February 12, 2010 http://detnews.com/article/20100212/AUTO01/2120418

J.D. Power sees positive year ahead for automakers

ROBERT SNELL
The Detroit News

Orlando, Fla. -- The U.S. retail auto market could rise by 1 million units this year thanks to a loosening of consumer credit and automakers making a gradual return to leasing, according to a J.D. Power & Associates industry forecast.

The firm raised its U.S. retail forecast for the year to 9.6 million vehicles, up from 8.6 million vehicles sold last year. The forecast reflects signs that the economy is improving, though there are risks, namely unemployment hovering around 10 percent and concern about a wider availability of credit.

"Credit has come a long way, but it's got a long way to go," Jeff Schuster, J.D. Power's executive director of automotive forecasting, said during a speech today at the National Automobile Dealers Association convention.

The U.S. market sold 7 million fewer vehicles from 2000 to 2009 amid an economic downturn, high gas prices and bankruptcies of General Motors Corp. and Chrysler LLC. Retail sales fell 22 percent in 2008, but Schuster forecasts a 12 percent increase this year.

Several reasons for the increase are the age of vehicles on the road that need to be replaced, an improving economy and a thawing of credit availability, he said.

Major automakers are making a slight return to leasing. Leasing peaked in 2008 with 20-22 percent of sales, but declined steadily as GM and Chrysler stopped offering lease deals that year and Ford Motor Co. scaled back, Schuster said.

He expects the leasing market to creep back up to the 15-18 percent range over the next two years.

"That's a positive sign in the marketplace," he said.

Automakers will face increasing competition over the next two years with an average 60 to 65 new models in the market by 2012.

Schuster also warned the trend by automakers may have overestimated demand for small cars while shifting away from gas-guzzling trucks and sport-utility vehicles.

Almost half of all vehicle launches over the next three years will be small cars.

"Everyone is bringing a small car," he said. "Maybe the industry went a little too far with it at this point."

While federal regulations propose setting stricter vehicle fuel efficiency standards, those standards could be loosened and lower demand for smaller vehicles, Schuster said.