Issue: Nov 2009

U.S. faces flat auto sales in 2010

Below are Links to News Stories Filed Monday from the Reuters Autos Summit Held in Detroit and Paris

by Reuters

U.S. auto sales are likely to remain flat in 2010, former General Motors Co GM.UL director Jerry York told Reuters on Monday.

While many analysts and industry observers are expecting a modest rebound from this year\'s forecast 10 million to 10.5 million sales of cars and light trucks, York said that view underestimates the severity of the economic downturn.

"It\'s a whole new ballgame, and I just can\'t fathom anything that\'s going to cause a material increase in auto sales in this country in 2010 compared to 2009," York told the Reuters Autos Summit in Detroit.

GM is likely to lose a percentage point or two of market share from its shift to just four brands, York told Reuters, adding that discussion about a future initial public offering of the company -- in which the U.S. government holds a large stake -- is the "dumbest thing in the world to be talking about ... right now."

York, an advisor to billionaire investor Kirk Kerkorian, also said that Ford Motor Co’s debt load is "very manageable" but warned that he believes Italian automaker Fiat SpA has a less than 50 percent chance of turning around Chrysler.

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Group 1 looks at buying Ford stores

Group 1 Automotive is interested in buying Ford Motor Co franchises in markets in which it already operates, such as Texas and Oklahoma, the chief executive of the dealership chain told Reuters on Monday.

Speaking at the annual Reuters Autos Summit in Detroit, Earl Hesterberg said the auto retailer was in a position to make strategic acquisitions but that it would stay away from increasing its exposure to General Motors Co GM.UL and Chrysler.

"We would be interested in buying a Ford dealership," Hesterberg said. "We are pretty bullish on Ford."

Hesterberg told Reuters he would like to expand the chain into Florida and Arizona eventually, but would prefer to wait until the economy gets better. "We would like to prioritize acquisitions that give us greater scale in markets we are already in," he said, referring to Texas, Oklahoma, Boston, New York, New Jersey, and the U.S. Gulf Coast.

Hesterberg also said he sees no signs of a rebound in consumer confidence and he has "no significant optimism" for U.S. vehicle sales in November and December.

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Group 1 sees no rebound in consumer demand

Group 1 Automotive sees no signs of a rebound in consumer confidence and has "no significant optimism" for U.S. vehicle sales through the end of 2009, its chief executive said on Monday.

The No. 4 U.S. auto dealership chain expects U.S. industry auto sales to rise in October from the previous month due to a higher inventory of cars and trucks but said it has no reason to believe underlying consumer demand has improved.

"I haven\'t seen anything that makes me optimistic if there is any rebound in consumer spending," Group 1 Chief Executive Earl Hesterberg said at the Reuters Autos Summit.

U.S. auto sales fell to 9.2 million units on an annualized basis in September from the 14.1 million unit rate in August, when car sales received a short-lived boost from the U.S. government\'s "cash for clunkers" trade-in incentives.

"Market reverted back to demand levels to levels we saw before cash for clunkers. The experience is pretty consistent and traffic is not much better in October than September," Hesterberg said.

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Toyota sees \'09 industry sales 10.3-10.4 million

Toyota Motor Corp expects industry-wide U.S. light vehicle sales to range between 10.3 million and 10.4 million units on an annualized basis in 2009, and top 11 million in 2010, the automaker\'s U.S. brand chief told Reuters on Monday.

Speaking at the annual Reuters Autos Summit, Bob Carter also said he expected October U.S. industry-wide vehicle sales to come in between 10.3 million and 10.5 million units on an annualized basis. Toyota\'s overall sales for the month are pacing down slightly from a year earlier, with its retail sales down "a few single-digit percentages," he said.

Automakers are expected to release October U.S. sales figures on Tuesday, when analysts expect to see the strongest results of the year with the exception of July and August, when vehicle sales received a short-lived boost from the U.S. government\'s "cash for clunkers" trade-in incentives.

Auto sales, a key measure of consumer demand, have been hurt in the past year as customers tightened purse strings amid a weak economy. The economic meltdown came on the heels of already-weakening vehicle demand amid record-high gasoline prices last year.

"We are seeing some mild but steady progressions," Carter told Reuters of demand for U.S. vehicles. "In the month of August, with the government stimulus and \'cash for clunkers,\' that gave the industry a shot in the arm." This, he added, created inventory shortages across the industry.

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Renault to support AvtoVAZ shake-up

PARIS (Reuters) - Renault is backing near-bankrupt Russian car-maker AvtoVAZ with financial support for a shake-up, but has refused Russian demands for a big cash injection, Chief Operating Officer Patrick Pelata told Reuters.

"They would love us to pour in lots of money because AvtoVAZ needs money but we don\'t have a lot of money -- We told them we cannot put more money in the joint venture," Pelata said at the Reuters Autos Summit on Monday.

