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GM, Ford Hope Foreign Sales Ease Recession Bumps

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Bloomberg News

Published: January 17, 2008

General Motors Corp. Chief Executive Officer Rick Wagoner says the United States is in an automotive recession. It's not likely to end this year, and Wagoner and his fellow CEOs are looking abroad for help.

After falling 2.5 percent to the lowest in a decade last year, U.S. vehicle sales will drop further in 2008, industry officials and analysts said at this week's Detroit auto show.

The domestic auto market may shrink for the third straight year, battered by the worst housing slump in 16 years and the highest unemployment since late 2005. With sales stagnating in Europe and down in Japan, automakers are banking on developing markets such as China and India to ease the pain.

"It's not just the United States that's going down, it's Western Europe," said Maryann Keller, an independent auto consultant based in Greenwich, Conn. "Everybody is aiming at Russia, China and India."

Ford Motor Co., the world's third-largest automaker, illustrates the diverging outlooks. Mark Fields, the company's president for the Americas, said the first half of 2008 "will be challenging."

John Parker, who oversees Asian operations, said Ford is studying whether to build a plant in China after opening its second in September.

Ford has lost U.S. market share annually since 1995, and earnings in Europe and South America haven't overcome losses in North America. Its shares are trading at 22-year lows.

"China is a market that's going to be as big as the United States or EU," Parker said during the North American International Auto Show. "We will do a third plant in China. The question is when."

Ford's chief economist, Ellen Hughes-Cromwick, and GM's senior manager of economic and industry analysis, Ted Chu, both predicted sales this year of 15.7 million in the United States, the world's largest auto market. That would be down from 16.1 million last year and the lowest total since 1998.

Worldwide industry sales may rise 4 percent this year to 75 million vehicles, Hughes-Cromwick said.

The biggest gains will come from countries where the rate of automobile ownership is climbing, Honda Motor Co. President Takeo Fukui said. "China, Russia, Eastern Europe are all growing quickly," he said.

Honda said last month its global sales probably rose 6 percent to 3.76 million vehicles last year, as growth in emerging markets outpaced the United States and offset a 12 percent drop in Japan. The company said it expects sales in China to grow 17 percent, after a 31 percent advance in 2007.

Toyota Motor Corp. expects to boost sales in Asia outside Japan by 20 percent to 1.58 million vehicles this year, Executive Vice President Tokuichi Uranishi said.

The company's sales in China may jump 43 percent to 700,000, he said. Toyota forecasts European volume to reach 1.27 million, helped by a record 200,000 in Russia.

GM thinks sales in China will grow apace with the market's projected 15 percent increase this year, said Kevin Wale, GM's top executive in the country. GM last year sold more than 1 million vehicles in China for the first time, he said.

The automaker also topped 1 million units in sales last year for the first time in the Latin America, Africa and Middle East region. Sales should increase in those markets again in 2008, said Maureen Kempston Darkes, the regional chief.

GM's Wagoner, who said that "from the automotive perspective, it feels like" a recession, also said growth outside the United States last year allowed GM to keep pace with Toyota as the Japanese rival tries to unseat the Detroit automaker as the world's largest.

GM's final tally will be "close" to Toyota's 9.37 million cars and trucks as GM had record sales in all regions outside the United States, Wagoner said. GM will announce its results Wednesday.

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