The auto industry could "collapse" outright in 2009, according to a report from J.D. Power and Associates released Thursday.
"While the global automotive industry is clearly experiencing a slowdown in 2008, the global market in 2009 may experience an outright collapse," said Jeff Schuster, executive director of automotive forecasting for J.D. Power and Associates.
The firm predicts that U.S. new-vehicle retail sales will total 10.8 million units in 2008, 2 million below 2007. Overseas, vehicle sales are expected to decline in China, India, and European markets, although the decline will be far more dramatic in mature markets.
"While mature markets are being impacted more severely than emerging markets, no country or region is completely immune to the turmoil," Schuster added.
The credit crisis will contribute to an already dire picture for the U.S. auto market, as consumers struggle to get auto loans. The report warned that there could be as many as 2.2 million fewer sales in 2008 if credit remains frozen and consumers are unable to purchase vehicles, the firm warned.
"Buyers are both voluntarily and involuntarily exiting the U.S. new-vehicle market," Schuster said. "The additional decline in expected vehicle sales is a function of growing concerns around availability of credit and leasing, declines in vehicle equity and general economic stress."
The report highlights the unprecedented turmoil facing the auto industry. Thursday, shares of General Motors (GM) closed at 58-year low, down $2.15 at $4.76. In response to its dire situation, GM issued a formal statement Friday attempting to reinsure nervous investors, stating that bankruptcy as an option is not on the table.
"Clearly we face unprecedented challenges related to uncertainty in the financial markets globally and weakening economic fundamentals in many key markets," GM said.
"But bankruptcy protection is not an option GM is considering. Bankruptcy would not be in the interests of our employees, stockholders, suppliers or customers."
Meanwhile Ford (F) stock fell 18%, finishing down 49 cents at $2.17.
Thursday, Standard & Poor's placed GM's credit ratings under review for a possible downgrade as the automotive markets weaken globally and on expectations that tight credit markets will hurt the company in the near future.
Ford and GM's "B-"long-term corporate rating and the GM's finance arm's "B-"long-term counterpart credit rating will be under review. S&P stated that it thinks the two companies have enough cash through the rest of 2008 but believes quickly worsening conditions within the automotive sector will make things harder for the firms in 2009.
"The CreditWatch placement reflects the rapidly weakening state of most global automotive markets, along with capital market conditions that will remain a serious challenge for the foreseeable future," said Standard & Poor's credit analyst Robert Schulz.
"We are facing an unprecedented set of economic challenges due to the global economic crisis," said Carl-Peter Forster, president of GM Europe. "The credit crisis and inflation from surging oil and commodities prices have seriously hurt consumer confidence."
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