By Rebecca Harrison
PARIS, Sept 23 (Reuters) - Auto bosses head for the Paris car show this week, hoping the gleam from new models will cut through war clouds over Iraq and gloomy equity markets which threaten to sink already shaky consumer demand.
As consumers queue for a glimpse of key money-spinning cars in sheetmetal for the first time, analysts will be pressing executives for clues on how many people are actually buying and how much they are willing to pay.
"Behind all the glitzy cars, the reality is that things are a bit gloomy," said Graeme Maxton of automotive consulting firm Autopolis. He said demand was shrinking almost everywhere.
Other analysts were more upbeat, but said they wanted clearer guidance on how executives see the industry panning out next year.
"We are not expecting a dramatic recovery but things seem to be stabilising and we need some idea of firms' internal planning for volumes in 2003," said one London-based analyst, who declined to be named.
Apart from embattled Italian carmaker Fiat , most manufacturers will arrive in Paris with sturdy second-quarter results under their belts, having topped expectations and cut debt levels.
Luxury and mass-market players alike have delivered sanguine verdicts on how the rest of the year should pan out, as tough cost-cutting helps cushion the effects of weaker demand.
The sector's resilience has been reflected in its shares, with the DJ Stoxx European auto index shedding just 16 percent this year compared to the Eurotop 300 index's 30-percent slide.
FOGGY FUTURE
But analysts urged caution, stressing firms had only beaten forecasts already marked low, and that the lingering threat of war in Iraq could quickly derail any recovery.
"Strikes in Iraq would spike oil prices, dampen demand and delay a recovery," said an analyst at Deutsche Bank in Paris, adding that any war-effect would do less damage than continued jitters over a recovery.
Many analysts agree sales in western Europe are likely to dip by between four and five percent this year and remain flat in 2003, indicating the market -- hard hit over the past 18 months by global economic weakness -- may be bottoming out.
But new car registrations in western Europe fell a steep seven percent in the volatile month of August, prompting concern among some analysts.
"The big question that people will be asking in Paris is 'where is short-term demand going in Europe?' said Patrice Solaro, autos analysts at Julius Baer in Paris. "There is no visibility for next year and people are starting to wonder if four to five percent growth was a bit optimistic."
Demand in the United States has remained buoyant as consumers pounce on interest-free loans, although some analysts say the incentives are crimping already slim profits and fear they may simply be stealing sales from future periods.
Auto sales in the world's largest economy surged to their highest level this year in August, flouting fears consumer spending may buckle as the stock market reels.
But in Japan the market remains lacklustre, with August domestic vehicle sales down 1.4 percent from a year earlier -- the 12th successive month of year-on-year decline. Domestic sales in January to August were down 5.4 percent from a year earlier, leaving investors and companies still dreaming of an upturn.
RAZZAMATAZZ
While the road ahead is still uncertain, one thing is sure -- participants at the show will be more upbeat than last year, when the September 11 attacks on the United States blackened the mood at the Frankfurt auto show.
"There are a lot of exciting model launches which should mean a more upbeat mood, compared to last year when salivating over the new BMW seemed a bit crass after September 11," said the London-based analyst.
Solaro said the fate of stylish new models was even more key this year as firms face ever-tougher competition in a tighter market, with the outlook still foggy.
"New models are always important, but this year they will act as a parachute for companies grappling with tough conditions," he said. "So there will be a bigger discrepancy between those launching successful new cars and those not."
Analysts at SSSB said the presentation of Renault's restyled Megane II could steal the show, with Porsche's long-awaited Cayenne sports utility vehicle also set to grab headlines. Analysts say both are strategically key.
With Fiat bosses conspicuously absent, all eyes will be on General Motors Corp. for clues on whether troubled Fiat may be forced to exercise a "put" option to sell its 80-percent stake in its car arm to the U.S. giant.
Nine months into a cost-cutting drive, the world's number two carmaker Ford Motor Co. will also be in the spotlight after it said earlier this month it would make a small profit in the third quarter and not the loss previously forecast.
Ford President and Chief Operating Officer Nick Scheele told analysts last week that the compnay needed more agressive cost cutting measures.