Home | Business News | Browse by Publication | M | Metal Center News

Automotive market outlook: new domestics in high gear: 2007 is shaping up as another good year for Honda, Nissan and Toyota--and another challenge for GM, Ford and DaimlerChrysler.

Article Excerpt
WITH AUTO INDUSTRY off to a slow start in the first quarter, North American vehicle sales and production are expected to trail last year's levels. "There is a lot of pessimism that 2007 will be a down year," says David Healey, automotive analyst for Burnham Securities, Northbrook, Ill.

New Domestic automakers such as Honda, Nissan and Toyota are faring better than the traditional Big Three, with sales so strong that some companies can't keep up with the demand. "Imports are up 16 percent from a year ago," says analyst Mark Cornelius, president of Morgan & Co., West Olive, Mich. "That is because the New Domestics are running full out. What they can't produce in the United States, they need to import."

At the same time, Detroit's Big Three--GM, Ford and Daimler-Chrysler--continue striving to retrench their operations, cutting capacity to bring it more in line with demand and freshening their products to entice consumers with new designs and features rather than "fire sale" prices.

Eli Lustgarten, president of ESL Consultants and senior vice president at Longbow Research in Independence, Ohio, noted at a recent Metals Service Center Institute conference that auto production is under considerable pressure. While the New Domestics expect to increase their output by 5 to 10 percent this year, the Detroit Three project a 3 to 5 percent decline. In the aggregate, be forecasts U.S. production in 2007 at around 14.9 million units, followed by a slight rebound in 2008 to around 15.3 million cars and trucks.

"While overall auto sales and production might be off a little, that will just bring it down to a decent year, as we have just gone through several years of extraordinary sales," says Doug Richman, vice president of engineering and technology for Kaiser Aluminum Corp., Foothill Ranch, Calif. "We aren't talking about a bloodbath, just a little midcourse correction."

Meanwhile, with gasoline prices still relatively high and mileage standards likely to become more stringent, carmakers on both sides of the cultural aisle are scrutinizing their product mix and the materials they use in order to bring lighter, more fuel-efficient vehicles to market. This may be good news or bad news for individual metals suppliers, depending on the products they sell and the automakers and vehicle platforms they support.

Negative views of the economy are contributing to a bearishness toward the automotive sector, says Erich Merkle, director of forecasting for IRN Inc., Grand Rapids, Mich. The slowdown in the residential housing market is coloring people's perceptions, and having a direct effect on demand for pickup trucks among individuals in the construction trades. In general, the economy has been softening, consumer debt is high and banks are tightening their lending...

View this article FREE - Now for a Limited Time, try Goliath Business News
Free for 3 Days!