How is sub-prime woes impacting US auto cos?

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Concern about home values and mortgage payments have pushed buyers to halt car purchases in the US. Car sales in August could drop 10% from a year earlier, after falling 19% in July. CNBC-TV18 finds out what this means for the sale of Ford's Land Rover and Jaguar.

 

A possible slowdown in the US economy may hurt its car sales. General Motors and Ford see 2007 industry sales of 16.3 to 16.5 million vehicles. Last year, carmakers sold 16.55 million vehicles. Ford's aim to turn around its North American operations by 2009 is likely to become difficult.

 

Alan Mulally , Chief Executive for Ford, is reported to have said at an industry conference in Michigan, "We're really watching the economic development but also the housing market and the tightening credit, because that could affect even more."

 

Experts see more pain this year. That could hurt Ford's third quarter results. This might push Ford to sell its Jaguar and Land Rover brands. It might even have to compromise on their value, though Ford appears to be buying time.

Tom Hoyt, Ford Spokesman, said, "We have simply said that while we've set no timetable on these discussions, we expect to come to a resolution by the end of this year, or early next year."

 

Ford's market capital on the July 26 was USD 17.28 billion. Now, it's USD 16 billion. That's largely because of the sub-prime crisis and the market crash. Analysts say it might fall further.

 

Market capitalization and sales of most car companies have fallen in the past few months. Such market conditions might not augur well for the sale of Ford's Jaguar and Land Rover. So, Ford can either wait for markets to stabilize or compromise on a deal.