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Automotive just keeps climbing: though there's no end in sight to the boom in auto production, carmakers are navigating some rough terrain in the form of spiking steel prices and struggles for market share.

Article Excerpt
Experts predict it will be another strong year for North American car and light truck sales--perhaps even stronger than last year in light of the improving North American economy.

That is not to say that the Big Three automakers and their suppliers don't lace some challenges: rising raw material costs, gasoline prices at $2 per gallon, and erosion of market share by Asian, and to a lesser degree European, transplant automakers who keep building production facilities in North America.

"The last four years have been the best years ever for the automotive industry," says Mark Cornelius, president of Morgan & Co. Inc., West Olive, Mich. More than 16.6 million passenger cars and light trucks were sold in the United States last year. While that is below the peak of 17.4 million in 2000, it was still quite respectable. Eron Shosteck, director of communications for the Washington-based Alliance of Automobile Manufacturers, says 2003 sales were among the best by historical standards.

Should 2004 sales continue at the same pace as during January and February, they'll closely match last year's, Cornelius says. Through February, U.S. sales for the Big Three were up 1.7 percent, while sales of Asian brands (both imports and those built in the United States) were up 11.4 percent; European car sales were down 9.5 percent.

Andy Boyd, spokesman for American Honda Motor Co., Torrence, Calif., says sales rates often accelerate as the year continues. David Healy, auto motive industry analyst for Burnham Securities, New York, says 2004 vehicle sales could exceed 17 million units, possibly as high as 17.4 million, propelled by economic recovery and higher real disposable income.

Some question how closely auto output will follow suit. Healy says that production by the Big Three is down from a year ago. Production in the first quarter has been reported at 3,039,000 cars and light trucks, compared with 3,133,000 in the first quarter of 2003.

The story for transplant automakers is somewhat different, partly because of new North American production capacity coming on line. Their vehicle output has been up somewhat from a year ago, Healy says.

Explaining this discrepancy, George Pipas, U.S. sales analysis manager for Ford Motor Co., Dearborn, Mich., says that production is a timing issue. "In 2002, there was an extremely fast sales pace that led to lower inventories of finished product. With production exceeding demand, it was necessary to rebuild inventories."

According to Automotive News, which regularly reports inventory levels, North American dealerships...

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