Outlook for the Auto Industry Economic Outlook Symposium Federal - PDF document

Outlook for the Auto Industry Economic Outlook Symposium Federal Reserve June 1, 2007

Auto Industry Leading Indicators Ability To Buy May ‘06 May ‘07 Disposable Income Green Green Household Debt Green Red Yield Curve Yellow Red Inflation Yellow Yellow Composite Green Red DC Economic & Market Intelligence

Consumer Debt Payments Installment, Mortgage & Auto Leases % of Disposable Personal Income 15.4% 16.0% 15.3% Mar 15.5% 15.0% 14.5% 14.0% 13.5% 13.0% 12.5% 12.0% 11.5% 11.0% 10.5% '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 DC Economic & Market Intelligence

Consumer Prices All Items, Not Seasonally Adjusted % Change Yr/Yr 18 16 14.8% 14 12 10 8 2.6% 6.3% Apr 6 4 2 0 -2 -4 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 DC Economic & Market Intelligence

Consumer Prices: Core Inflation All Items Less Food & Energy, NSA % Change Yr/Yr 18 16 13.6% 14 12 10 8 5.6% 6 2.3% Apr 4 2 0 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 DC Economic & Market Intelligence

Auto Industry Leading Indicators Willingness to Buy May ’06 May ‘07 Consumer Attitudes Yellow Yellow Unemployment Claims Green Green Workweek Green Green Stock Market Green Green Composite Green Green DC Economic & Market Intelligence

Consumer Attitudes Average of U of M & Conference Board Index 140 128.4 120 98.5 May * 100 80 60 58.1 * Preliminary 40 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 DC Economic & Market Intelligence

Buying Conditions for Vehicles During Next 12 Months Index 165 170 164 160 Good 150 127 140 May * 130 120 119 110 Bad 104 100 90 80 * Preliminary 70 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 Source: Reuters/University of Michigan DC Economic & Market Intelligence

Sub Prime Market Housing and the

Source: Census '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 New Home Sales Thousands DC Economic & Market Intelligence 1600 1400 1200 1000 800 600 400 200 0

Existing Home Sales Million Units SAAR 7.5 7.0 6.5 6.0 5.5 5.0 4.5 '99 '00 '01 '02 '03 '04 '05 '06 '07 Source: National Association of Realtors DC Economic & Market Intelligence

New Homes for Sale At End of Month, SA Buying Conditions Thousands U.S. Economy Good Time/Bad Time to Buy, Index 600 550 500 450 400 350 300 250 200 150 100 '83 '84 '86 '88 '90 '92 '94 '95 '97 '99 '01 '03 '05 Source: National Association of Home Builders DC Economic & Market Intelligence

Existing Homes for Sale NSA Thousands 4000 3500 3000 2500 2000 1500 1000 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 DC Economic & Market Intelligence Source: National Association of Realtors

Source: Census '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 Housing Starts New Housing Units DC Economic & Market Intelligence Thousands 2500 2000 1500 1000 500 0

Median New Home Prices Yearly % Change, 12 Month Moving Average 20 18 16 14 12 10 8 6 4 2 0 -2 -4 -6 -8 '70 '75 '80 '85 '90 '95 '00 '05 Source: National Association of Realtors DC Economic & Market Intelligence

Median Existing Home Prices Yearly % Change, 12 Month Moving Average 18 16 14 12 10 8 6 4 2 0 -2 -4 '70 '74 '78 '82 '86 '90 '94 '98 '02 '06 Source: National Association of Realtors DC Economic & Market Intelligence

U.S. Household Net Worth Trillions of 2000 $ 55.6 60 55 50 45 40 35 30 25 20 15 9.3 10 Equity in 5 Real Estate 0 '73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 Source: Flow of Funds DC Economic & Market Intelligence

U.S. Housing Affordability Index Existing Homes Index 150 130 111.9 Apr 110 103.8 90 70 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 Source: National Association of Realtors DC Economic & Market Intelligence

Buying Conditions for Houses During Next 12 Months Index 200 175 Good 175 180 160 136 May * 140 120 Bad 116 100 106 102 80 60 40 * Preliminary 20 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 Source: Reuters/University of Michigan DC Economic & Market Intelligence

Mortgage Delinquencies Total Loans with Installments Past Due, SA Percent 16.0 14.0 12.0 Sub-Prime Loans 10.0 8.0 6.0 4.0 Prime Loans 2.0 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 DC Economic & Market Intelligence Source: Mortgage Bankers Association

Subprime Foreclosures Started During Quarter, SA % Units 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 DC Economic & Market Intelligence Source: Mortgage Bankers Association

The Effect of Gas Prices on Auto Sales

Oil Prices Dollars/Barrel Actual 2004 2005 2006 West Texas Intermediate $ 41 $ 56 $ 66 DC Economic & Market Intelligence

