Bleak Forecast for U.S. Auto Makers

ANN ARBOR, Mich. — U.S. auto makers face continued sluggish sales, increased competition and more red tape in the coming decade, the University of Michigan said in a bleak industry forecast.

Only modest growth in the North American market is expected in the next 10 years, according to the annual report scheduled for release today by the university’s Transportation Research Institute.

Its central message was a call back to basics for the Big Three at a time of flagging auto sales and intense foreign competition.

“Manufacturers cannot forget the purpose of their business: to provide vehicles that are desirable, affordable and offer the customer real value while meeting the broad expectations of society, labor, government and others,” the report said.

The U.S. passenger car market is expected to grow just 1.1% annually over the next 10 years, the institute said. By contrast, demand for import models will grow by 2.1%.

“Corporate strategies must adapt to relatively flat markets and strive to build market share, reduce costs and increase profit margins and reinvestment rates,” the report said.

The report, prepared annually by the university institute’s Office for the Study of Automotive Transportation, was to be detailed today at the Automotive News World Congress in Detroit. The conference is being held in conjunction with the North American International Auto Show.

The university based its forecast on surveys of executives and engineers at North American auto makers and their suppliers, who discussed industry trends in materials, technology and marketing.

Consumers discouraged by high-priced luxury automobiles are buying smaller cars equipped with more options, said University of Michigan researcher David Andrea, who wrote the report.

“As a result, the upper ends of each price segment are the fastest-growing segments of the auto market,” he said.

“Our respondents believe that the real transaction prices for cars and light trucks will continue to rise while real household income remains the same and real disposable personal income declines.”

Tighter government regulations on exhaust emissions, fuel economy and safety emerged as a major obstacle to U.S. auto makers in this year’s forecast.

“While regulatory activity was not a major concern of our 1989 panelists, more than 75% of our 1991 panelists believe . . . regulations will become more stringent,” Andrea said.

Despite the current focus on Japanese competition, North American auto makers can expect more production from car makers in Mexico, Australia and India in the decade ahead, the report said.

Profitable markets for U.S.-made cars and light trucks likely will emerge in Czechoslovakia, Poland, Hungary and other former Eastern Bloc nations, the institute said.