Lower Gas Prices?

DETROIT — The mood may be gloomy in Detroit, where Big Three auto makers are coming off a tough 2006 and remain smack in the middle of a painful restructuring that will see massive job cuts and several plants closed over coming months.

But the U.S. market, at least, will stay relatively healthy this year, top economists for the companies tell the Society of Automotive Analysts in here, with gas prices likely to decline and sluggish housing sales to have a less-than-feared impact on new-vehicle demand.

Van E. Jolissaint, Ellen Hughes-Cromwick and G. Mustafa Mohatarem, chief economists for DaimlerChrysler AG, Ford Motor Co. and General Motors Corp., respectively, are within easy distance of each other when it comes to their U.S. sales forecasts.

Jolissaint and Mohatarem are the most bullish, predicting a total new-vehicle market of 17.0 million units. In the case of DC's Jolissaint, that includes 16.5 million light vehicles and 500,000 medium- and heavy-duty trucks. GM's Mohatarem would not break out his sales forecast by weight class.

Ford's Hughes-Cromwick is more conservative, calling for a total market of 16.8 million, including 16.4 million light vehicles.

“When 2007 ends, we're likely to say it was an OK year, not a great year, but an OK year,” Jolissaint says, adding the economy is part way through a mid-cycle slowdown and prospects for a once-feared recession are slim.

Concern the housing market will drag down new-vehicle sales is vastly overstated, all three economists indicate, with vehicle-sales patterns showing only a fraction of the volatility of the housing sector over the past 20 years.

Jolissaint says the “bottom is in sight” for the housing recession any way, though Mohatarem says that may be “too early to call.”

Fuel economy has risen to a level of concern for car buyers not seen since 1980. But all three point to increasing oil production from non-OPEC nations as a sign prices should stay stable or even decline in 2007.

Oil prices have fallen from $78 a barrel in July to below $50 as of press time. Hughes-Cromwick is pegging gasoline to settle in at about $2.50 per gallon.

The leveling off of gas prices is one reason Jolissaint is predicting a market-share gain for utility vehicles and pickup trucks in 2007.