Mazda Spring 2009 Economic Update Sponsored By Lease Busters

OADA Web PresentationEconomic and Auto Outlook 2009

Presented by Carlos Gomes

Senior Economist, Scotiabank

Sponsored by LeaseBusters

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Carlos GomesSenior EconomistIndustry ResearchThe Scotiabank Group, Toronto

Presentation toPresentation to::

Ontario Automobile Ontario Automobile Dealers AssociationDealers Association

Toronto, OntarioToronto, Ontario

April 7, 2009April 7, 2009

Economic & Auto Industry Economic & Auto Industry Outlook: 2009Outlook: 2009Searching for a Bottom

Global Economic Growth United States & Western Europe

-3

-2

-1

0

1

2

3

4

5

6

7

8

9

97 98 99 00 01 02 03 04 05 06 07 08 09

-3

-2

-1

0

1

2

3

4

5

6

7

8

9yr/yr % change

0

1

2

3

4

5

6

7

8

9

97 98 99 00 01 02 03 04 05 06 07 08 09

0

1

2

3

4

5

6

7

8

9yr/yr % change

Global Growth

Global Growth Moderates

U.S. Real GDP

Euro-zone Real GDP

Emerging Markets

Gradual Improvement in Assemblies to Begin by Spring

New Domestics to Surpass Detroit Three Output in Early 2009

4

5

6

7

8

9

10

2007 2008 2009

4

5

6

7

8

9

10

8

9

10

11

12

13

14

15

16

17

2007 2008 2009

60

70

80

90

100millions of units

North American Vehicle Production

Sharp Inventory Adjustment

New Domestics

Detroit Three

U.S. Dealer Inventories

days’ supply millions of units

forecast

North American Vehicle Production

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

2007 2008 2009

0.30

0.35

0.40

0.45

0.50

0.55

0.60

Boom, Bust, and Early Stabilization

0

3000

6000

9000

12000

2007 2008 2009

0.90

0.92

0.94

0.96

0.98

1.00

U.S. Home Sales (LHS)

index

Coincidence to Lagging Ratio

(RHS)

ISM (RHS)

indexmillions of units

Baltic Dry Index (LHS)

U.S. Housing & Manufacturing Key Leading Indicators

index

Canadian Economy Slows…

-16

-12

-8

-4

0

4

8

12

16

98 99 00 01 02 03 04 05 06 07 08 09

-6

-4

-2

0

2

4

6yr/yr % change

Manufacturing – Canada (LHS)

Services – Canada (RHS)

Manufacturing Leads Slowdown

yr/yr % change

Employment – Canada (RHS)

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

00 01 02 03 04 05 06 07 08 09

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

… … Lifting Unemployment Unemployment

%

Unemployment Rate – Ontario

Unemployment Rate – Canada

-20

-15

-10

-5

0

5

10

15

20

88 90 92 94 96 98 00 02 04 06 08

90

100

110

120

130

140

150

160

170

180

U.S. Affordability Remains Strained

yr/yr % change

U.S. Housing U.S. Housing Affordability IndexAffordability Index

U.S. Median U.S. Median House PricesHouse Prices

U.S. House Prices Decline Spreads

index

International House Prices

-20

-15

-10

-5

0

5

10

15

20

25

04 05 06 07 08 09

-20

-15

-10

-5

0

5

10

15

20

25

U.K. House U.K. House PricesPrices

Canada – Canada – MLS PricesMLS Prices

yr/yr % change

Ontario –Ontario –MLS PricesMLS Prices

U.S. Housing Recession

0.3

0.5

0.7

0.9

1.1

1.3

1.5

00 01 02 03 04 05 06 07 08 09

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

Plunging U.S. Home Sales …

mn units

New Home Sales

Existing Home Sales

mn units

3

4

5

6

7

8

9

10

11

00 01 02 03 04 05 06 07 08 09

months’ supply

Existing Home Sales

… And Soaring Inventories

New Home Sales

Balanced Market

Low Rates For a Long Time

-2

-1

0

1

2

3

4

5

6

02 03 04 05 06 07 08 09 10

Canada 10-yr Gov’t. Bond

U.S. 10-yr T-Bond

% forecast

Canada-U.S. Bond Spread

-2

-1

0

1

2

3

4

5

6

02 03 04 05 06 07 08 09 10

Canada

U.S.

