某汽车战略分析报告课件

PresentationtotheAutomotiveNewsWorldCongressStephenJ.Girsky

January2004PresentationtotheAutomotiveDisclosuresAnalystCertificationAnalystCertificationThefollowinganalystsherebycertifythattheirviewsaboutthecompaniesandtheirsecuritiesdiscussedinthisreportareaccuratelyexpressedandthattheyhavenotreceivedandwillnotreceivedirectorindirectcompensationinexchangeforexpressingspecificrecommendationsorviewsinthisreport:StephenJ.Girsky.ImportantUSRegulartoryDisclosuresonSubjectCompaniesTheinformationandopinionsinthisreportwerepreparedbyMorganStanley&Co.Incorporated(“MorganStanley”).AsofNovember28,2003,MorganStanleybeneficiallyowned1%ormoreofaclassofcommonequitysecuritiesofthefollowingcompaniescoveredinthisreport:Delphi,GeneralMotors,GoodyearTire&Rubber,JohnsonControls,MagnaIntlInc.,TBCandTowerAutomotive.Withinthelast12months,MorganStanleymanagedorco-managedapublicofferingofsecuritiesofDaimlerChryslerAG,Delphi,Ford,GeneralMotors,StandardMotorProductsandTenneco.Withinthelast12months,MorganStanley,MorganStanleyoranaffiliatehasreceivedcompensationforinvestmentbankingservicesfromAftermarketTechnology,AmericanAxleandMfg.,BorgWarnerInc.,DaimlerChryslerAG,Delphi,Ford,GeneralMotors,StandardMotorProducts,SuperiorIndustries,Tenneco,TowerAutomotiveandVisteonCorporation.Inthenext3months,MorganStanleyexpectstoreceiveorintendstoseekcompensationforinvestmentbankingservicesfromAftermarketTechnology,AmericanAxleandMfg.,ArvinMeritor,AutoNation,BorgWarnerInc.,DaimlerChryslerAG,DanaCorp.,Delphi,Ford,GeneralMotors,GenuinePartsCo.,GoodyearTire&Rubber,JohnsonControls,LearCorp.,LithiaMotors,MagnaIntlInc.,StandardMotorProducts,SuperiorIndustries,Tenneco,TowerAutomotive,UnitedAutoGroupandVisteonCorporation.Theresearchanalysts,strategist,orresearchassociatesprincipallyresponsibleforthepreparationoftheresearchreporthavereceivedcompensationbaseduponvariousfactors,includingqualityofresearch,investorclientfeedback,stockpicking,competitivefactors,firmrevenuesandinvestmentbankingrevenues.MorganStanley&Co.IncorporatedmakesamarketinthesecuritiesofAftermarketTechnology,Delphi,DuraAutomotive,Ford,GeneralMotors,MagnaIntl.,TBCandTowerAutomotive.GlobalStockRatingsDistribution(asofDecember31,2003)(Continued)DisclosuresAnalystCertificatiDisclosuresDisclosuresDisclosuresMorganStanleyisinvolvedinmanybusinessesthatmayrelatetocompaniesmentionedinthisreport.Thesebusinessesincludespecializedtrading,riskarbitrageandotherproprietarytrading,fundmanagement,investmentservicesandinvestmentbanking.MorganStanleymakeseveryefforttousereliable,comprehensiveinformation,butwemakenorepresentationthatitisaccurateorcomplete.Wehavenoobligationtotellyouwhenopinionsorinformationinthisreportchangeapartfromwhenweintendtodiscontinueresearchcoverageofsubjectcompany.ReportspreparedbyMorganStanleyresearchpersonnelarebasedonpublicinformation.Factsandviewspresentedinthisreporthavenotbeenreviewedby,andmaynotreflectinformationknownto,professionalsinotherMorganStanleybusinessareas,includinginvestmentbankingpersonnel.Thevalueofandincomefromyourinvestmentsmayvarybecauseofchangesininterestratesorforeignexchangerates,securitiespricesormarketindexes,operationalorfinancialconditionsofcompaniesorotherfactors.Theremaybetimelimitationsontheexerciseofoptionsorotherrightsinyoursecuritiestransactions.Pastperformanceisnotnecessarilyaguidetofutureperformance.Estimatesoffutureperformancearebasedonassumptionsthatmaynotberealized.ThispublicationisdisseminatedinJapanbyMorganStanleyJapanLimitedand/orMorganStanleyNipponSecuritiesLimited;inSingaporebyorganStanleyDeanWitterAsia(Singapore)Pte.,regulatedbytheMonetaryAuthorityofSingapore;inAustraliabyMorganStanleyDeanWitterAustraliaLimitedA.B.N.67003734576,alicenseddealer,whichacceptsresponsibilityforitscontents;incertainprovincesofCanadabyMorganStanleyCanadaLimited,whichhasapprovedof,andhasagreedtotakeresponsibilityfor,thecontentsofthispublicationinCanada;inSpainbyMorganStanley,S.V.,S.A.,aMorganStanleygroupcompany,whichissupervisedbytheSpanishSecuritiesMarketsCommission(CNMV)andstatesthatthisdocumenthasbeenwrittenanddistributedinaccordancewiththerulesofconductapplicabletofinancialresearchasestablishedunderSpanishregulations;intheUnitedStatesbyMorganStanley&Co.IncorporatedandMorganStanleyDWInc.,whichacceptresponsibilityforitscontents;andintheUnitedKingdom,thispublicationisapprovedbyMorganStanley&Co.InternationalLimited,solelyforthepurposesofsection21oftheFinancialServicesandMarketsAct2000.PrivateU.K.investorsshouldobtaintheadviceoftheirMorganStanley&Co.InternationalLimitedrepresentativeabouttheinvestmentconcerned.Thetrademarksandservicemarkscontainedhereinarethepropertyoftheirrespectiveowners.Third-partydataprovidersmakenowarrantiesorrepresentationsofanykindrelatingtotheaccuracy,completeness,ortimelinessofthedatatheyprovideandshallnothaveliabilityforanydamagesofanykindrelatingtosuchdata.TheGlobalIndustryClassificationStandard("GICS")wasdevelopedbyandistheexclusivepropertyofMSCIandS&P.Thisreportoranyportionhereofmaynotbereprinted,soldorredistributedwithoutthewrittenconsentofMorganStanley.Additionalinformationonrecommendedsecuritiesisavailableonrequest.DisclosuresOverviewAutoOutlook:Sameproblems;LessofthemGlobalDilemma:Mostparticipantsspendingforgrowthyettheindustrydoesnotgrow.Demandgrowthislikelytobemodestdespiteeconomicrecovery.Competitivepressuresarelikelytoremaindifficult.Weakerdollarcouldlevelprovidesomeoffset.Higherratescreateriskofweakerdemand,weakermixandlowerfinancecompanyearnings.BigThreeopportunity:Actualqualityisbetterthanperceivedquality.OverviewAutoOutlook:SameproGlobalLightVehicleSales:SlowGrowthCAGR1.2%Source:LMC~J.D.Power&MorganStanleyResearchGlobalLightVehicleSales:SlGlobalSalesForecasts:2003-2004Source:GlobalInsight&MorganStanleyResearch*NoteforecastsarederivedfromGlobalInsightGlobalSalesForecasts:2003-U.S.Sales16.7mmUnitsFY03E16.8mmUnitsFY04ESource:Autodata&MorganStanleyResearchU.S.Sales16.7mmUnitsSource:JapaneseSAAR5.6mmUnitsFY03E5.7mmUnitsFY04ESource:MorganStanleyResearchJapaneseSAAR5.6mmUnitsSourceWesternEuropeanSAAR14.1mmFY03E14.2mmFY04ESource:MorganStanleyResearchWesternEuropeanSAAR14.1mmSouGlobalExcessCapacityat25%-30%

