2005 industry forecast: analysts weigh in on what the automotive industry can expect from the new year

Automotive Industries, Nov, 2004 by John Peter

Robinet doesn't see any new trends in outsourcing, but expects things to remain pretty much the same. While outsourcing has eliminated many jobs in the U.S., it isn't particularly bad for some companies.

"What makes sense to outsource will continue to be outsourced," Schuster says. "The publicly traded companies are actually awarded on the market with announcements that involve outsourcing to cut costs."

The Economy

When people talk about the economy and the automotive industry, the conversation inevitably leads to gasoline prices. But 2005 will bring more than just high gasoline prices. The increased prices in oil will also drive up utility prices affecting just about every part of the automotive industry.

"The plastics guys are crying right now," says Robinet. "Those guys are not on steal resale And if you're a chrome plater, you're using metals and those have gone up. Virtually every part of the vehicle has seen some increase in terms of its input prices."

Robinet also points out that these escalating costs are not just affecting business but consumers as well. And people with higher utility bills have less money to spend on cars. But even that may not have too much effect on 2005 sales.

"Oil above $50 a barrel--we see that as a short-term situation," says Schuster. "The general consumer has been led to believe that it's not something that's going to be ongoing, so as long as it's not, we don't see a problem."

The Election

There is a general consensus among analysts that the results of the 2004 Presidential election won't result in any major changes to the industry in 2005.

"Bush isn't going to do anything draconian in terms of fuel-efficiency mandates." Brooke says. "Kerry won't be able too either. If the Midwest carries the election for him, he's locked in."

Langlois says that the first thing on either candidate's agenda is the drive for some kind of reform of the healthcare, which has been the topic of many speeches by the top level managers from the Big 3. Langlois thinks that healthcare reform is one thing that the auto industry can be involved in driving.

"I think we're finally getting to the point where business is going to drive that train in coming up with something," says Langlois. "And to that extent the election will sort of factor into what that strategy is."

Schuster says that the election will remove the uncertainty.

"I think that's really what's hit the industry and the economy and the overall consumer confidence level. There are jitters right now, not knowing what the outcome Hill be," Schuster says. "There's that comfort thing where you know who's in there and you know where they stand regardless if it's your guy or not."

U.S. SALES SHARE

                    CY2003     CY2004     CY2005

General Motors       28.5%      28.3%      27.1%
Ford                 22.2%      20.9%      20.5%
DaimlerChrysler      14.1%      14.3%      14.1%
Toyota               11.2%      12.1%      12.6%
Honda                 8.1%       8.2%       8.9%
Nissan                4.8%       5.6%       5.6%
Hyundai               3.8%       4.2%       4.7%
BMW                   1.7%       1.7%       1.8%
Volkswagen            2.3%       2.0%       2.1%
Others                3.2%       2.7%       2.6%

Source: CSM WorldWide

OEM/PROGRAM                             CY2002         CY2003

Total North American Production      16,377,749     15,902,395
N.A. Car Production                   7,190,916      6,461,461
N.A. Total Truck Production           9,186,833      9,440,934
GM Production                         5,512,938      5,327,456
Total FORD Production                 4,158,720      3,792,531
Total DAIMLERCHRYSLER Production      2,746,882      2,574,643
Total NEW DOMESTIC Production         3,959,209      4,207,765

OEM/PROGRAM                             CY2004         CY2005

Total North American Production      15,757,353     16,018,436
N.A. Car Production                   6,151,841      6,420,186
N.A. Total Truck Production           9,605,512      9,598,250
GM Production                         5,117,191      5,050,798
Total FORD Production                 3,585,371      3,509,606
Total DAIMLERCHRYSLER Production      2,670,934      2,656,762
Total NEW DOMESTIC Production         4,383,857      4,801,270

OEM/PROGRAM                             CY2006

Total North American Production      16,299,861
N.A. Car Production                   6,551,294
N.A. Total Truck Production           9,748,567
GM Production                         4,967,036
Total FORD Production                 3,485,059
Total DAIMLERCHRYSLER Production      2,767,383
Total NEW DOMESTIC Production         5,080,383

Mitsubishi is now grouped within New Domestics as DCX's equity stake
is no longer a controlling interest.

Source: CSM WorldWide