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Friday, 24 October 2008

Bleak 2009 for car makers

MILAN/FRANKFURT - FIAT and Hyundai Motor Co added to the gloom surrounding automakers on Thursday with bleak forecasts for next year as the global financial crisis takes its toll.

Italian industrial group Fiat said global demand for its products could drop 10 to 20 per cent in a 'worst-case' scenario, while a senior official at Hyundai, South Korea's top automaker, said he expects car demand in emerging countries to fall next year.

Germany's Daimler, maker of Mercedes-Benz luxury cars and heavy trucks, is due to publish its quarterly results at about 6.00 pm and is widely expected to issue its second straight profit warning.

Global automakers are facing shrinking demand as consumers put off major purchases on fears of a recession.

At 3.32 pm, the DJ Stoxx European auto index was down 2 per cent, while the wider market was little changed. Fiat shares were suspended after a sharp fall.

Fiat said its trading profit could plunge by 65 per cent next year. Although the maker of cars, trucks and tractors called its forecast a 'worst case' scenario but analysts saw it as definitive.

'In any case, it will be seen as a profit warning,' one analyst said.

Fiat released better-than-expected third-quarter earnings, boosted by strong sales at its farm machinery business. Trading profit rose nearly 8 per cent to 802 million euros, beating market expectations.

Hyundai posted a 38 per cent fall in third-quarter net profit, also beating market expectations and lifting is shares, but its outlook was gloomy too.

'The market situation in emerging countries is much worse than expected,' Mr Park Dong-wook, a director at Hyundai's treasury division, told reporters. Hyundai is the world's No.5 auto maker along with affiliate Kia Motors Corp.

Sales of higher-end models are also slowing in Hyundai's domestic market, analysts said.

'The stock is rebounding on heavy foreign buying but it is hard to say the outlook for auto makers is improving,' said Mr Kim Joong-Hyun, an analyst at Goodmorning Shinhan Securities.

'There could be some pick-up in sales in the fourth quarter as Hyundai makes up lost output during strikes, but that alone doesn't support optimism amid the sinking world economy.' -- REUTERS

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