or20mmunitsSource:Autofacts&MorganStanleyResearchGlobalExcessCapacityat25%-CapEx/D&AFY2003E:

OEMsSpendingforGrowth

Source:Companydata&MorganStanleyResearch*AdjustedtofitscaleCapEx/D&AFY2003E:

OEMsSpeZeroSumGameGlobalDilemma:Mostparticipantsarespendingforgrowth,yettheindustrydoesnotgrow.Slowgrowth&excesscapacitysuggestdeflation/revenuepressuresarelikelytocontinue.Noteverybodycanbeawinner.Winnerswillbelowcostproducerswhodeliveragoodproductthatconsumersarewillingtopayfor.ZeroSumGameGlobalDilemma:MModestDemandGrowthDemandgrowthislikelytobemodestdespiteeconomicrecovery:Autosalesdidnotweakenmateriallyinthemostrecentrecessionandthus,significantpent-updemandwasnevercreated.Thenumberofoff-leasevehiclesisfallingsharply–fewerconsumersarebeingforcedbacktoadealertobuyorleaseanewvehicle.Extendedfinancingtermsarelikelytoprolongvehicleturnover.Economicconditionsappearmixed.ModestDemandGrowthDemandgroLightVehicleSalesTrendLineDemandSource:MorganStanleyResearchLightVehicleSalesTrendLineLightVehicleSalesCycle:TroughtoTroughSource:R.L.Polk,GlobalInsight&MorganStanleyResearchLightVehicleSalesCycle:TroWeightedMedianAgeofaVehiclevs.Sales1YearLeadCorrelation77.6%Source:Polk&MorganStanleyResearchWeightedMedianAgeofaVehicOffLeaseVehiclesBegintoDeclineSource:Manheim&MorganStanleyResearchFewerConsumersBeingForcedBacktotheDealershipsOffLeaseVehiclesBegintoDeAverageMaturityofVehicleLoans(months)Source:FederalReserveBoard&MorganStanleyResearchAverageMaturityofVehicleLoTakingLongertoEstablishConsumerEquitySource:FRB&MorganStanleyResearchTakingLongertoEstablishConEconomicConditionsBetterthantheywere,butstillnotrobustSource:CPI&MorganStanleyResearchPeakTroughNowJan-02Oct-02Nov-03InterestRatesConsumerConfidenceGasolinePricesUsedCarPricesEmploymentEconomicConditionsBetterthaAffordabilityNear25YearBestNumberofWeeksofIncometoPurchaseaVehicleSource:FRB&MorganStanleyResearchAffordabilityNear25YearBesIntenseCompetitionCompetitivepressuresarelikelytoremaindifficult:Capacitygrowthtocontinuein2004.Pricingislikelytoremaindifficultalthoughaweakdollarmayprovideamodestoffset.Marketsharepressurestocontinueaswell.IntenseCompetitionCompetitiveNACapacityAdditions,DespiteFlatSlsOutlookSource:Companydata&MorganStanleyResearch20052003FordNissan(122)2503082004FordGM(211)(98)80=100,000unitsGMFordHondaNissanToyota125(146)18020030NetIncreaseOf853,000UnitsorRoughly5.1%ofNAsales2006Toyota150389180ToyotaDCXHyundai2356NACapacityAdditions,DespiteExcessCapacity&MoreIsOnTheWayEvery1%Pt.ofMarketShareTranslatesinto$1.0bninProfits853,000UnitsofAddedCapacityis5.1%ofNACapacity,or$5bninPretaxProfitsNAPretaxProfit

BigThreeFY03E(inMM)

$1,971 Source:MorganStanleyResearchEstimatesExcessCapacity&MoreIsOnTRevenuePressuresWorstSince1970’sNewCarCPIvs.DomesticLightVehicleSalesSource:CPI&MorganStanleyResearchRevenuePressuresWorstSinceY/YChangeinMonthlyNewCarCPISource:CPI&MorganStanleyResearchY/YChangeinMonthlyNewCarPriceReductionsPressureManufacturersEvery1%DeclineinPricesisWorth$1.0bnatGM$850mmatFord$550mmatDCXSource:MorganStanleyResearchPriceReductionsPressureManuBigThreeMarketShareContinuestoSlide76.0%60.2%61.7%Every1%PointofShareisWorthRoughly$1bninProfitSource:Autodata&MorganStanleyResearchBigThreeMarketShareContinuMarketShareWinners/Losers–FY03Source:Autodata&MorganStanleyResearchMarketShareWinners/LosersBigThreeShareofSalesbySegment:

