Industrial original equipment
17.4% of Group sales, 23.8% of I&A sales
In 2007, the market continued to show good year-on-year growth in all regions. Total US industrial production as measured by the US Federal Reserve was higher, while capacity utilisation was flat compared to 2006. The US was negatively impacted by continued weakness in the residential construction market. The construction machinery index was down by 18.8% in 2007 compared to 2006. The oilfield, mining and agricultural markets showed good growth, especially outside of North America.
Outlook
The market is expected to show continuing modest growth in 2008 globally. The North American market is expected to show a moderate slowdown, whilst Eastern Europe and Asia are expected to show good growth in 2008.
US Industrial production index
Source: Federal Reserve
Industrial replacement
13.1% of Group sales, 18.0% of I&A sales
The industrial replacement market performed strongly in 2007 following the strength of the original equipment market.
Outlook
The industrial replacement market is expected to follow the industrial original equipment market with softness in North America and growth outside of North America.
Automotive original equipment
20.4% of Group sales, 27.9% of I&A sales
Global automotive production in 2007 increased by around 3.0% compared to 2006 according to CSM auto database, with a total of 54.9 million light vehicles manufactured. In North America, 15.0 million units of light vehicles were produced, compared to 15.3 million in 2006. According to Ward’s Autos, production volumes in North America at General Motors and Ford were down by around 7% and 6% respectively, whereas Chrysler kept volumes flat. In Europe, production increased by 5.6% to 21.5 million units, and in Japan and Korea production grew by 2.3% in 2007. There was continued strong growth in Latin America and other emerging markets, including China and India, which grew by 19.1% and 13.1% respectively.
Our exposure to the Detroit Three (‘D3’) in North America is steadily coming down and now stands at approximately 7% of Group sales in North America and approximately 10% of Group sales worldwide.
Outlook
Looking ahead to 2008, CSM is forecasting North American production to decline to 14.4 million units, the lowest level in nearly 15 years. European production is expected to increase by 1.7% due to strong demand from Eastern Europe, and production in China, India and Latin America will be ahead by 12.2%, 33.2% and 10.9% respectively.
North America automotive production (million units)
Source: CSM
Global automotive production (million units)
Source: CSM
Automotive aftermarket
20.0% of Group sales, 27.4% of I&A sales
The global automotive aftermarket showed steady growth in 2007. Factors such as the weather, stock rebalancing and customer consolidation are all variables that can impact the market. The aftermarket is also driven by consumer sentiment, disposable income and the price of fuel.
Outlook
In 2008, we expect the market in North America and Europe to grow in line with GDP. There is some risk to the aftermarket in North America from increased gasoline prices. Growth is expected to be above GDP in regions such as Eastern Europe and Asia because of their rapidly developing car parks.
Growth of the US automotive aftermarket (million $)
Source: AAIA
Manufactured housing/recreational vehicles
3.7% of Group sales, 2.8% of I&A sales
Wholesale shipments of all towable recreational vehicles declined by 10.9% in the US compared to last year. Consumer confidence is a key driver in the level of shipments and confidence as measured by the Conference Board fell during 2007. Manufactured home shipments fell by 18.5% over the last twelve months. A weaker real estate market suppressed the demand for manufactured housing, particularly the high volume multi-section manufactured homes.
Outlook
Both the manufactured housing and recreational vehicle markets are expected to remain weak in 2008.
US manufactured home shipments (units, 000s)
Source: Manufactured Housing Institute Monthly Report
US recreational vehicles (units, 000s)
Source: Recreational Vehicle & Conversion Vehicle Monthly Report