June 21, 2002

Automakers face ‘cutthroat’ competition says report

New York, New York – Standard & Poor’s has released its forecast for the Autos & Auto Parts Industry, which outlines a scenario of increased price competition globally for manufacturers. Reasons given include continued reliance on rebates and cheap financing in the U.S., a fragmented and saturated European market, and protected markets and fierce local competition across Asia.

The industry forecast is part of Standard & Poor’s Industry Survey on Autos & Auto Parts, a study produced every six months by the firm’s senior equity analyst for autos and auto parts.

According to Standard & Poor’s senior equity analyst for this industry, the forecast for General Motors has improved following substantial gains in the quality of its products and improved profitability. At Ford, the number two U.S. car manufacturer continues to work its way out of a series of long festering troubles arising from the continued effects of extensive recalls of Firestone tires, lower sales volume and low employee morale that have drained cash and resulted in sharply cut dividends, and a shake up of top management. After several quarters in the red, DaimlerChrysler’s Chrysler division has achieved a return to profitability in the first quarter of 2002 resulting from higher factory shipments and improved costs. A critical part of the industry supply chain, auto parts suppliers face more difficult circumstances, due in large part to the decline in vehicle production from a weakened global economy but also from ill-advised expansions and acquisitions and asbestos-related litigation costs.

“The global automobile business is cutthroat,” says Efraim Levy, Standard & Poor’s senior equity analyst for the auto & auto parts industry and author of the survey. “The proliferation of vehicle models has contributed to increased competition and has hurt profit margins. We don’t expect much improvement any time soon.”

Industry Surveys for the Auto & Auto Parts Industry looks at the issues affecting all segments of the automobile & auto parts industry in the U.S., including light vehicles, auto parts (including OEMs, replacement parts, and replacement parts distribution), industry trends, niche markets, improving parts quality and use of new materials, sales trends, market share, the declining number of dealerships, and increased use of telematics in vehicles. It also looks at the global auto industry, including the impact of the auto industry on the U.S. trade deficit, Japanese competition in the U.S. truck market, and e-commerce transactions among major automakers.

Readers can purchase the Standard & Poor’s Industry Survey on Autos & Auto Parts online at sandp.ecnext.com

Connect with Autos.ca