FY-03vs.FY-02Source:Autodata&MorganStanleyResearchBigThreeShareofSalesbySeUSDollarperEuro:Jan03-PresentSource:FactSet&MorganStanleyResearchUSDollarperEuro:Jan03-PJapaneseYenvs.U.S.DollarSource:FactSet&MorganStanleyResearchJapaneseYenvs.U.S.DollarSoYentoUSDollarPriceSensitivity:YTD03Source:CompanyData&MorganStanleyResearchNote:*IncludesAcura,Infiniti,LexusYentoUSDollarPriceSensitiWeakerDollarCouldHelpaLittleSource:MorganStanleyResearchWeakerDollarCouldHelpaLitGlobalOperatingMarginsFY02Source:Companydata&MorganStanleyResearch*MorganStanleyEstimatesExcludingPension&OPEBExpensefortheBigThreePorscheNissanBMWHondaToyotaHyundaiGMPeugeotKiaVWDCXRenaultFordFiat16.4%10.6%8.9%8.4%8.1%6.1%5.7%5.0%4.7%4.0%3.8%1.7%1.8%-6.2%GlobalOperatingMarginsFY02HigherRatesCouldbeaNegativeHigherratescreateriskofweakerdemand,weakermixandlowerfinancecompanyearningsExtendedtermssuggestlongerreplacementrates.Every1%increaseinfinancingrateson5-yearloansisworth$730-750pervehicle.HigherRatesCouldbeaNegatiAutoFinanceTerms:Fall2001vs.NowSource:FRB&MorganStanleyResearchAutoFinanceTerms:Fall2001GMAC/FMCCBorrowingCostsSource:FRB&MorganStanleyResearchGMAC/FMCCBorrowingCostsSouBig3Opportunity:

ActualQualityisBetterthanPerceivedQualitySource:JDPower,CNW&MorganStanleyResearchBig3Opportunity:

ActualQuaTheBigThree:Positives&NegativesEachCompanyFacesUniqueChallenges:GMhasoperationalmomentumandhasmadesignificantstridesrelativetoitsfixedlegacycosts.Ford’sshareislikelytoremainunderpressure.Whileearningsandcostcuttinghavebeenstrong,cashflowneedstocatchup.DCXcontinuestostrugglewithitsproductline.Qualityissues,bothperceived(Chrysler)andactual(Mercedes)continuetolinger.TheBigThree:Positives&NegBigThreeRelativeStockPerformance:2003Source:FactSet&MorganStanleyResearchBigThreeRelativeStockPerfoGeneralMotorsGMstillappearstohaveavariablecostadvantagevs.F&DCXandafixedcostdisadvantage.GM’saggressivefundingofpensionandhealthcarehavehelpedtonarrowthefixedcostdisadvantage.SignificantnewproductlaunchesgiveGMitsbestchanceofgainingshare/reducingincentivesinyears.GMisgoinginto2004withaboveaverageinventory.Financecompanyearningsarelikelytodeclineduetohigherinterestratesandlowermortgagerefinancingactivity.GeneralMotorsGMMarketShare35.5%28.0%28.4%Source:Autodata&MorganStanleyResearchGMMarketShare35.5%28.0%28.4%U.S.Healthcare&PensionCost/UnitFY03Source:Companydata&MorganStanleyResearch$1,134$601$1,159$814$889$740$1,899$902$1074$185$88U.S.Healthcare&PensionCostGMPensionFundedStatus:2003UpdateSource:CompanyData&MorganStanleyResearchGMPensionFundedStatus:2003GMHasBuiltInventoryin2003Source:Autodata&MorganStanleyResearchGMHasBuiltInventoryin2003FinancialServiceEarningsUnlikelytoMatch2003Source:Companydata&MorganStanleyResearchFinancialServiceEarningsUnlGMNew/Replacement/RedesignedProductsSource:CompanyData,Ward’sAutomotive&MorganStanleyResearchGMNew/Replacement/RedesigFordMotorCompanyEarningshaveexceededexpectations.Nowcashflowneedstocatchup.WiththeexceptionoftheF-Series,newproductsarelimiteduntilyear-end,suggestingsharepressureislikelytocontinue.InternationalOperations/PremierAutoGroupneedtostartpullingtheirweight.Stabilityinmanagementranksisimportant.FordMotorCompanyFMarketShareSource:Autodata&MorganStanleyResearch19.6%19.5%20.2%25.7%FMarketShareSource:AutodataFvs.GMCashFlowSource:Companyreports&MorganStanleyResearchFvs.GMCashFlowSource:ComFAutoPre-TaxProfit,1999-2004ESource:CompanyData&MorganStanleyResearchFAutoPre-TaxProfit,1999-20FGeographicPre-taxProfit:3Q03vs.3Q02Source:Companyreports&MorganStanleyResearchFGeographicPre-taxProfit:3FNew/Replacement/RedesignedProductsSource:CompanyData,Ward’sAutomotive&MorganStanleyResearchFNew/Replacement/RedesignFNewProductMonitorSource:Autodata&MorganStanleyResearchFNewProductMonitorSource:AGM/FordOutlook;WhatTheySayGMexpectsmarketstogrowaroundtheworldandtheirmarketsharetogrowineveryregion.FordexpectsprofitstodeclineinNorthAmerica.Theywerenotspecificbutsuggestcostissueslingering.GMexpectsEuropeanprofitstogrowby$300-400mm($500-$700mmpretax)in2004,whileFordexpectsprofitstogrowby$900-1,000mm.Itisunclearhowthisprofitgrowthcanoccurgiventhedifficultmarketconditionsthere.GM/FordOutlook;WhatTheySayDaimlerChryslerProductlinehasbeenplayingdefenseforsometime.Offenseneedstogetonthefield.Chryslerfacesperceivedqualityproblems.Mercedeshasactualqualityproblems.Affiliateissuesmayloomlargein2004.CommercialtruckbusinessatDCXcouldbeapositivesourceofearningsforthecompanyin2004.DaimlerChryslerDCXMarketShare12.2%12.8%13.1%Source:Autodata&MorganStanleyResearchDCXMarketShare12.2%12.8%13.1DCXCar&Lt.TruckSalesAsA%ofParentCarsLightTrucksSource:Autodata&MorganStanleyResearchDCXCar&Lt.TruckSalesAsAChrysler&DCXOperatingMarginsSource:Companyreports&MorganStanleyResearchChrysler&DCXOperatingMargiDCXNew/Replacement/RedesignedProductsSource:CompanyData,Ward’sAutomotive&MorganStanleyResearchDCXNew/Replacement/RedesiImplicationsGMwillcontinuetopursueits“growourwayout”strategy.DCXimprovedcoststructureiskeepingitinthegame.Newproductiscriticaltoalleviatingrevenuepressure.ForeignOEMsarelikelytocontinuetoaddcapacityinNA.Fordlikelytobeplayingdefenseforonemoreyear.Thecompanyneedstohangonandcontinuetoattacktheircostsuntilnewproductarrives.Onthebrightside,theBigThreeproductisthebestitseverbeen.Source:MorganStanleyResearchImplicationsGMwillcontinuetSuppliers’RelativeStockPerformance:2003Source:FactSet&MorganStanleyResearchSuppliers’RelativeStockPerfDealers’RelativeStockPerformance:2003Source:FactSet&MorganStanleyResearchDealers’RelativeStockPerforExpectations:YearAgovs.TodaySource:MorganStanleyResearchExpectations:YearAgovs.TodStephen.Girsky@MorganSStephen.Girsky@MorganStanley.cPresentationtotheAutomotiveNewsWorldCongressStephenJ.Girsky

