by 2012.

The bad news is, most of that growth is expected to take place overseas, especially China, and the Detroit 3 are still overwhelmingly dependent on the U.S. market – especially Chrysler LLC, since its divorce last year from Daimler AG.

U.S. light-vehicle sales in 2007 dropped 2.8% to 16,148,811, according to AutoData Corp., Woodcliff Lake, N.J. At the analysts’ conference, all three domestic automakers predicted U.S. sales will fall below 16 million in 2008, not including medium and heavy trucks. That would be the lowest level since 1998.

Specifically, Hughes-Cromwick said Ford’s light-vehicle forecast for 2008 is about 15.7 million. GM is “in the same ballpark,” said Ted H. Chu, lead economist, global market and industry analysis for GM. Paul Traub, senior manager, economics and industry analysis for Chrysler LLC, declined to make a specific forecast, but said 2008 should be in a range between 15 million and 16 million, including medium and heavy trucks The middle of that range is about 15 million light vehicles.

Traub said risks to auto sales include a continued decline in house prices, accelerating mortgage defaults, tightening credit conditions, higher energy prices, and the possibility that consumers could cut back significantly on spending.

Opportunities for the Detroit 3 include lower sales to daily rental fleets, which could lead to higher per-car margins; higher U.S. exports, which could offset the problems in the housing market; fiscal stimulus, including more rate cuts by the Federal Reserve, Traub said.

To describe the contrast between globally healthy auto demand and slower U.S. sales, GM’s Chu quoted a 1980s book by essayist and biophysicist Harold Morowitz: Cosmic Joy and Local Pain.

Reader Comments

john lim

January 18, 2008 11:12 AM

i disagree with you, Jim. In a few years, GM will get 65% of its sales from overseas. GM's Opel is extremely successful in Europe. In fact, GM Europe achieved record sales in 2007. GM also made huge gains in China and had joint ventures in Russia, India, and South America.

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