Below par performance expected from US auto makers

Chennai: Global credit rating agency Standard & Poor's (S&P) Rating Services has predicted .Sub-par financial performance during this year from the big three auto makers n the US.
"Difficult long-term trends will predominate," says S&P's credit analyst, Scott Sprinzen.

"Mature markets in North America and Western Europe, proliferation of competing products, and persisting excess production capacity will all make for sub-par financial performance of the automotive operations of General Motors Corporation, Ford Motor Company, and the Chrysler Group of DaimlerChrysler AG," he adds.

Although 2004 has gotten off to a sluggish start, S&P still expects auto demand in the US to experience a cyclical uplift for the full year. US light vehicle sales are expected to total approximately 16.8 million units, up from 16.6 million units in 2003.

According to S&P, better general economic conditions should enable some abatement of price competition. However, the "pull-forward" effect of past price discounting, plus the dampening effects of rising interest rates, declining lease terminations and the lengthening consumer auto loan terms will all constrain the extent of volume and pricing improvement.

In other major markets, S&P expects Western European passenger car registrations to be fairly flat in 2004 compared with the 14.2 million registrations in 2003. S&P also expects total vehicle demand to be basically flat in Japan and South Korea compared with last year's demand.