Detroit rebound stuck in low gear?

By Peter Bohan

DETROIT (Reuters) - Automakers received more bad news at the world's largest auto show on Tuesday as forecasts for a 27-year low in sales this year and auto bailout politics threw cold water on hopes for a speedy industry recovery.

Top analyst J.D. Power forecast U.S. auto sales in 2009 to fall 13 percent to about 11.4 million vehicles, a fourth straight year of declines that will further pressure the U.S. economy and could push some automakers closer to collapse.

U.S. sales in 2008 sank to 13.2 million vehicles, down from 16.2 million in 2007 and the worst result in 16 years.

"Let's maintain our sense of humor, folks," J.D. Power president Finbarr O'Neill told an industry seminar on the sidelines of the Detroit Auto Show. "We're going to need it."

The credit crunch, recession and weak consumer confidence continue to batter car buyers. Auto sales generally account for more than 10 percent of U.S. retail sales, a prime driver of economic growth. But there are hopes the Obama administration's economic stimulus package will boost consumer confidence.

O'Neill said the pace of U.S. auto sales could edge up to 10.9 million units in the first quarter of this year, compared with 10.2 million in the last quarter on 2008.

"We believe we're near the bottom, or at the bottom," he said. "The market will come back, but it won't come back to where it was before."

In the meantime, he added, "there's a lot of speculation about who's going to win and who's going to lose."

Ford Motor Co senior economist Emily Kolinski-Morris cited worries about consumer finances amid forecasts of housing industry declines near the "magnitude of the 1930s," with housing starts falling as much as 76 percent from their peak.

Consumer spending, which has driven U.S. growth for years, has dried up. Millions have lost their jobs. Others who tapped the equity of their homes for loans have been foreclosed.

So the probability of an automaker going bankrupt is "greater than not," Deutsche Bank analyst Rod Lache said.

"There's no guarantee that all of the automakers are going to survive this process," he said. "There is much more systemic risk than we've ever seen."

"Somebody is the walking dead out there," O'Neill said.

POLITICAL HEAT EVEN WORSE THAN THE ECONOMY?

In the game of survivor that is shaping for Detroit's Big 3, politics may be more important than even consumer spending.