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Analyst: Auto Industry Could Improve With Gov't Help

JPMorgan analyst said aid designed to boost liquidity in the asset-backed securities market could stabilize annual auto sales in the 10 million range and possibly boost sales by 2 million.

NEW YORK (AP) -- Financial help from the government's Term Asset-Backed Securities Loan Facility and other moves to loosen up credit for auto loans could help stabilize or even improve vehicle sales this year, a JPMorgan analyst said Wednesday.

Himanshu Patel said the facility known as TALF, which is designed to boost liquidity in the asset-backed securities market, could stabilize U.S. auto sales in the 10 million range and possibly boost the year's sales by as much as 2 million units.

Sales also stand to benefit from the recent $5 billion in aid given to GMAC LLC, along with the potential granting on an industrial loan charter to Ford Motor Credit in the first half of this year, he said.

Patel noted that while tight credit isn't the only factor hurting auto sales now, he noted that about eight out of every ten vehicles purchases are dependent on financing.

"The Detroit Three captive finance companies likely rely on the ABS market for roughly one-half of their auto loan funding needs (GMAC's dependence may decline over time as recent bank holding company status provides it newer, potentially lower-cost, funding sources)," Patel wrote in a note to investors.

"The ABS market was an expensive but still-functioning source of auto loan funding in the first three quarters of 2008; post-Lehman, the market all but died in fourth quarter 2008."

Patel also said in a separate note to investors that while January's overall vehicle sales, which were down from December, may look bad on the surface, it was mainly a result of the steep drop in fleet sales.

Meanwhile, retail vehicle demand appears to have stabilized and January's retail sales were actually up from October through December's levels, he said.

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