Automotive sales slump predicted for 2003

Car and light truck sales are predicted to drop in 2003, according to a new report, which means trucking companies that transport finished vehicles as well as production line components could see freight volumes fall off. According to financial consulting firm Fitch Ratings, North American light vehicle sales volumes will be down 4% to 7% compared to this year -- a drop concentrated mostly in the U.S. market, where sales should fall to between 15.5 and 16 million units in 2003.Fitch added that a number of other issues are confronting the automotive manufacturing community. One is net pricing, which is defined as the change in the year-over-year vehicle price of a comparably equipped vehicle, net of vehicle incentives. The Big Three (Ford, General Motors, DaimlerChrysler) have delivered negative net pricing for much of the last six years, said Fitch, and the trend played a major role in recent high levels of light vehicle sales. However, the downward price move cannot continue as automakers and their suppliers can only cut costs for so long. Automakers, especially the domestic U.S. companies, must now alter this trend by closing plants and cutting other costs to be profitable, Fitch said. The contract negotiations with the United Auto Wortkers (AW) union next year will be one of the most important in the last two decades. That's because major job cuts may be required to enable the Big Three to boost profitability. Fitch estimates that the Big Three need to remove over 2.5 million units of car and light truck capacity in order to get back to profitable production levels.

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