AvtoVAZ racked up first half losses of 19.4 billion roubles ($668 million) -- nearly 10 times more than the previous year -- as Russian demand for cars collapsed when the crisis hit. Russian car sales fell 52 percent in September.

Pelata told Reuters there was still a "big question mark" over the outlook for the Russian market.

Renault is backing a shake-up of the AvtoVAZ supply base and assembly platforms with an undisclosed financial sum, Pelata said, adding to the 650 million euros ($958.1 million) it spent on a 25 percent stake in the Lada maker in the winter of 2007/08.

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Dura CEO sees no quick rebound in auto sales

DETROIT (Reuters) - The U.S. economy is set for a double-dip recession that will keep unemployment high and could pressure auto sales into the middle of the next decade, the head of Dura Automotive Systems told Reuters on Tuesday.

"We\'re planning on a double-dip for a couple reasons," said Tim Leuliette, chief executive of the privately held auto parts maker.

Current forecasts for moderate economic recovery do not give employers across many sectors of the economy any reason to start adding jobs, Leuliette told the Reuters Autos Summit in Detroit.

"A 2 to 3 percent-type of growth for our business is really a zero employment growth environment," Leuliette said. "We see further headcount declines, employment declines. And so at some point even those that are forecasting some growth, I think, we are going to see start to dissipate."

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Dura eyes suppliers, sees consolidation

DETROIT (Reuters) - Dura Automotive Systems Inc is looking at acquiring the assets of an Asian and a European auto parts supplier and will consider more opportunities as supplier valuations become cheaper, its chief executive told Reuters on Tuesday.

Speaking at the Reuters Autos Summit in Detroit, Tim Leuliette said the auto parts supply industry is severely distressed, adding that about 200 U.S. suppliers are going through quiet liquidation processes in which they are slowly selling assets to other suppliers or private equity companies.

"Those liquidations are occurring in a quiet way," Leuliette said. "We are seeing this more quiet, more cost-effective transition than a bankruptcy proceeding," he said. Such processes are also less disruptive to automakers than bankruptcy filings, Leuliette told Reuters.

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UAW hopes for GM IPO "sooner rather than later"

DETROIT (Reuters) - United Auto Workers President Ron Gettelfinger told Reuters on Tuesday the union would like to see an initial public offering by General Motors Co GM.UL "sooner rather than later" and said the projected lifespan of a union-aligned healthcare trust fund was in flux after the automaker\'s bankruptcy.

"It looks like that\'s what they want to do, they want to go public," Gettelfinger said of GM and Chrysler when asked about the timing of a GM initial offering at the Reuters Autos Summit in Detroit. "For us, sooner rather than later is better."

The UAW and Detroit\'s automakers reached historic contracts in 2007 that established healthcare trusts for union retirees that are due to become active at the start of next year. Part of the funding from GM and Chrysler is in company stock, the value of which is uncertain.

Gettelfinger in announcing the plans two years ago said that funding was arranged to make the GM healthcare trust, called a Voluntary Employee Beneficiary Association, last 80 years -- long enough to cover the current generation of retirees and employees.

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Daimler Trucks chief sees dip in orders

PARIS/MOSCOW (Reuters) - New truck orders at Daimler AG, the world\'s largest commercial vehicle maker, could decline through the first quarter of next year, the head of its trucks division told Reuters on Tuesday.

"I\'m expecting a little bit of a downward trend in the first quarter because we don\'t have the EPA \'10 orders any longer," Andreas Renschler told the Reuters Auto Summit, referring to prebuys ahead of U.S. Environmental Protection Agency emission norms going into effect at the start of 2010.

He added he did not believe fourth-quarter new orders would exceed the 75,000 booked in the three months to September.

Despite the tough market, Renschler told Reuters he wanted to stay on as head of the division. Media had speculated his contract expiring late next year would not be renewed and reported that Wolfgang Bernhard -- a former star executive in the industry -- would replace him.

For 2010, Renschler expects more or less stable demand in Europe and Japan. In the United States, he sees a chance for growth after three years of declines, thanks to deliveries in the first quarter of orders made ahead of the EPA rules.

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Toyota sees natural demand back in H2 2010

PARIS (Reuters) - The European car market will have to wait until the second half of 2010 for natural demand to return even though there are some signs of recovery now, Toyota Motor Europe\'s chief executive told the Reuters Auto Summit.

Tadashi Arashima said on Tuesday that Toyota would not achieve its previous target of 6 percent market share in Europe this year, which had proved to be "probably too optimistic, too ambitious" and for next year would hope to be close to the level of 5.3 percent it achieved in 2008.

"We actually lost share in France and in Italy. For next year, we want to go back to at least last year\'s share -- 5.3 percent or even 5.5 percent," he told the summit, which is taking place November 2 to 5 at Reuters\' offices in Paris and Detroit.

