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Detroit auto show to open with newfound optimism

Source : BUSINESS_STANDARD
Last Updated: Mon, Jan 10, 2011 19:41 hrs

The most significant arrival at this year’s Detroit auto show is something of a throwback to the heady days of the late 1990s: optimism that growth is accelerating in an infamously cyclical industry.

Coming just at the start of the new year, the Detroit event that opens to the media on Monday is the first of a string of trade shows where automakers clamour to build buzz for vehicles months before they hit showrooms.

The US auto industry snapped a four-year sales decline in 2010, including three consecutive sales months above the 12 million unit annual rate to close the year. Most analysts expect double-digit growth in 2011 and further gains in 2012.

The last time the US auto market saw three consecutive years of substantial sales growth was in the late 1990s when Detroit automakers were still riding high.

James Paulsen, chief investment strategist for Wells Capital Management, believes US sales could reach annualised rates of 15 million to 16 million units by the end of 2011.

Other analysts have offered a more conservative outlook on 2011, given persistently high US unemployment rates and a still uncertain outlook for the housing market.

Jeff Schuster, director of forecasting for J D Power and Associates, expects US auto sales to reach 12.8 million vehicles in 2011 and rise to 15 million in 2012.

The 2011 forecast could increase, he added.

"I think coming off the momentum we had in the fourth quarter there’s more likely to be upside risk than a downward revision," Schuster said at a Society of Automotive Analysts meeting in Detroit on Sunday.

Happy days are here again, almost
If austerity was the watchword at the Detroit auto show the past three years, then growth and new investment aimed at capitalising on the still-developing upswing dominate presentations this year.

One sign of the industry’s renewed confidence: vehicle debuts are expected to roughly double at the Detroit auto show this year to as many as 40 all-new vehicles, up from 18 in 2010.

Another major theme: the rollout of new small cars, electric vehicles and hybrids that major automakers have readied to roll out at a time when oil prices — and gasoline prices at the pump — are heading higher.

Those include a larger version of Toyota’s market-leading Prius hybrid, the first-ever compact sedan for General Motors’ Buick and a boxy concept known as the Curb from Hyundai.

The Korean automaker grew at more than twice the rate of the overall market in 2010 at 24 per cent, seizing market share from rivals with competitive pricing and a reputation for sharply better quality.

The Detroit auto show also represents a major milestone for Volkswagen. The German automaker plans to show off a new version of its Passat that will be built at its first US plant. The $1 billion plant in Chattanooga, Tennessee, is near completion and will begin operations later this year.

The Detroit show is also significant for the US automakers, which are in varying stages of a comeback in sales and in profitability.

Just 18 months after emerging from government-funded bankruptcies, GM and Chrysler have vehicles that were named fijalists for the North American car and truck of the year. The winners will be announced Monday at the show.

GM completed its public share offering in November, the largest ever, and its shares are up 18 per cent from the IPO price. Chrysler is expected to launch its own IPO in the second half of 2011.

Meanwhile, Ford passed Toyota as the number two US automaker in sales behind GM in 2010 and its stock has risen more than 80 per cent since the start of last year.

Ford posted a 19 per cent US sales gain in 2010, it’s largest percentage increase since 1984.

A KPMG survey found a much higher percentage of senior automotive industry executives expect global market share growth from Ford than Toyota in 2011.

"Ford in one year essentially eclipsed Toyota, which is a big change in one year," said Gary Silberg, who leads KPMG’s auto consulting business in the United States.

After massive recalls and US market share losses in 2010, Toyota aims to turn the tide by expanding its Prius hybrid into a family of vehicles in a bid to add to consumer perceptions that the automaker is a leader in "green" technology.

Meanwhile, Nissan Motor Co, which has skipped the Detroit show for three consecutive years, said it would return in 2012.




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