January2004PresentationtotheAutomotiveDisclosuresAnalystCertificationAnalystCertificationThefollowinganalystsherebycertifythattheirviewsaboutthecompaniesandtheirsecuritiesdiscussedinthisreportareaccuratelyexpressedandthattheyhavenotreceivedandwillnotreceivedirectorindirectcompensationinexchangeforexpressingspecificrecommendationsorviewsinthisreport:StephenJ.Girsky.ImportantUSRegulartoryDisclosuresonSubjectCompaniesTheinformationandopinionsinthisreportwerepreparedbyMorganStanley&Co.Incorporated(“MorganStanley”).AsofNovember28,2003,MorganStanleybeneficiallyowned1%ormoreofaclassofcommonequitysecuritiesofthefollowingcompaniescoveredinthisreport:Delphi,GeneralMotors,GoodyearTire&Rubber,JohnsonControls,MagnaIntlInc.,TBCandTowerAutomotive.Withinthelast12months,MorganStanleymanagedorco-managedapublicofferingofsecuritiesofDaimlerChryslerAG,Delphi,Ford,GeneralMotors,StandardMotorProductsandTenneco.Withinthelast12months,MorganStanley,MorganStanleyoranaffiliatehasreceivedcompensationforinvestmentbankingservicesfromAftermarketTechnology,AmericanAxleandMfg.,BorgWarnerInc.,DaimlerChryslerAG,Delphi,Ford,GeneralMotors,StandardMotorProducts,SuperiorIndustries,Tenneco,TowerAutomotiveandVisteonCorporation.Inthenext3months,MorganStanleyexpectstoreceiveorintendstoseekcompensationforinvestmentbankingservicesfromAftermarketTechnology,AmericanAxleandMfg.,ArvinMeritor,AutoNation,BorgWarnerInc.,DaimlerChryslerAG,DanaCorp.,Delphi,Ford,GeneralMotors,GenuinePartsCo.,GoodyearTire&Rubber,JohnsonControls,LearCorp.,LithiaMotors,MagnaIntlInc.,StandardMotorProducts,SuperiorIndustries,Tenneco,TowerAutomotive,UnitedAutoGroupandVisteonCorporation.Theresearchanalysts,strategist,orresearchassociatesprincipallyresponsibleforthepreparationoftheresearchreporthavereceivedcompensationbaseduponvariousfactors,includingqualityofresearch,investorclientfeedback,stockpicking,competitivefactors,firmrevenuesandinvestmentbankingrevenues.MorganStanley&Co.IncorporatedmakesamarketinthesecuritiesofAftermarketTechnology,Delphi,DuraAutomotive,Ford,GeneralMotors,MagnaIntl.,TBCandTowerAutomotive.GlobalStockRatingsDistribution(asofDecember31,2003)(Continued)DisclosuresAnalystCertificatiDisclosuresDisclosuresDisclosuresMorganStanleyisinvolvedinmanybusinessesthatmayrelatetocompaniesmentionedinthisreport.Thesebusinessesincludespecializedtrading,riskarbitrageandotherproprietarytrading,fundmanagement,investmentservicesandinvestmentbanking.MorganStanleymakeseveryefforttousereliable,comprehensiveinformation,butwemakenorepresentationthatitisaccurateorcomplete.Wehavenoobligationtotellyouwhenopinionsorinformationinthisreportchangeapartfromwhenweintendtodiscontinueresearchcoverageofsubjectcompany.ReportspreparedbyMorganStanleyresearchpersonnelarebasedonpublicinformation.Factsandviewspresentedinthisreporthavenotbeenreviewedby,andmaynotreflectinformationknownto,professionalsinotherMorganStanleybusinessareas,includinginvestmentbankingpersonnel.Thevalueofandincomefromyourinvestmentsmayvarybecauseofchangesininterestratesorforeignexchangerates