John Casesa, first vice president of Merrill Lynch, says that dollars spent on incentives are not producing sales at the same level they have sustained since 9/11 whenCorp. went to 0% financing to kick-start sales.
“It looks like the market is saturated,” Casesa says. He predicts U.S. sales this year will reach 16.6 million units and run at about the same rate in 2005. Further out, Casesa forecasts “steady demand” for the next seven or eight years based on continuing economic recovery in the short term, which he expects will be the case.
Casesa tracks 15 publicly owned supplier companies, and says those whose products are limited to specific applications outperform conglomerates by a wide margin in delivering strong financial results.
He offered good news for suppliers in general, saying, “I think the worst is over in terms of pricing pressures, because productivity is rising.”
Corp.’s sliding market share will keep the heat on the No.1 auto maker to meet its massive health and pension costs, as it now has 2.4 retirees to every employee, he says. Still, “I think GM will continue short term to protect market share (currently 27.4%).”
U.S. market winners will be determined increasingly by the number of new vehicles they can bring into the pipeline, Casesa says. “They are going to need more ‘young’ products in their showrooms to compete.”