Munich (Reuters) -- Citigroup expects the profits of European auto companies to turn negative in 2009 and "an almost universal passing of dividends" for the year, and revised its ratings on some European car makers.
Volumes could continue to fall right through 2009 and investors can still afford to underweight the sector, the brokerage said in a note to clients.
Citigroup upgraded BMW to "buy" from "sell," saying it switched to BMW as its preferred German holding from Daimler AG, which it downgraded to "hold" from "buy" on worsening truck volumes.
Citigroup said Peugeot SA had by far the lowest valuation in the sector and was its choice among small car and value names. It upgraded shares of the largest carmaker in France to "buy" from "hold."
Downgrading GKN Plc to "sell" from "hold," the brokerage said customer disruption led to a further cut in its forecasts for the company.
Citigroup also downgraded Scania AB to "sell" from "hold" on reduced free float and Fiat SPA to "hold" from "buy" on a worsened economic situation.
European car, truck and parts makers, hit by slumping demand, are trimming working hours, extending holidays, shutting down factories and cutting jobs to reduce output.