,securitiespricesormarketindexes,operationalorfinancialconditionsofcompaniesorotherfactors.Theremaybetimelimitationsontheexerciseofoptionsorotherrightsinyoursecuritiestransactions.Pastperformanceisnotnecessarilyaguidetofutureperformance.Estimatesoffutureperformancearebasedonassumptionsthatmaynotberealized.ThispublicationisdisseminatedinJapanbyMorganStanleyJapanLimitedand/orMorganStanleyNipponSecuritiesLimited;inSingaporebyorganStanleyDeanWitterAsia(Singapore)Pte.,regulatedbytheMonetaryAuthorityofSingapore;inAustraliabyMorganStanleyDeanWitterAustraliaLimitedA.B.N.67003734576,alicenseddealer,whichacceptsresponsibilityforitscontents;incertainprovincesofCanadabyMorganStanleyCanadaLimited,whichhasapprovedof,andhasagreedtotakeresponsibilityfor,thecontentsofthispublicationinCanada;inSpainbyMorganStanley,S.V.,S.A.,aMorganStanleygroupcompany,whichissupervisedbytheSpanishSecuritiesMarketsCommission(CNMV)andstatesthatthisdocumenthasbeenwrittenanddistributedinaccordancewiththerulesofconductapplicabletofinancialresearchasestablishedunderSpanishregulations;intheUnitedStatesbyMorganStanley&Co.IncorporatedandMorganStanleyDWInc.,whichacceptresponsibilityforitscontents;andintheUnitedKingdom,thispublicationisapprovedbyMorganStanley&Co.InternationalLimited,solelyforthepurposesofsection21oftheFinancialServicesandMarketsAct2000.PrivateU.K.investorsshouldobtaintheadviceoftheirMorganStanley&Co.InternationalLimitedrepresentativeabouttheinvestmentconcerned.Thetrademarksandservicemarkscontainedhereinarethepropertyoftheirrespectiveowners.Third-partydataprovidersmakenowarrantiesorrepresentationsofanykindrelatingtotheaccuracy,completeness,ortimelinessofthedatatheyprovideandshallnothaveliabilityforanydamagesofanykindrelatingtosuchdata.TheGlobalIndustryClassificationStandard("GICS")wasdevelopedbyandistheexclusivepropertyofMSCIandS&P.Thisreportoranyportionhereofmaynotbereprinted,soldorredistributedwithoutthewrittenconsentofMorganStanley.Additionalinformationonrecommendedsecuritiesisavailableonrequest.DisclosuresOverviewAutoOutlook:Sameproblems;LessofthemGlobalDilemma:Mostparticipantsspendingforgrowthyettheindustrydoesnotgrow.Demandgrowthislikelytobemodestdespiteeconomicrecovery.Competitivepressuresarelikelytoremaindifficult.Weakerdollarcouldlevelprovidesomeoffset.Higherratescreateriskofweakerdemand,weakermixandlowerfinancecompanyearnings.BigThreeopportunity:Actualqualityisbetterthanperceivedquality.OverviewAutoOutlook:SameproGlobalLightVehicleSales:SlowGrowthCAGR1.2%Source:LMC~J.D.Power&MorganStanleyResearchGlobalLightVehicleSales:SlGlobalSalesForecasts:2003-2004Source:GlobalInsight&MorganStanleyResearch*NoteforecastsarederivedfromGlobalInsightGlobalSalesForecasts:2003-U.S.Sales16.7mmUnitsFY03E16.8mmUnitsFY04ESource:Autodata&MorganStanleyResearchU.S.Sales16.7mmUnitsSource:JapaneseSAAR5.6mmUnitsFY03E5.7mmUnitsFY04ESource:MorganStanleyResearchJapaneseSAAR5.6mmUnitsSourceWesternEuropeanSAAR14.1mmFY03E14.2mmFY04ESource:MorganStanleyResearchWesternEuropeanSAAR14.1mmSouGlobalExcessCapacityat25%-30%

