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Strategies & Market Trends : The Stock Market Bubble -- Ignore unavailable to you. Want to Upgrade?

To: bobby beara who wrote (1663)	9/17/1998 11:39:00 PM
From: Box-By-The-Riviera™	Read Replies (1) \| Respond to of 3339

Thursday September 17, 11:07 pm Eastern Time Mexico car industry crashes into turmoil By Tomas de la Rosa MEXICO CITY, Sept 17 (Reuters) - The Mexican car industry faces a bleak end to this year after soaring growth in 1997, as global turmoil keeps interest rates high and the peso weak. ''The second half of the year will be as bad as it gets because internal sales will not increase or if they do, will increase very little,'' said Adalberto Gonzalez of consultants Grupo de Economistas Asociados (GEA). Gonzalez said high interest rates would be disastrous for the finance-dependent industry and, because of its importance to the economy as a whole, the auto trade would contribute to a sharp slowdown in growth in the last six months of the year. Financial crises which began in Asia spread to Russia last month and from there to emerging markets around the world. Mexico has had to hike key interest rates to almost 50 percent from around 20 percent six weeks ago to boost a plunging peso. High credit costs have persuaded some carmakers to suspend financing plans. Ford Ford Motor Mexico (NYSE:F - news) last week cut is expected sales for 1998 to 115,000 units from 123,000 previously. The forecasts are a dramatic reversal of recent fortunes. Auto sales in Mexico soared 48.3 percent to 482,146 in 1997 compared with 1996, and original estimates for 1998 pointed to another surge in sales, this time by 30 percent. ''We are going to have to revise our internal consumption levels downward after strong growth. We had projected 42 percent (increase in consumption) but I believe that from September the growth will moderate substantially,'' said Cesar Castro, an economist at the Mexican Analysis and Economic Forecasting Centre (CAPEM). CAPEM now projects 35 percent general consumption growth. The Mexican Association of Automobile Distributors (AMDA) has not yet altered its estimate for 1998 car sales of 610,000 unites. Nevertheless, it warned that sales next year would at very best remain stable and were more likely slip to around 570,000 units as the effects of high interest rates and economic uncertainty came to bear. AMDA's economic research director Alicia Jara Diaz said all depended on the economy. If gross domestic product expanded 4.0 percent in 1999, sale would probably be stable. If GDP growth slipped below 4.0 percent, then sales would fall. ''All this depends on what happens internationally and on internal problems, for example how long will interest rates remain high,'' Jara said. As far as exports were concerned, analysts said they feared economic slowdown in the United States, the main market, would cancel out any positive effects of the peso's devaluation against the dollar.