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Analyst: No Quick Turnaround In Store For Automakers

Auto industry analysts say there are few signs that would indicate a short-term turnaround and predict that the struggling economy could lead to some consolidation in the industry.

DETROIT (AP) -- Automakers should not expect a quick turnaround in consumer demand, auto industry analysts said Tuesday, predicting the struggling economy could lead to some consolidation in the industry.

Deutsche Bank analyst Rod Lache told the Society of Automotive Analysts conference that there are few encouraging signs that would indicate a short-term turnaround. He predicted U.S. auto sales would fall about 13 percent to 11.5 million units in 2009, hurt by high unemployment, low consumer confidence and mounting consumer debt.

"The industry really needs to brace itself for an extended period of weak demand," Lache said at the conference, which coincided with media previews of the North American International Auto Show.

Finbarr O'Neill, president of J.D. Power and Associates, predicted U.S. auto sales would decline to 11.4 million units in 2009, followed by some growth to 13.4 million units in 2010 and 14.7 million units in 2011.

Lache and O'Neill predicted there could be some consolidation within the industry. As General Motors Corp., Ford Motor Co. and Chrysler LLC undergo massive restructuring, Lache said there's no guarantee that all three will survive, and consolidation could swallow some of the smaller companies, including Chrysler.

O'Neill said there could be a forced consolidation of one of the domestic auto companies as part of the rescue package approved by the Bush administration for General Motors and Chrysler, but it was unclear how the incoming administration of President-elect Barack Obama would execute the plans.

"At some point an economic decision will be made by some companies" about their viability in the difficult U.S. market, O'Neill said.

The grim outlook for 2009 followed a traumatic year for the auto industry. U.S sales fell 13.2 million in 2008, down 18 percent from 16.1 million in 2007, with much of the losses piling up late in the year because of the financial crisis and credit crunch. In December, U.S. sales tumbled 36 percent.

GM and Chrysler were rescued from likely bankruptcy with $17.4 billion in federal loans in December and the two companies are now trying to gain concessions from workers and creditors.

The concessions must be approved by union members and bondholders and submitted as part of GM and Chrysler's restructuring plans due Feb. 17. The government could call in the loans at the end of March if the companies have failed to significantly restructure themselves.

Emily Kolinski Morris, Ford's top economist, said the company expects auto sales during the first six months of this year to remain at the sluggish pace of late 2008.

"The real question is what happens in the second half of the year," she said.

During the first half of 2009, Ford expects U.S. auto sales to range between 10 million to 11.5 million units on an annualized basis. The economic stimulus plan being pushed by the incoming Obama administration could boost sales in the second half to an annualized rate of about 11 million to 14 million, she said.

For the full year of 2009, Ford expects the entire industry to sell 10.5 million to 12.5 million vehicles in the U.S., Kolinski Morris said.

GM has said it's predicting U.S. sales of 10.5 million to 12 million in 2009, and many analysts' predictions have fallen in a range of 10.5 million to 11.5 million.

Ford shares fell 8 cents, or 3 percent, to $2.56 in midday trading. GM shares fell 13 cents, or 3.1 percent, to $4.02.

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