Auto sales in the United States and Canada are moving in starkly different directions, according to forecasts issued in each country yesterday.
Standard & Poor's Corp. issued a gloomy forecast for the U.S. market, saying high gasoline prices and the housing crisis will push sales down to 14.9 million vehicles this year, which would be their lowest level since 1997.
In Canada, however, strong job creation - particularly in Western Canada - and strong sales nationally in January and February prompted DesRosiers Automotive Consultants Inc. to upgrade its forecast for Canadian deliveries in 2008.
Sales should hit 1.645 million vehicles in Canada this year, up from a previous forecast of 1.603 million issued in November and down slightly from the 1.653 million last year, Dennis DesRosiers, president of the consulting firm, said in a note to clients yesterday.
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"Canada is actually creating a fair number of jobs this year (the U.S. is shedding jobs) and in Canada if you have a job you need a vehicle, simple as that," Mr. DesRosiers said.
In what he called a strange twist, the U.S. slump could give a boost to auto makers in Canada. Because the Canadian market is about 10 per cent of the size of the U.S. market, auto makers normally allocate a much greater percentage of their hot-selling vehicles to U.S. dealers.
"With the U.S. market in a full-scale decline across most segments, many of the best sellers are being freed up to be sold in Canada instead of the U.S.," he said. "Great availability helps the market in Canada."
Price cuts have also helped, he added. Transaction prices have fallen by about 5 per cent so far this year as auto makers have reacted to the rise in the value of the Canadian dollar and widespread publicity last fall about lower prices for new vehicles in the United States.
The negative S&P outlook is based on oil prices at $110 (U.S.) a barrel and a frozen lending market, the ratings agency's chief economist David Wyss said in a report issued yesterday.
Mr. Wyss noted that vehicle sales were 16.1 million in the United States last year, down from 16.5 million in 2006, and the stimulus of the U.S. tax rebate is probably too small to provide a boost to the market this year.
High gasoline prices have another impact, S&P noted, by sending buyers into smaller vehicles that generate smaller profits for Chrysler LLC, Ford Motor Co. and General Motors Corp.
The fragile economic picture threatens the recovery being undertaken by the Detroit Three as they adjust to years of market share losses.
