NEW YORK -- The Wall Street financial-industry crisis could push back any recovery in U.S. auto sales beyond 2010, unless a number of ifs come to pass, several top auto industry analysts concluded today at a conference here.
For instance, auto sales could improve as soon as 2010, but not sooner:
If the credit crisis that drove Lehman Brothers into bankruptcy this week doesnt get much worse.
If auto loans for consumers continue to be widely available, despite reports of tighter approval standards and an increase in turndowns.
If auto lenders can borrow enough money to make retail loans and leases -- for those who still offer leases.
If automakers can continue to raise enough cash to keep from going bankrupt.
Considering the financial crisis that drove Lehman Brothers into bankruptcy Monday, Sept. 15, none of those ifs is a given. Those were some of the views at the auto Industry Hot Topics Conference, co-sponsored by J.D. Power and Associates and Standard & Poors.
Camera crews nearby
The conference met at the Manhattan headquarters of The McGraw-Hill Cos., the parent company of both sponsors. A couple of blocks away, a TV camera crew staked out Lehman Brothers headquarters, looking to shoot video of employees leaving with boxes of possessions.
The problem is nobody knows where all the risks are, said Robert Schnorbus, J.D. Power chief economist, in an interview during a conference break.
Schnorbus said in a presentation that light-vehicle sales this year should be about 14.2 million. That would be the lowest in 15 years. For 2009, he gave an essentially flat forecast of 14.3 million. The first substantial improvement would be an estimated 14.9 million in 2010.
Even achieving that anemic level of sales will be difficult, he said.
How bad is the business outlook for the auto industry? Its so bad that the first half of 2008 is going to look good by comparison, Schnorbus said.
Were at the point now where were wondering if we can get something like (the sales level) of the first half of 2008, in the second half of 2009. And thats whats becoming increasingly at risk, because of the latest round of business failures, he said. For now, Schnorbus said hes sticking to his forecast despite the Lehman Brothers filing.
Standard & Poors has an even lower forecast of 14.0 million light vehicles for 2008 and 2009, said Gregg Lemos Stein, associate director.
Even bad numbers look good
Even at 14.0 (million), theres more downside risk than upside, especially if what were seeing this week continues for months, if not longer, he said. That would certainly be a downside risk to our forecast.
A fundamental trouble with the financial crisis is the widespread feeling that all of the bad mortgages that are at the root of the crisis havent surfaced, Schnorbus said.
It killed Bear Stearns, and we would have hoped that after Bear Stearns there would be no other next shoe to drop, he said. But what you find is maybe the problems were buried deeper than we thought.
JPMorgan Chase & Co. bought out Bear Stearns & Co. Inc. in March, in part because of the mortgage crisis. Behind those bad mortgages there was a leveraged buyer, and behind that leveraged buyer was another leveraged buyer, Schnorbus said.
Schnorbus quoted another conference speaker, Chief Economist David Wyss of Standard & Poors, who said, Rule number one of banking is: Dont lend money to people who need it.