Standard & Poor's Equity Research believes American auto companies will struggle as an unfavorable shift in the mix of models combines with heightened competition. These factors, along with an expected drop in demand both this year and next, should lead to restrained profits and limited share price appreciation, according to Efraim Levy, senior automotive equity analyst, and author of the article. Levy also sees the Detroit Three automakers losing ground in 2007 as foreign carmakers take more market share.
"While cost-cutting efforts may boost domestic auto profits, a number of factors including high gasoline prices may counter this and hurt revenues," said Levy. "The competitive landscape is widening and intensifying with new product introductions and buyer incentive programs. In our view, the Big Three's dominance is waning and they're becoming more vulnerable in a number of areas. These include light trucks, which may be hurt by a weakened housing market, as well as the luxury vehicle market, where margins are being squeezed by increased luxury import sales."
The article is part of a special auto report published dually on RatingsDirect, the real-time Web-based source for Standard & Poor's credit ratings, research, and risk analysis, and in the April 4th issue of CreditWeek, the financial market intelligence leader's weekly outlook on credit risk.
TELECONFERENCE REPLAY INFORMATION
Standard & Poor's Ratings Services held a telephone conference call on Friday, March 23, 2007 to discuss its forthcoming special CreditWeek report on the state of the global auto industry, addressing the 2007 outlook for global automakers. Speakers participating in this teleconference were Standard & Poor's automotive equity analyst Efraim Levy; automotive credit analysts Maria Bissinger, Robert Schulz, and Gregg Lemos-Stein; and Kevin Riddell from the J.D. Power & Associates powertrain forecasting team. (Like Standard & Poor's, J.D. Power is a division of The McGraw-Hill Cos.)
Recorded replays of the call are available and can be accessed through two options.
Replay Number: 1-203-369-0965
These replays are available until Friday, March 30, 2007
Replay Web Streaming: http://www.mymeetings.com, Under Events, Select Join an event
Conference ID#: 6513088
These replays are available until Friday, April 20, 2007
Please note that Standard & Poor's offers all of its broadcast teleconference calls to all interested participants on a complimentary basis.
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