Some automakers forecasting no more than 10% sales growth in the US this year may be overly cautious and need to boost output there, analysts have said.
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After four years of falling demand, the unwillingness to count on more than near-10% growth, after the 27-year low last year, is an abrupt U-turn for an industry criticised for unrealistic forecasts before the General Motors and Chrysler bankruptcies last year, Reuters reported after talking to analysts and industry executives in Detroit this week.
Production plans have been based on forecasts that some analysts see as a bit too conservative.
One sign: GM this week followed Toyota and Honda Motor in saying it was eyeing extra US production capacity.
Analysts told the news agency that automakers are positioned to raise output if the market increases slightly more than expected, iinstead of idling workers or slowing assembly lines.
“There is something of a bit of not wanting to get your hands burned,” Paul Ballew, a former GM economist who is now a senior vice president at Nationwide Mutual Insurance, said.
Ballew, who has studied industry demand patterns for 30 years said auto executives may have become overly cautious on their sales outlooks, similar to how a shocked industry reacted to the recession of the early 1990s.
He thinks the US automakers will need a full two years from the depths of recession to bounce back to more normal sales levels.
“It’s a recovery, but everything is relative,” he said.
Ballew expects US sales to grow to 12m vehicles in 2010, slightly ahead of many forecasts, 13m in 2011 and about 15m in 2012, which he also sees as normal annual light vehicle demand.
The US most recently peaked at around 17m light vehicle sales in 2005. The decline increased after Lehman Brothers failed in 2008 and dipped over 20% in 2009 to 10.4m.
Ballew told Reuters he saw normal demand at about 15m, Ford reckons around 15.5m.
For 2010, most automakers have forecast about 11.5m.
Mazda North America chief Jim O’Sullivan called the industry mood “guardedly optimistic.”
Ford’s 2010 forecast of 11.5 to 12.5m, including medium and heavy duty trucks has been called optimistic by media and analysts but would still be below the rate that old vehicles are expected to fall out of service.
“I don’t think there are any locks,” chief sales analyst George Pipas told the news agency. “Most likely we will see some improvement.”
“I am reasonably confident that we will not go backwards in 2010,” he added. “Most forecasts are pretty balanced with the reality of the economic situation.”
JD Power and IHS Global Insight also foresee around 11.5m sales, with JDP saying that was conservative, though analysts have suggested pent-up demand could push volume higher.
Autoconomy.com analyst Erich Merkle, more optimistic than most since last spring, when GM and Chrysler faced bankruptcy, has pegged 2010 sales around 12.5m.
“I’ve been a contrarian, but I see more people moving my way,” he told Reuters.
