GM expected to thrive in 2010

A global recovery in auto sales may soon restore General Motors to health as it emerges from the shadow of bankruptcy, according to Carlos Gomes, senior economist at Scotia Economics.

The cyclical recovery, which began in the spring, is poised to produce record volumes in 2011, Gomes said Tuesday.

“General Motors is not only a North American-based company, but it is one of the leaders outside the continent,” said Gomes.

“For example, GM, in 2009, will sell as many vehicles in China as it will in the U.S. So, as volumes pick up globally, GM will be one of the main beneficiaries of that.”

On the other hand, Chrysler Group LLC’s dependence on the North American market makes its future less certain, he added.

“Chrysler does not sell that much outside North America; it becomes a tougher situation for them.”

The global auto industry is on the verge of returning to record sales volumes, according to the automotive outlook from Scotia Economics.

The report, released Tuesday, forecasts that global sales for consumer vehicles will rise 5.5 per cent to 52.73 million units in 2010, “setting the stage for record volumes in 2011.”

That would follow what’s expected to be a 4.2 per cent drop in sales this year to 49.96 million vehicles.

This recovery, the Scotia report says, has less to do with what’s happening in mature car markets, such as the United States, Canada and Europe, and more about countries with rapidly expanding middle classes, like China, India and Brazil.

Gomes said the impact these countries will have on the auto industry is a side-effect of their rapid economic growth that has seen them catching up with more industrialized countries for several years.

“Per-capita income gains (in emerging economies) are advancing at a quite fast pace, and their vehicle-penetration rates are very, very low,” he said. “As incomes increase in China and India and other places, one of the things these people will aspire to is to own a vehicle.”

Gomes said there are about 40 vehicles for every 1,000 people in China, compared to about 600 per 1,000 individuals in G7 countries.

China, after seeing auto sales growth of more than 40 per cent this year, should see another 20 per cent uptick in 2010, putting its car sales at about nine million, the Scotia report said. Including trucks and buses, China surpassed the U.S. as the largest auto market this year, with sales of about 13 million, the report also noted.

In the U.S., sales of passenger vehicles are expected to come in at 10.3 million this year, down more than 20 per cent from 13.19 million in 2008. This market is expected to see a 11.7 per cent jump in 2010 to 11.5 million vehicles sold.

Expectations for vehicle sales gains in Canada next year are in line with the overall global trend.

A 5.5 per cent rise is expected in 2010, putting sales at 1.53 million. This year’s sales are anticipated to tally 1.45 million, down 11.6 per cent from 1.64 million last year, the Scotia report said.

Ontario, with its product mix, is poised to benefit from the improving market, added Gomes.

“The fact we do have several plants that are making pretty popular crossover utility vehicles is definitely a bonus for us because that’s the segment that will continue to remain the strongest going forward,” he said. “Even in this year when we had sharp sales declines, we’re starting to see the crossover segment is posting double-digit gains. I do believe that as the industry gains momentum that will continue to be the place to be.”

Employment levels in the domestic auto industry will also continue to rise, he said.

“We started to see some stabilization in employment levels during the summer and, as we close off 2009, we’ve actually started to see some hiring take place,” Gomes said, citing Toyota’s plans to add a shift and at least 800 jobs to its facility in Woodstock.

While the minivan is no longer a growing segment, Chrysler will continue to dominate minivan sales, he said.

“It’s a segment that is important, but no longer a segment that has strong growth potential. Chrysler is the leader and will continue to remain relatively strong in the marketplace.”