TRAVERSE CITY, Mich.-- There is reason to be optimistic about the North American auto industry, General Motors chief economist said yesterday.
Mustafa Mohatarem said the nations economy is currently in a cyclical downturn, but he expects that it will recover strongly in the second half of this year and into next year.
"As demand picks up, youll see recovery in pricing," Mohatarem said at the Management Briefing Seminars. That could provide the opportunity for GM and other automakers to reduce their spending on incentives.
"If you look back in history, when an industry is in a downturn, manufacturers try to protect pricing but lose unit sales," Mohatarem said. "Now, they fear if they lose market share they wont be able to get it back. Manufacturers would rather lose pricing and keep their units. As the economy recovers, so will pricing."
China has proved to be a strong market, growing at a rate of 40 percent last year, and it looks like it will do the same this year, Mohatarem said.
"But if China doesnt address its banking system, it could come to a crashing halt," he said. "They have between five and 10 years to change their current system."
Mohatarem also said GM is paying close attention to when Western banks will enter into the China market.
Mohatarem stressed the importance of keeping an eye on U.S. market.
He said: "That is and will remain the strongest market in the world."