Canada-U.S. Central Bank Spread

% forecast

Source: Bank of Canada; Federal Reserve; Global Insight; Scotia Economics

Central Bank Rates Canadian & U.S. Bond Yields

U.S. Real Fed Funds & Financial Stress

-2

-1

0

1

2

3

4

5

6

90 92 94 96 98 00 02 04 06 08

-0.8

-0.4

0.0

0.4

0.8

1.2

1.6

2.0

2.4

%

Ted Spread

U.S. Real Fed Funds

Financial Conditions Begin To Ease

-2

-1

0

1

2

3

4

5

6

90 92 94 96 98 00 02 04 06 08

-2

-1

0

1

2

3

4

5

6

U.S. Real Fed Funds & Real GDP

yr/yr % change

Real GDP

Real Fed Funds

%%

Financial Stress/Event Risk In Financial Markets

-4

-2

0

2

4

6

8

10

12

14

69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Franklin National

First Penn

Drysdale Securities/Mexican Default

Continental Illinois

Black Monday

S&L Crisis

Peso Crisis

Asian Currency

Crisis

LTCM/Russia Default

NASDAQ Bubble

Subprime Meltdown

Penn Central

Ted Spread%

Gulf War

Y2K

Silver Bubble

Latin American Debt Crisis

Ted Spread is a three month LIBOR minus three month T-bills

Lehman Bros

0

1

2

3

4

5

2007 2008 2009

400

600

800

1000

1200

1400

1600

Boom, Bust, and Stabilization

400

800

1200

1600

2007 2008 2009

4000

8000

12000

16000S&P 500 (LHS)

S&P/TSX (RHS)

TED Spread (LHS)

Emerging Markets (LHS)

index

Emerging Markets (RHS)

Stocks Stress

index index%

Fiscal Stimulus To The Rescue

0 2 4 6 8

France

U.K.

Japan

Germany

Canada

U.S.

China

Coordinated Fiscal Stimulus

% of GDP

Source: OECD, IMF, BNS.

China NA NA NA

United States 21 37 42

Canada 12 41 47

Germany 0 46 54

Japan 4 73 24

United Kingdom 15 93 -8

France 0 75 25

Timing of Package

201020092008

40

45

50

55

60

65

70

75

90 92 94 96 98 00 02 04 06 08

Canadian Households in Better Shape

Canada

U.S.

% of household real estate

16

18

20

22

24

26

90 92 94 96 98 00 02 04 06 08

Canada

U.S.

Household Debt

% of household assets

Household Equity

6

8

10

12

14

16

18

20

78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 100.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

