Ford chief economist says economic indicators point toward favorable conditions for automotive sales

By Jennifer Lanning Drey

Portland, Ore., Dec. 14 - Ford Motor Co.'s chief economist Ellen Hughes-Cromwick told analysts and investors at the UBS Automotive Economics Conference, held Thursday, that fundamental economic factors appear to indicate favorable conditions for automotive sales over the next few years.

In particular, Hughes-Cromwick said the current global economic conditions are very positive for the industry, with several emerging markets having reached what she called the "take-off" stage of vehicle buying, meaning their per capita growth has begun to accelerate as compared to top-line GDP growth.

"The growth in the overall global economy is sufficient to support an expansion next year in terms of unit sales," Hughes-Cromwick said.

During her presentation, she pointed to the fact that global GDP growth has been above trend for four consecutive years, and although it is expected to decline next year, it is also expected to remain more than a point above the long-term trend of 3.5%.

Ford's major markets in terms of vehicle sales now include China, Japan, Spain, Brazil, India and Russia, as well as the United States and Europe.

"The growth pace in these markets is changing and is very dynamic," Hughes-Cromwick said.

Looking ahead, Ford expects that emerging markets will represent more than 90% of vehicle sales growth during the next decade, she also said.

The United States is currently Ford's largest market, where 17.5 million units were sold last year, and Hughes-Cromwick believes economic factors are also favorable there, and in other mature markets, as customers look to "upscale" new vehicles with added features.

That upscaling has led to an increase in the average transaction price for automobiles sold in markets such as the United States and Europe, Hughes-Cromwick said.

Ford-generated statistics, adjusted for inflation, show that in 2004, 41.3% of new vehicles sold in the United States had a transaction price of more than $30,000, compared to 30.1% of those sold in 2002 and 20.1% of those sold in 1999, she said.

Hughes-Cromwick attributed the higher transaction prices to a significant increase in household wealth. She also said Thursday that she believes the long-established relationship between the housing and automotive industries, where one often follows the other, is not as solid as it used to be and is showing signs of decoupling.

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