As auto industry executives plan for a dismal 2009, they face a lot of uncertainty on investing for the future.
The key question: What will a "normal" year look like?
For nine years starting in 1999, the normal U.S. market was around 16.9 million units. But the post-credit-crisis world may be much different, and smaller.
Or maybe not.
The industry is nowhere near a consensus, which increases planning risk in a capital-intensive industry. Sizing company resources and capacity is much different for 17 million vehicles than for 15 million.
"The sweet spot could be 15 million," says Jim O'Sullivan, CEO of Mazda North America.
But Robert Schnorbus, chief economist of the consulting firm J.D. Power and Associates, says: "Of course we will return to 16 or 17 million. Every recession we hear this argument that Americans have fundamentally changed, but Americans love their features and comfortable cars."
The arguments fall into two camps.
Some executives and analysts such as PricewaterhouseCoopers see the 17 million years as an aberration, artificially pumped up by a false sense of personal wealth, lax lending standards and irresponsible automaker incentives. Even with a recovery, fewer people will be able to afford new vehicles.
PwC's Automotive Institute forecasts that sales will rebound to 15.5 to 16 million units in 2012 and beyond.
Others believe fundamentals such as economic recovery, population growth and pent-up demand will push sales back above 16 million — though few see that in less than four years.
And after the disastrous second half of 2008, and with an even worse 2009 ahead, executives are cautious about forecasting the upside.
"Nobody wants to forecast a 17 or 18 million unit market," says Joe Hinrichs, Ford group vice president of manufacturing. "I don't think anybody really knows."