Escaping the DownturnOutlook is strong despite economic chaos elsewhere

Juergen Schrempp made Bob Eaton an offer he couldn't refuse. Ford Motor Co.'s board of directors named William C. Ford Jr. non-executive chairman and promoted Jacques Nasser to CEO. General Motors Corp. and the UAW learned - let's be optimistic - that no one wins in a strike. Ferdinand Piech learned that even when you buy every luxury European automobile marque that's not nailed down, you still need to read the fine print. That's why BMW will wind up with the Rolls-Royce nameplate in 2003 even though Volkswagen AG outbid its German rival for Rolls-Royce Motor Cars Ltd.

Those were just some of the unpredictable highlights of 1998. Okay, so maybe the GM strikes were predictable.

Indeed, there are enough distractions to worry about as we approach the end of the millennium. The economic woes of Asia and Latin America are still swirling. We are a year away from the Y2K reckoning. Wall Street charts are looking like a seismograph after an earthquake.

Despite that, there is persuasive evidence that the sheer force of American optimism, the evolution of information age technology and the inability of any automaker to pass price increases on to consumers will sustain the U.S.'s longest economic expansion since World War II for another year.

Low interest rates, relatively full employment, strong consumer confidence and Americans' insatiable thirst for bigger, heavier and more expensive sport/utility vehicles and pickup trucks are a potent antidote to more global uncertainties.

That said, the rate of growth in new car and truck sales will probably slow. A recent survey of 29 leading economists conducted by the National Association of Business Economists found an expectation that the U.S. gross domestic product, the value of all goods and services produced in the U.S., will grow 2.1% in 1999, down from an expected 3.6% this year.

A majority of those economists said they expect the Federal Reserve Board to cut the federal funds rate, at which banks make short-term loans to each other, by between a half to a full percentage point by the middle of 1999.

"We don't see any real signs of a recession for next year," says Ford Chief Executive Officer Jacques A. Nasser. "But we do see a weakening. We don't feel it yet. If you had to peg a forecast at this point that was more precise than accurate, 15 million is about what we think."

In the second part of our two-issue package, WAW takes a close look at the state of the automotive industry entering 1999 at General Motors Corp., Ford Motor Co. and the United Auto Workers union, as well as the other North American manufacturers - from DaimlerChrysler AG to CAMI, and all points in between.