TPT July 2016

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60 JULY 2016
G LOBA L MARKE T P L AC E
The auto industry in the US can be expected
to remain healthy through the rest of the
decade
Because carmakers go to great lengths to keep their plans
under wraps, the annual “Car Wars” report from Bank of
America Merrill Lynch is eagerly awaited and closely perused
in the auto industry. In addition to previewing upcoming
products, the comprehensive study assesses the strengths
and weaknesses of individual producers over the next
four model years. The latest installment of “Car Wars” was
presented on 11 May by Merrill Lynch senior auto analyst
John Murphy to an Automotive Press Association audience
in Detroit.
As reported by Greg Gardner and Brent Snavely in the Detroit
Free Press, Mr Murphy is more optimistic than his Wall Street
peers, most of whom see the North American auto market as
at or near a cyclical peak. He expects automakers, flush with
cash from rising sales, to launch some 58 new cars and trucks
annually in the US over the next four years – well above the
historical average of 38 vehicles per year.
Mr Murphy expressed confidence that the US auto industry
will be selling more than 20 million vehicles annually by
2018, eclipsing last year’s record of 17.5 million, which itself
surpassed the prior record of 17.35 million sold in 2000. He
cited, as encouraging signs, steady job growth since the
recession of 2008 and 2009, together with stronger consumer
confidence and a sharp spike in total mileage. (According to
data from the US Federal Highway Administration, Americans
drove 3.15 trillion miles last year, more than ever before, for
the largest uptick [3.5 per cent higher than in 2014] in more
than a decade. The previous record, around 3 trillion miles,
was set in 2007.)
TRUCKS, SUVS AND CROSSOVERS WILL DOMINATE
The Free Press reporters noted that the main objective of “Car
Wars”, which Merrill Lynch introduced in 1991, is to gauge
the relative competitiveness of the automakers. The thesis
is that those able to develop and launch the freshest lineups
are likely to take market share from their rivals and, ultimately,
post higher profits.
Some specifics from this year’s “Car Wars” forecast:
› By 2020, 88 per cent of General Motors sales will come
from newly launched products, slightly ahead of the 86
per cent estimate for Ford. Honda (85 per cent) and FCA (Fiat
Chrysler Automobiles), at 84 per cent, follow. At 79 per cent,
Toyota almost reaches the industry average of 81 per cent,
with Nissan close behind at 76 per cent.
› Trucks, sport utility vehicles and crossovers will come in
for most of the attention over the next few years. FCA will
release what senior editor Greg Migliore of Autoblog calls “a
critical salvo” with a new Ram 1500 in 2018; new generations
of the Chevy Silverado and GMC Sierra are expected in 2019;
and a new Ford F-150 in 2020. Mr Murphy suggested that
GM might speed up the production schedule for its trucks,
prodding Ford to respond.
› Given the replacement rates of Korean and European
carmakers (76 per cent and 70 per cent, respectively),
Mr Murphy believes that their “slower product cadence and
lineups,” with fewer trucks, put them in a weaker position vis-
à-vis their US rivals.
• So when will this famously cyclical industry see its next
slowdown, Mr Murphy was asked in Detroit.
The answer: “Sometime in the next three to five years.”
The ai r lanes
An acute shor tage of pilots looms
for the US airlines industry
Kate Murphy is a Texas-based commercial pilot and journalist
who writes frequently for The New York Times . On 16 April the
paper published her article “Plenty of Passengers, but Where
Are the Pilots?”
Ms Murphy began by noting something that goes unnoticed
among the many exasperations of air travel in the US. “The
gate agent may not tell you that’s why you’re grounded,” she
wrote. “But a dearth of qualified pilots is disrupting, reducing,
and even eliminating flights.”
She cited as evidence at least 29 communities from Modesto,
California, to Macon, Georgia, that have lost air service since
2013, together with hundreds more that had their number
of flights reduced. And airports that have not lost service
are unable to get the additional flights needed to pace local
economic development.
“We’ve had $5 billion of new industry come to our area, and the
airlines say they can’t grow us because there aren’t enough
pilots,” Mike Hainsey, executive director of Golden Triangle
Regional Airport, which serves three small cities in Mississippi,
told the Times.
The main reason for the pilot shortage is, of course, the
surge in the number of passengers. According to the US
Department of Transportation, domestic airlines carried
a record 895.5 million passengers last year, up 5 per cent
from 2014. To meet growth over the next 18 years, Boeing
forecasts that the global industry will need more than half a
million new pilots.
Next, Ms Murphy pointed to the roughly 18,000 pilots in the
US who will age out by 2022. She calls this “a can Congress
kicked down the road in 2007” when it raised the mandatory
retirement age to 65 from 60 to delay the exit of military pilots
who moved to commercial airlines after the Vietnam War.
The bottleneck in the supply of new pilots also derives from
federal legislation passed after the 2009 crash in Buffalo, New
York, of a regional airline plane, attributed in part to errors by
the flight crew. As of 2013, all entry-level first officers (co-pilots)
on commercial carriers must now have at least 1,500 hours of
flight time – up from a previous minimum of 250 hours.