However, he added: "we don\'t want to discount too much just for the sake of increasing volumes or running the factory. We want to have legitimate sales to consumers."

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Auto market will stabilize in 2010: Moody\'s

PARIS (Reuters) - The worst of the automotive industry crisis is over, and world sales are set to stabilize next year, a Moody\'s analyst told the Reuters Auto Summit on Wednesday.

However, European manufacturers, which have been brought back from the brink by government support measures, still need to solve the problem of excess production capacity and take steps to improve operating profitability if they are to keep their investment ratings, Falk Frey, senior vice president corporate finance, said.

"Our concern is that price pressure will accelerate because of oversupply and overcapacity and the negative price effect resulting from the underlying trend toward cheaper, smaller cars, as well as the need to reduce CO2 emissions and tax schemes that favor cars with lower emissions," Frey told Reuters.

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Auto suppliers poised for more consolidation

PARIS (Reuters) - Automotive suppliers can look forward to a wave of consolidation as businesses hit hard by the crisis seek to restructure, boost economies of scale and gain access to new technologies, industry executives said at the Reuters Auto Summit.

"Suppliers are the part of industry that is the most at risk, and the one where we will see the most concentration and consolidation in the next few months," said IHS Global Insight analyst Carlos da Silva, speaking at the summit, which is taking place from Nov 2-5 at Reuters\' offices in Paris and Detroit.

French parts suppliers emphatically underlined the trend on Monday, when Faurecia agreed to buy U.S. clean emissions specialist EMCON Technologies and Valeo boosted its stake in its Chinese compressors joint venture to 100 percent from 60 percent.

"I really expect that we\'ll see a significant volume in M&A again in 2010, both on a manufacturing side and even more so on the supplier side," Klaus Pflum, Nomura\'s head of European automotive M&A had said at the summit on Monday.

Valeo\'s CEO Jacques Aschenbroich told the summit he would be on the look-out for opportunities, focusing on three main business areas -- comfort & safety, energy consumption and vision.

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DBT eyes 25 pct share of French EV charge-points

PARIS (Reuters) - France\'s DBT, which makes charging points for electric cars, wants to supply at least 25 percent of the 75,000 France plans to install as part of its plan to get the cars on the road, its CEO told the Reuters Auto Summit.

"You need to get the charging points in place before the cars," Herve Borgoltz, CEO of the group which is based in Pas-de-Calais, northern France, said at the summit, which is taking place at Reuters offices in Paris and Detroit from Nov 2-5.

"If the cars arrive and there aren\'t any charging points, it will be like in 1998," he added, referring to an earlier attempt to get electric cars on the road in France.

"It would be like launching a car with a conventional engine without any petrol stations," he said. Charging stations will play an important role in getting electric cars on the roads, as early models need charging frequently.

Borgoltz told Reuters a station at least every 80 kilometers was needed, and each station should have 5-6 charging points. The group is talking to French retail chains Auchan and Castorama about installing charging points in their car parks.

DBT, founded in 1990, generated 6 million euros of sales last year and sees this doubling next year.

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How to boost fuel efficiency? Raise taxes, executives say

DETROIT (Reuters) - There\'s a simple way to get Americans to drive fuel-efficient cars, according to auto executives, but they are not going to like it -- sharply hike the gas tax.

While politically unpalatable, gasoline that costs at least $4 a gallon would have a far greater effect on American fuel usage than Washington\'s $25 billion loan program meant to spark investment in new technologies, executives told the Reuters Autos Summit in Detroit.

Consumer demand for fuel-efficient cars like Toyota Motor Corp\'s Prius and Ford Motor Co\'s Escape hybrid surged last summer as gasoline prices soared above $4 a gallon.

But with the pressure off -- the average U.S. retail gas price was $2.66 a gallon at the end of October, according to the benchmark Lundberg survey -- Americans are once again buying fuel-hungry sport utility vehicles and other large cars.

"The U.S. allows the price of gasoline to go back and forth across this line where the consumers don\'t care about fuel efficiency and where consumers do care about fuel efficiency," Mike Jackson, chief executive of AutoNation Inc, the No. 1 U.S. auto retailer, told the Reuters Summit in Detroit on Wednesday.

Gradually raising gas taxes to the point where fuel costs $4 to $5 at the pump will do more to stimulate demand in next-generation vehicles like General Motors Co\'s forthcoming Chevy Volt plug-in hybrid than any other policy initiatives, including raising the national fuel efficiency standards know as CAFE, Jackson said.

Jerry York, a former GM board member and an adviser to billionaire investor Kirk Kerkorian, agreed.

"Unless gas is $3.50 or $4 a gallon, consumers are not going to want to buy those cars," York told Reuters on Monday.

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