York: Severe weather conditions, geopolitical concerns,
high fuel prices, and low used-vehicle prices are among
the factors that contributed to the slowing of North American
auto sales in recent months, according to a Standard &
Poors (S&P) ratings services report.
slow sales pace has caused dealer inventory levels to
spike above historical averages, and several vehicle manufacturers
have indicated that they will reduce production during
the second quarter of 2003, which will negatively affect
the financial performance of auto suppliers.
vulnerable are suppliers with high fixed costs or heavy
customer concentrations among the big three auto makers,
whose sales have softened more than average and, thus,
currently have a greater oversupply of inventory in the
market, says credit analyst Martin King.
remainder of 2003 is expected to be very challenging for
most auto suppliers. Slower sales will pressure profit
margins and could lead to intensified pricing pressures
as vehicle makers, struggling with their own profit issues,
look for price cuts and ways to reduce content on certain
vehicles, he added.
to him the retail sales of new vehicles declined during
the fourth quarter of 2002, after exceeding expectations
for much of the year. Most auto retailers reported negative
same-store, year-over-year sales and gross profit comparisons
for their new-vehicle operations during the fourth quarter.
the slower pace of new-vehicle sales, most of the rated
public dealerships are expected to remain solidly profitable
in the first quarter of 2003.