In This Issue: For Carmakers, No Easy Drive To Growth: Auto markets in industrialized countries are maturing, and as a result, car sales there are-and will continue to be-essentially stagnant. Thus in the U.S. and Europe, winners and losers henceforth will be decided by who can squeeze out the largest market share, while trading buyers up to more expensive models, as well as who can cope with the challenge of rising energy costs. An Uneven Road For European Auto Sales: Beyond 2006, long-term demographic stagnation will curb potential growth in the auto market, although its initial effects will be uneven, as populations continue to expand in countries such as Spain and Ireland, and incomes in the poorer EU members catch up with the rest. GM And Ford Need Traction On North American Turnaround In 2006: Revenue shortfalls stemming most recently from an adverse shift in product mix, in addition to excess capacity and legacy costs relative to current market share levels remain at the heart of the problem. GM's and Ford's performance outside the U.S., including GM's significant share in growing markets such as China, does not begin to offset the poor performance in North America. A Global Push For Asia's Big 5 Automakers: The global market may be becoming increasingly competitive, but Japan and Korea's top automakers are hitting new production records and expanding outside their domestic markets at a rapid pace. Faced with stagnant demand in their home countries and a need to reduce foreign exchange risks, the big automakers in both countries are rapidly expanding production overseas and shearing off market shares from the foreign incumbents. Dream Machines: Emerging Markets Beckon The World's Carmakers: Imagine a rapidly growing economy in which billions of increasingly affluent citizens cannot wait to buy their first car and take to the freedom of the open road. No, this is not a multinational auto executive's fantasy: it is the reality of China and India. As demand starts to stagnate in the West's mature and saturated automotive markets, the East's full growth potential is becoming apparent to the world's carmakers. Troubled Domestic Automakers Find A Warm Reception In The U.S. ABS Market: GMAC and Ford Motor Credit have increased their ABS issuance as their credit ratings have slid. In 2005, as corporate credit ratings dropped below investment grade, issuance jumped 50% to $44 billion. How Detroit Can Defend Its Turf: Since 1990, the U.S. market share of Detroit's Big Three has fallen 15 percentage points, to an alltime low of just under 60% of cars and light trucks, while the share of Japan's Big Three has jumped to 27%, up 10 points. No Acceleration Seen For U.S. Auto Stocks In 2006: Standard & Poor's Equity Research Services' fundamental outlook for U.S.-based automobile manufacturers is negative. Competition should thus remain intense, stimulated by new product introductions and sales incentives in the form of discounted prices and financing rates. | 
