Word: auto
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...bondholders could try to resist bankruptcy, but there would be consequences. Among the bondholders are banks such as JPMorgan Chase and Wells Fargo that themselves have taken money from the government's Troubled Asset Relief Program. Standing in the way of the Administration's plans for the auto industry would win them few friends. One option the bondholders have is to try to seize the factories. But that would jeopardize the partsmakers too, and the banks are also holding the paper for many industry suppliers. If the factories shut down as a result of a legal battle, so would...
...because it is. "Assuming general economic recovery, in the developed markets we will see maybe 95% of what it had been," says John Paul MacDuffie, an associate professor of management and co-director of the International Motor Vehicle Program at the Wharton School of the University of Pennsylvania. U.S. auto and light-truck sales topped 16 million for eight years and reached nearly 17 million in 2004 and 2005. Those numbers have slumped dramatically, but the current downturn is cyclical, says MacDuffie; there's no evidence of permanent decline in the demand for vehicles. (See pictures of the world...
...true that we've been putting off buying cars for nearly two years as unemployment has climbed and credit has been choked off. (Showroom traffic is increasing, notes Summit Auto's Buscher; it's financing that continues to lag.) But that also means that we'll be readier to buy when credit starts to loosen. Even if this recession lingers longer than expected, results will pick up substantially in 2011. Analyst Luedeman predicts that sales in North America will bottom out at 8.4 million units this year (others say slightly higher), then jump to 10.2 million...
...Lastly, the auto demand curve is a leading indicator out of a recession. Any GDP growth will correlate directly with auto sales - until growth reaches 4%. At that point, sales growth then turbocharges to about 7%, if the past is any measure. Analysts insist that when you combine the replacement demand, scrappage rates, demographic changes and an economic recovery, there's a case to be made that North American demand will approach 16 million units within five years. "We haven't seen this kind of positive force in replacement demand for this amount for a while," says the auto economist...
...best cars from the 2009 Detroit Auto Show...