LexFather

Germans brace for U.S. downturn

MUNICH -- A possible recession in the United States is threatening the sales outlook for German automakers, although executives say they are well positioned to weather a downturn.

The U.S. market accounts for more than 20 percent of the total sales of Porsche, BMW and Mercedes-Benz. But executives say they would be less affected by a recession than other automakers because of their upscale customer base.

Porsche relies on the American market for 36 percent of its worldwide sales. Despite the shaky economic outlook, the Stuttgart-based sports-car maker remains confident.

"Especially in the U.S., we have a very solvent clientele," CEO Wendelin Wiedeking has told shareholders. "Porsche is prepared for a possible slump."

In addition, he said, sales held up in the earlier crises triggered by falling share prices in 2000, the Sept. 11 attacks in 2001, and the beginning of the Iraq war in 2003.

Audi also says it won't let the threat of a recession hold up its growth plans. "We generate 90 percent of our sales outside the U.S., and our growth in those areas is unabated," a spokesman said.

The situation seems different for Volkswagen's main VW brand. It has recorded losses in the U.S. market for years.

"The high volume manufacturer is closer to the average consumer," said Arndt Ellinghorst, an analyst at Credit Suisse.

The VW brand generates just 6 percent of its worldwide sales in the U.S., a total of 230,571 vehicles. "But it's well positioned in growth markets like China, South America and eastern Europe," said Juergen Pieper, an analyst at Bankhaus Metzler.

Ellinghorst, the Credit Suisse analyst, advises companies "to keep their inventory of vehicles low in the U.S., sell only as many as necessary, and then sell the vehicles with higher contributions to profit in emerging markets."

Porsche is leading the way: "Inventories in the U.S. have already been sharply reduced," Wiedeking said.

Automakers are sticking with their U.S. investment plans. BMW is expanding its factory in Spartanburg, South Carolina, and VW is close to announcing the site for a new U.S. factory.

Albrecht Denninghoff of BHF-Bank believes the timing is right for the move: "Land is cheap. The dollar is cheap. Real property is chea

mmarshall

.........and, often, talk is cheap.

thetopdog

I thought the US would account for a lot more than just 20% of sales for BMW, Merc and Porsche

mavericck

Why's that? We're only a very small percentage of the world's population.

Allen K

iTrader: (4)

+1 Also, the lower end models of the BMW and Merc don't make their way to the states. Nor do the smaller engine choices.

marshmallo

Hmmm, the rich are also pulling back on their spending. The ultra rich could
care less, but the near-rich, merely-rich and the slightly-excessively-rich
could be affected more than expected.

Gojirra99

That's right, they are selling the lower end models & smaller engines & diesels in Europe in big volumes in Europe which makes up the bulk of their sales, many as fleet sales to taxi companies & corporations. Those are not available here, & if they were, they will be selling in the price range of most Toyota's & Honda's, etc. here, & of course those lower end cars usually make up the bulk of total sales.