Automakers, suppliers and dealers continued to underperform the slumping stock market in the first quarter.
Each of the three automotive groups tracked by the Automotive News/PricewaterhouseCoopers Total Shareholder Return Index posted larger declines in the quarter than the Dow Jones Industrial Average, which lost 3.6 percent, and the Standard & Poor's 500, which dropped 3.2 percent.
Only 15 of the 62 companies on the shareholder index showed a percentage gain for the first quarter of 2003. Only 14 posted a gain over the past year.
The downturn in the industry was more dramatic than PricewaterhouseCoopers anticipated. Continued economic uncertainty, war jitters and poor consumer confidence dragged down share value. Underfunded pension programs and skyrocketing health-care costs aren't helping the companies' equity either.
"The first quarter saw the auto sector down much more significantly," says Jay Singer, a PricewaterhouseCoopers director. "You see the high vehicle inventory level with the automakers as well as retailers. You have consumer confidence issues.
"Production will be cut in the second quarter to manage the supply side of the picture," Singer says. "On the demand side, you still see heavy incentives. The big question is: How long can this continue?"
The potential long-term effects of incentives on margins may be taking hold.
"This is particularly critical for the Big 3, which have continued to see market share decline despite paving the way in the incentive battleground," according to Pricewaterhouse-
Despite price and cost-reduction pressures on suppliers, their shareholder value outperformed automakers in the first quarter.
Still, the suppliers' performance was weak, down 8.2 percent.
"It was also the first quarter in the last year and a half that the three-year index was better for suppliers than vehicle manufacturers," Singer says.
Suppliers fared better than automakers in part because vehicle manufacturers haven't pushed their incentive costs onto the parts makers, as they've pushed along other cost pressures.
Mike Burwell, a PricewaterhouseCoopers partner, says, "The question is: Will there be a cost shift in the future? We know it's in the works."
Retailers performed the best of the three sectors for the first quarter, yet still posted a 5.5 percent decline.
The only positive number across the groups was the retailers' three-year performance, up 64.4 percent.