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TWST: Let's start with an overview of your coverage in the auto space.
Mr. Novak: I cover about 30 companies in this space, ranging from the
vehicle manufacturers, to parts suppliers, to the publicly traded
dealership groups. TWST: Why don't we start at the top with the auto manufacturers? What is
going on? Is it as bad as it seems to be?
Mr. Novak: It's really a tale of two industries. On one hand, vehicle
unit sales have been running at historically high levels in North
America and Europe for several years. On the other hand, there have been
dramatic shifts in market share among the global players, with General
Motors (GM) and Ford (F) experiencing much of the pain. The challenges
at GM and Ford are secular and not cyclical. We've moved from the Big
Three to the Global Six or Seven, and GM and Ford are struggling to
adapt to the shifting landscape. Looking ahead, the macro environment
including rising interest rates, higher gasoline prices and a slowdown
in housing could challenge everyone. We think unit sales will fall about
3%-5% this year, with GM and Ford experiencing further declines in
market share. As a result, there will likely be more pain in Detroit,
while the Asian companies will continue to do well, even if there are
some bumps created by the macro environment. Also, the industry should
see impressive growth in emerging markets over the next 10-20 years, but
meaningful profits could be years away and it's not clear who the
winners will be in those markets.
Tickers included in this excerpt: ALV, BWA, CC, CM, F, GM, GNTX, HD, HMC, JCI, KMX, LEA, MGA, NSANY, SAH, TM, TRW, VC, ZK
For more information call (212) 952 7433. The
Wall Street Transcript does not endorse any of the comments made by interviewees, and does
not make stock recommendations.
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