The dark cloud hanging over the auto industry has started to dissipate, but the storm isn't over, said Steve Girsky, managing director and senior auto analyst for Morgan Stanley in New York.
Pricing and market share problems brought on by intense competition and currency exchange rates still dog Detroit automakers, Girsky told the Automotive News World Congress.
But there is some good news, he said. A recovering economy and a tendency by consumers to take more car trips will fuel better than expected vehicle demand and help the industry sell about 15.9 million vehicles in 2002, Girsky said.
"We think there is something to be said about consumer purchase behavior, the whole cocooning effect," he said,
"Consumers are not flying on vacation as much anymore; consumers want to drive more. Maybe they'll save some money on a trip to Disney World and upgrade their car. Staying closer to home should help car demand."
Still, fierce competition from import manufacturers is making life difficult for domestic manufacturers.
General Motors, Ford Motor Co. and the Chrysler group are being "sandwiched" between Korean manufacturers on the market's bottom and German and Japanese manufacturers at the top, he said.
Also hurting domestic automakers is the weak Japanese yen, which has fallen 28 percent against the dollar during the past year, Girsky said.
"The Japanese manufacturers have a lot of their costs in yen and their revenues in dollars, so a weak yen is like the equivalent of a price increase or a cost reduction for them," he said.
But low inventories should help domestic automakers, Girsky said. That means lower capacity production schedules likely will remain firm in the near term and could mean a decline in new-car incentives, Girsky added.
"You're seeing signs of capacity coming out of the business; Chrysler has taken a little out; Ford has taken some out," he said. "We'd like to see GM take some out, but we're not getting there yet.
"An improvement in the supply/demand equation will help the price situation going forward, as well. Again, that's two years away, but you're starting to see signs that it's happening. It's the rate of change that's important. The industry is taking steps now to lay the groundwork for something more successful in the future."