GM sees US economic rebound by Q2 next year

SHANGHAI - The September 11 hijack attacks battered the U.S. economy but a strong recovery should emerge before the end of the first quarter next year, General Motors chief economist Mustafa Mohatarem said on Thursday.

The senior official at the world's biggest automaker was more optimistic than many economists, who see an upturn in the second half of 2002.

"Clearly things are going to slow down and have slowed down after the September 11 incident. For planning purposes, we're looking at recovery starting somewhere towards the end of the first quarter," Mohatarem told Reuters Television.

"I think that with the amount of monetary stimulus we have in the system, with the fiscal stimulus that's coming, that the recovery will probably start earlier than that," he said in an interview on the sidelines of the APEC meetings in Shanghai.

Despite the sagging U.S. economy and the September 11 hijack attacks which had sent car demand spiralling, industry sources say car and light truck sales in October are running at their fastest pace this year.

The rebound is partly credited to cheap loans launched first by GM in its "Keep America Rolling" programme in mid-September, accompanied by a patriotic advertising campaign, and swiftly adopted by its rival carmakers.

GM extended on Wednesday its offer of zero-interest loans on new vehicles to November 18 from end-October, a move other car makers may have to copy despite repeated warnings by Ford Motor Co. that the costs were unsustainable.

Mohatarem said incentives were necessary to keep GM's market growing in an uncertain environment.

"We've been very pleased with the results of the current incentives and really our strategy is to come up with programs to help maintain the market," he said.

GM has said the loan programme helped cap its sales decline in September at a modest three percent.


Despite that success, GM said last week it would stop production at five plants and curtail work at a sixth in its largest production stoppage since the end of February.

However, Mohatarem did not expect more cuts as these measures were taken in response to a dramatic fall in demand for rental cars after September 11.

"Rental fleets are very important for GM and others...But the overall consumer market has strengthened and we've been very pleased with the response to the incentives," he said.

On Monday ratings agency Standard and Poor's cut GM's and Ford's credit ratings by two notches, citing rising competition from overseas rivals amid a deepening industry slowdown.

The "BBB-plus" rating will likely raise GM's borrowing costs and the strong dollar gave European competitors in the United States an advantage, but Mohatarem said these challenges were manageable.

"We are in a cyclical industry, we've dealt with this before and we'll deal with it again. We intend to remain competitive in the market place," Mohatarem said.

"If you go by the amount of monetary stimulus in place, (the U.S. economic rebound) will be a very strong recovery," he said.

ATTENTION COMMENTERS: Automotive News has monitored a significant increase in the number of personal attacks and abusive comments on our site. We encourage our readers to voice their opinions and argue their points. We expect disagreement. We do not expect our readers to turn on each other. We will be aggressively deleting all comments that personally attack another poster, or an article author, even if the comment is otherwise a well-argued observation. If we see repeated behavior, we will ban the commenter. Please help us maintain a civil level of discourse.

Email Newsletters
  • General newsletters
  • (Weekdays)
  • (Mondays)
  • (As needed)
  • Video newscasts
  • (Weekdays)
  • (Weekdays)
  • (Saturdays)
  • Special interest newsletters
  • (Thursdays)
  • (Tuesdays)
  • (Monthly)
  • (Monthly)
  • (Wednesdays)
  • (Bimonthly)
  • Special reports
  • (As needed)
  • (As needed)
  • Communication preferences
  • You can unsubscribe at any time through links in these emails. For more information, see our Privacy Policy.