Auto outlook: Semi-bright

By Dennis Seid/NEMS Daily Journal

TUNICA – The worst is over for the automotive industry, but the road to recovery might still be a bit bumpy, said an industry consultant at the Southern Automotive Conference on Thursday.
Kim Korth, president and owner of global consulting firm IRN Inc., said opportunities exist for both manufacturers and suppliers.
“There can be many in the industry doing bad, but you can thrive,” she said. “For example, differentiation in technology is possible; there is a difference in performance that can set you apart.”
The conference, in its third year, has attracted more than 400 attendees, bringing together auto manufacturers, auto suppliers, economic development officials and anyone interested in making contacts and expanding networks within the $1 trillion industry.
The automotive manufacturers associations of Mississippi, Alabama and Tennessee are hosting the 2 1/2-day event at Harrah’s Mid-South Convention Center.
North weighed in on several topics, including the health of the economy and its impact the auto industry.
U.S. auto sales plummeted from about 16.5 million vehicles in 2006 to 10.4 million last year as the recession clamped down. Industry analysts predict sales will improve this year to around 11.2 million, still well below figures from just a few years ago but far from the trough of last year.
But getting people to buy more cars and trucks depends on the economy, whose recovery has been anything but certain.
“There are many reasons why the recovery has been slow,” Korth said. “You have the lingering effects of the financial crisis and credit crunch, the uncertainty of regulation and taxes, consumers’ reluctance to spend, a lack of business confidence, weakness overseas and weakness in the housing market.”
And while the housing market has been trumpeted by many experts as the linchpin to economic growth, North thinks its impact is overemphasized.
The high unemployment rate, hovering between 9.6 percent and 9.8 percent nationally, is one of the biggest barriers to economic growth.
In Northeast Mississippi, the jobless rate has averaged more than 10 percent for most of the past two years.
“If the economy were to add 100,000 jobs per month starting in September, it would take three years to get back to pre-recession employment levels,” Korth said. “So it’s been a jobless recovery.”
Jobs will generate income, which will generate buying, which will spur the economy.
That, of course, will help the auto industry, which is still trying to gain traction.
Some good news, North said, is that between 2010 and 2020, about 20 million people of driving age will be added.
“North American sales and production should reach ‘normal’ levels in the next two or three years,” she said. “We think production will be between 14.5 million to 15 million through 2015.
“We’re not going to get back to where we were, but I think we’ll be in much better shape.”
Korth also rated all the major automakers:
• She said Honda was the most flexible of all of the companies, saddled only by conservative vehicle designs.
• Nissan, which has a manufacturing plant in Canton, is also doing well, but some of its designs perhaps have gone too far in the other direction, she said.
• Toyota, which is building a Corolla plant in Blue Springs, no longer has its bulletproof reputation and must work hard to regain customers’ trust and loyalty after its massive recalls of the past year. It, too, suffers from unimaginative vehicle design.
“I think Toyota will learn from its mistakes and be much stronger,” she said.
• The Detroit 3 automakers – GM, Ford and Chrysler all are faring better, especially Ford.
• Chrysler has a great champion in Sergio Marchionne, the CEO of Fiat, which bought Chrysler last year.
• Ford has runaway hits with several vehicles, but may be overemphasizing its small cars.
• GM has a “great product,” especially its trucks and SUVs, and should do very well in the next five years.

Contact Dennis Seid at (662) 678-1578 or dennis.seid@djournal.com.