Wall Street turmoil could stall car industry recovery

August 9th, 2011 | The Detroit News

It may take time for the auto industry to feel the impact of economic turmoil because experts don’t expect interest rates on auto loans to increase immediately and the popularity of leasing should continue to grow.

But consumer confidence, already battered, has taken another blow with a downgrade of the U.S. credit rating, and many now think U.S. auto sales will fail to reach 13 million this year, as analysts and automakers have projected.

While the industry is worried — though not as spooked as investors — carmakers are cautiously clinging to forecasts of a fragile recovery.

They face challenges that include higher material costs and concerns that credit will dry up. Add to that the plummeting value of investment portfolios, which may keep consumers from buying until their financial future appears more secure.

“This kind of drop in stock prices impacts consumer confidence, which naturally impacts people’s desire to buy a Michigan export like a car,” said David Sowerby, portfolio manager for Loomis, Sayles & Co. L.P., investment management in Bloomfield Hills.

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