Consumer Spending Energy Goods & Services % of Disposable Income 9.0% 8.0% 7.0% 6.0% 5.7% Mar 5.0% 4.0% 3.0% '59 '62 '65 '68 '71 '74 '77 '80 '83 '86 '89 '92 '95 '98 '01 '04 '07 DC Economic & Market Intelligence

Cost Per Mile Driven* U.S. Auto Industry New Light Vehicles Cents 20 18 16 14 Trucks 12 10 Cars 8 6 4 2 0 '75 '78 '81 '84 '87 '90 '93 '96 '99 '02 '05 '08 * EPA Combined Weighting DC Economic & Market Intelligence

Importance of Fuel Economy in Vehicle Buying Decisions Ranking 4 th 1980 22 nd 2001 19 th 2002 13 th 2003 11 th 2004 9 th 2005* 4 th 2006 * Pre-Katrina/Rita DC Economic & Market Intelligence

New Vehicle Consumer Prices % Change Year/Year 4.5% 3.5% 2.5% - 1.0% 1.5% Apr 0.5% -0.5% -1.5% -2.5% '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 Monthly Data DC Economic & Market Intelligence

Current Oil Price Forecasts West Texas Intermediate, Dollars/Barrel Actual Forecast * 2004 2005 2006 2007 2008 Analysts Average $ 41 $ 56 $ 66 $ 63 $ 63 EIA 64 64 DaimlerChrysler 63 60 Analysts: PIRA, Global Insight, MacroAdvisors * April/May ‘07 DC Economic & Market Intelligence

2007 Gasoline Price Forecast Comparison, Retail Prices All Grades 350 DCX CG 300 EIA 250 GI GI 200 High PIRA 150 Jan- Feb- Mar- Apr- May- Jun- Jul-07 Aug- Sep- Oct- Nov- Dec- 07 07 07 07 07 07 07 07 07 07 07 Annual Average: DCX: $2.56/gal CG: $2.91/gal assumption for 2007 planning volumes EIA: $2.66/gal GI: $2.48/gal* GI High: $2.84/gal* assumes $75/bbl to $77.50/bbl oil through end of year PIRA: $2.52/gal * Derived from wholesale forecast DC Economic & Market Intelligence

Total Vehicle Sales Gasoline Scenarios, Calendar Year Chrysler Forecast Gasoline $/Gallon 2007 $2.54 $3.00 $3.50 2008 2.46 2.85 3.30 Million Units 2007 17.2 17.0 16.8 2008 17.4 17.2 17.0 Every 10 Cent increase in gasoline price equates to 40,000 fewer vehicle sales. DC Economic & Market Intelligence

U. S. Auto Industry Sales Light Vehicles, Million Units Actual Forecast 2005 2006 2007 2008 U.S. 17.4 17.1 17.0 17.2 Canada 1.6 1.7 1.6 1.6 Mexico 1.2 1.2 1.2 1.2 Total NAFTA 20.2 19.9 19.8 20.0 DC Economic & Market Intelligence

U.S. Auto Industry Sales Forecasts April 2007 Forecast H/(L) June 2006 Million Units + 10% Std Mid Size Car + 88% Small SUV + 20% Compact SUV + 6% Mid Size Pickup Small Car + 12% - 1% Mid-Size SUV 0% Compact Car - 5% Luxury Full Size Car - 8% Sport Tourer - 13% Std Full Size Car - 7% Large Pickup - 14% Minivan & MPV - 11% Full Size SUV -220 -140 -60 20 100 180 260 DC Economic & Market Intelligence

U.S. Industry Car/Truck Mix % of Total Industry 60.0 55.0 50.0 C ar 45.0 T ruck 40.0 35.0 30.0 2004 2005 2006 2007 2008 Actual Forecast DC Economic & Market Intelligence

U. S. Auto Industry Sales Stock and Days Supply Stock Days (000s) Supply Chrysler Group 483 60 General Motors 1,028 80 Ford Motor Co. 566 63 Source: SIR, April 2007 DC Economic & Market Intelligence

Light Vehicle Production Industry, NAFTA Q1 Q2 Q3 Q4 Total (in 000) 2005 3,965 4,138 3,731 3,919 15,753 2006 4,129 4,114 3,399 3,609 15,252 2007 3,823 4,028 3,636 3,758 15,245 2008 3,987 4,108 3,847 3,883 15,825 % Change Yr/Yr ’06/’05 + 4.1% - 0.6% - 8.9% - 7.9% - 3.2% ’07/’06 - 7.4% - 2.1% + 7.0% + 4.1% 0.0% ’08/’07 + 4.3% + 2.0% + 5.8% + 3.3% + 3.8% Source: Wards Automotive, April 2007 DC Economic & Market Intelligence