Carmakers brace for gloom time

Milan/Frankfurt: Automakers in Europe and South Korea forecast bleak times ahead yesterday as US players already hit hard by a fast slowing economy began a round of closures and job cuts.

Results from Germany's Daimler, South Korea's Hyundai Motor and Fiat in Italy added to the gloom facing the automotive industry as recession clouds gather in the western world.

The news came as Daimler's US affiliate, Chrysler, cut a shift at a Toledo plant and brought forward the closure of its Newark operation, and as a report said General Motors was cutting jobs too. GM and Chrysler are in talks about a cost-saving merger deal.

Germany's Daimler, maker of Mercedes-Benz luxury cars and heavy trucks, lowered its expectations for the year and cast doubt on all of its own forecasts.

"The [Daimler] figures are even below our very cautious estimates. Provisions for lower residual values and lower margin targets at Mercedes-Benz cars are also surprisingly weak," said DZ Bank analyst Michael Punzet.

Outlook

Fiat said global demand for its products could drop 10-20 per cent and its profit tumble by as much as 65 per cent in a 'worst-case' scenario.

At Hyundai, South Korea's top car maker, a senior official expected demand in emerging markets to fall next year.

Global car makers face a sharp drop in sales as drivers put off major purchases on fears of a recession and the cost - if not the lack - of getting loans.

Daimler cut its revenue and profit forecast for 2008 after reporting a plunge in its third-quarter results by two-thirds. "We are in a situation that is very challenging," Daimler chief executive Dieter Zetsche said in a statement.

But the company said its situation was strong: "Despite the ongoing financial market crisis, the group has a solid financial position, which should also remain stable throughout the rest of the year."

Fiat said its trading profit could plunge 65 per cent next year, and although the maker of cars, trucks and tractors called its forecast a "worst case" scenario, analysts saw it as definitive. "It will be seen as a profit warning," an analyst said.

Hyundai, the world's fifth-largest automaker along with affiliate Kia Motors Corp, posted a 38 per cent fall in third-quarter net profit.