United States

millions of units

Auto SalesAuto Sales

Housing StartsHousing Starts

Auto & Housing Cycles

millions of units

0.7

0.9

1.1

1.3

1.5

1.7

1.9

2.1

78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10100

150

200

250

300

Canada

thousands of units

Auto SalesAuto Sales

Housing StartsHousing Starts

thousands of units

forecast

forecast

25

30

35

40

45

50

55

60

65

70

00 01 02 03 04 05 06 07 08 091.4

1.5

1.6

1.7

1.8

Buying Plans & Vehicle Sales

%

-2

-1

0

1

2

3

4

5

00 01 02 03 04 05 06 07 08 091.4

1.5

1.6

1.7

1.8yr/yr % change

Employment & Vehicle Sales

Canadian Vehicle Sales

Employment

millions of units millions of units

Canadian Vehicle Sales

Households Planning a Major Purchase

Employment Growth & Confidence Drive Vehicle Sales

New Car Prices Decline

U.S. New Car Prices & Employment

-3

-2

-1

0

1

2

3

4

5

6

97 98 99 00 01 02 03 04 05 06 07 08 09

-3

-2

-1

0

1

2

3

4

5

6yr/yr% change

U.S. Car Prices

U.S. Private Sector

Employment

29.0

30.0

31.0

32.0

33.0

05 06 07 08 090.7

0.8

0.8

0.9

0.9

1.0

1.0

1.1

Canadian Dollar & New Vehicle Prices

000’s of U.S. dollars

Canadian DollarCanadian Dollar

Vehicle PricesVehicle Prices

CAD/USD

08070605 09

Used Vehicle Imports Moderate, Supporting Prices

Vehicle Imports Surge as C$ Strengthens Used Car Prices are Under Pressure

-12

-10

-8

-6

-4

-2

0

2

4

6

8

00 01 02 03 04 05 06 07 08 09

-12

-10

-8

-6

-4

-2

0

2

4

6

8yr/yr% change

0

40

80

120

160

200

240

280

00 01 02 03 04 05 06 07 08 09

60

65

70

75

80

85

90

95

100thousands of units

Vehicle Imports

Scotiabank Used Car

Price Index – One-Year

Old Models

Canadian Dollar

US cents Manheim Used Vehicle Index – United States

30

35

40

45

97 98 99 00 01 02 03 04 05 06 07 08

30

35

40

45

Canada’s Vehicle Fleet…

per cent of total fleet

Vehicles 4 Years Vehicles 4 Years or Lessor Less

Vehicles 9 Years Vehicles 9 Years or Olderor Older

Source: R.L. Polk & Co and Desrosiers Automotive Consultants

Canada Vehicle Fleet

30

35

40

45

97 98 99 00 01 02 03 04 05 06 07 08

30

35

40

45

Ontario’s Vehicle FleetOntario’s Vehicle Fleet

% of total fleet

Vehicles 4 Years Vehicles 4 Years or Lessor Less


Ontario Vehicle Fleet

Ontario’s Aging Fleet … ... Has Many Vehicles At Least 11 Years Old

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

2.0

97 98 99 00 01 02 03 04 05 06 07 08

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

2.0


millions of units

1.8

2.0

2.2

2.4

2.6

2.8

3.0

97 98 99 00 01 02 03 04 05 06 07 08

1.8

2.0

2.2

2.4

2.6

2.8

3.0


Vehicles 4 Vehicles 4 Years or LessYears or Less

millions of units

Source: R.L. Polk & Co and Desrosiers Automotive Consultants

200

300

400

500

600

00 01 02 03 04 05 06 07 08 09

200

300

400

500

600

Small Cars Dominate The Canadian Markets …

thousands of units

Medium CarsMedium Cars

Small CarsSmall Cars

… But Crossover Utility Vehicles Are Growing Rapidly

50

100

150

200

250

300

350

00 01 02 03 04 05 06 07 08 09

50

100

150

200

250

300


CUVsCUVs

SUVsSUVs

New Vehicle Market -- Canada

Pickup Pickup TrucksTrucks

Ontario Automobile Sales

300

400

500

600

700

1980 1985 1990 1995 2000 2005

300

400

500

600


Ontario Vehicle Sales – An Historical Perspective

forecast

This Report is prepared by Scotia Economics as a resource

for the clients of Scotiabank and Scotia Capital. While the

information is from sources believed reliable, neither the

information nor the forecast shall be taken as a

representation for which The Bank of Nova Scotia or Scotia

Capital Inc. or any of their employees incur responsibility.

Carlos GomesSenior EconomistIndustry ResearchThe Scotiabank Group, Toronto

Presentation toPresentation to::

Ontario Automobile Ontario Automobile Dealers AssociationDealers Association

Toronto, OntarioToronto, Ontario

April 7, 2009April 7, 2009

Economic & Auto Industry Economic & Auto Industry Outlook: 2009Outlook: 2009Searching for a Bottom