or20mmunitsSource:Autofacts&MorganStanleyResearchGlobalExcessCapacityat25%-CapEx/D&AFY2003E:

OEMsSpendingforGrowth

Source:Companydata&MorganStanleyResearch*AdjustedtofitscaleCapEx/D&AFY2003E:

OEMsSpeZeroSumGameGlobalDilemma:Mostparticipantsarespendingforgrowth,yettheindustrydoesnotgrow.Slowgrowth&excesscapacitysuggestdeflation/revenuepressuresarelikelytocontinue.Noteverybodycanbeawinner.Winnerswillbelowcostproducerswhodeliveragoodproductthatconsumersarewillingtopayfor.ZeroSumGameGlobalDilemma:MModestDemandGrowthDemandgrowthislikelytobemodestdespiteeconomicrecovery:Autosalesdidnotweakenmateriallyinthemostrecentrecessionandthus,significantpent-updemandwasnevercreated.Thenumberofoff-leasevehiclesisfallingsharply–fewerconsumersarebeingforcedbacktoadealertobuyorleaseanewvehicle.Extendedfinancingtermsarelikelytoprolongvehicleturnover.Economicconditionsappearmixed.ModestDemandGrowthDemandgroLightVehicleSalesTrendLineDemandSource:MorganStanleyResearchLightVehicleSalesTrendLineLightVehicleSalesCycle:TroughtoTroughSource:R.L.Polk,GlobalInsight&MorganStanleyResearchLightVehicleSalesCycle:TroWeightedMedianAgeofaVehiclevs.Sales1YearLeadCorrelation77.6%Source:Polk&MorganStanleyResearchWeightedMedianAgeofaVehicOffLeaseVehiclesBegintoDeclineSource:Manheim&MorganStanleyResearchFewerConsumersBeingForcedBacktotheDealershipsOffLeaseVehiclesBegintoDeAverageMaturityofVehicleLoans(months)Source:FederalReserveBoard&MorganStanleyResearchAverageMaturityofVehicleLoTakingLongertoEstablishConsumerEquitySource:FRB&MorganStanleyResearchTakingLongertoEstablishConEconomicConditionsBetterthantheywere,butstillnotrobustSource:CPI&MorganStanleyResearchPeakTroughNowJan-02Oct-02Nov-03InterestRatesConsumerConfidenceGasolinePricesUsedCarPri