US auto sector to rebound, Sabic CEO says

05 November 2007 18:40  [Source: ICIS news]

By John Waggoner

HOUSTON (ICIS news)--The US automotive sector should soon rebound from weak demand and troubles in the financial sector, chief executive Mohamed al-Mady of Saudi Basic Industries Corporation (Sabic) said on Monday.

“The housing market and the financial crisis may have a bearing, but we hope it is limited and the US will rebound,” al-Mady said in an interview.

Sabic in May announced the acquisition of US specialty polymers maker GE Plastics, which is the largest supplier of engineering plastics to local automakers.

US carmakers have been plagued in recent months by low demand.

Turmoil on the financial markets since August, and the erosion of guarantees for subprime mortgage-backed securities, had led to concerns by some analysts that the situation could aggravate carmakers’ woes.

Demand could suffer in the short term if credit tightens or if US consumer spending is somehow compromised, al-Mady said, but added that US third-quarter gross domestic product (GDP) figures raised hopes that the impact of financial turmoil would be limited.

“Third quarter’s figures were still good. It is quite remarkable, but things do change,” he said.

The cyclical nature of the US auto industry and its history of recovering from previous crises suggest that the current downturn would not last, al Mady said.

“These things may have a short-term effect,” he said. “We are very lucky that we bought the company in the twilight of this financial crisis.”

Sabic intends to continue advancing technology that will help automakers manage low demand through energy efficiency and other benefits, he said.

“It will give automakers an edge in dealing with Sabic,” he said.

If Asian manufacturers expand in the US market, it could represent a boon for the engineering plastics market since Toyota and Honda tend to use more plastic components than their US counterparts, he added.

By: John Waggoner
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