A muted recovery in U.S. light vehicle sales next year could trap many suppliers and automakers into airline-style “‘boom and bust’ cycles without the boom,” warns Fitch Ratings.

In its annual auto outlook, the ratings agency predicts U.S. demand will creep up 8% to 11.1 million units in 2010, a level so anemic that much of the industry will continue to burn cash. Companies that are unable to shore up their balance sheets will be extremely vulnerable to the next industry downturn, Fitch says.

The ratings agency says the industry’s high fixed costs, excess capacity and long product development cycles could leave it “littered with failures.” It says suppliers and automakers that have emerged from Chapter 11 could face “double-dip bankruptcies.”

Fitch predicts the weak market will prevent Chrysler Group LLC and General Motors Co. from launching initial public stock offerings next year to allow the U.S. government to begin selling its stock. The U.S. owns 60.8% and 10% of GM and Chrysler, respectively. GM executives have said an IPO could come in the second half of next year. Chrysler doesn’t expect to go public before 2011.

Chrysler is forecasting an operating profit next year if U.S. demand reaches 11 million units. GM expects volume of 10 million-11 million units but says it can break even on an operating basis even if sales range between 10 million-10.5 million vehicles.

The average fuel economy of cars and light trucks sold in the U.S. this year rose an estimated 0.1 mile per gallon to 21.1 mpg, the fifth consecutive year-over-year improvement, says the Environmental Protection Agency.

The EPA says fuel economy has improved by 1.8 mpg, or 9%, since 2004. The agency’s annual report, which includes carbon dioxide emissions for the first time, says average tailpipe emissions have decreased 39 grams per mile, or 8%, to 422 grams per mile in the five-year period. The agency notes that those improvements reverse an 18-year trend of declining fuel economy and increasing emissions, thus returning those measures to the levels of the early 1980s.

Among major automakers, Honda again sold the most fuel-efficient vehicles, averaging 23.6 mpg, followed by Hyundai-Kia (23.4) and Toyota (23.2). Volkswagen raised its fuel economy by 0.5 mpg to 22.8. Ford (20.5) and General Motors (19.9) also boosted fuel efficiency. But Chrysler backslid by 0.6 mpg to 18.7 to remain in last place.

The EPA calculates its figures differently than the National Highway Traffic Safety Administration, which gauges compliance with federal fuel economy regulations. Even so, the very gradual improvement in fuel economy in EPA terms shows how difficult it will be for automakers to boost their average fuel economy-as measured by NHTSA-by 40% to 35.5 mpg by 2016.

General Motors Co. is expected to reveal the turnaround plan for its Opel unit this week, first to labor representatives and then to government officials.

The countries that host Opel or Vauxhall plants-including Belgium, Germany, Poland, Spain and the U.K.-say they won’t discuss GM’s request for restructuring aid until they see the proposal. They plan to hammer out a joint response at a Dec. 4 meeting.

GM has said it will cover some of the €3 billion ($4.5 billion) of restructuring costs. But acting Opel chief Nick Reilly says it would be “quite difficult” for the company to foot the entire bill because of its heavy restructuring costs in the U.S. and elsewhere. GM assures European Union officials that all decisions about job reductions and plant closings would be based on economic criteria-not tied to promises of financial assistance.

Separately, GM says that today it is repaying the last €400 million ($598 million) of the €1.5 billion ($2.2 billion) bridge loan Germany made in June. As a result, the trust that controls a 65% stake in Opel can now be dissolved.

Hakan Samuelsson, who is credited with successfully overhauling Munich-based truckmaker MAN SE during five years as CEO, unexpectedly resigned yesterday, effective immediately.

Georg Pachta-Reyhofen, head of MAN’s diesel unit, has temporarily added CEO duties to his existing responsibilities. The company says Samuelsson was convinced MAN needed a “fresh start” in top management and hopes his decision will help the company “devote all of its attention” to its core business.

Analysts say his departure could make it easier for Volkswagen AG Chairman Ferdinand Piech achieve his ambition of merging MAN and rival Scania AB into a VW truck unit.

Samuelsson alienated Scania management when he attempted a hostile takeover in 2006 that was thwarted by Volkswagen, one of the Swedish truckmaker’s largest shareholders. Since then VW hiked its MAN ownership to 30% and took a controlling stake in Scania. MAN bought VW’s truck operations in Brazil in March.

In May German prosecutors launched investigation into allegations of bribery at MAN. Handelsblatt, which does not cite its sources, says Piech is taking advantage of the probe to force Samuelsson out. But prosecutors tell reporters Samuelsson is not a suspect.

General Motors Co. is suing Plymouth, Mich.-based JTEKT North America Inc. in federal court in Detroit, says the Associated Press.

The news service cites GM’s lawsuit, which says the company is seeking repayment for more than $30 million of warranty expenses for replacing faulty steering assembly parts supplied by JTEKT.

GM says customers have complained about rattles and clunks in its Chevrolet Cobalt and HHR, and Pontiac G5 and Pursuit compact cars, dating back to the 2005 model year. The automaker blames the problems on “excessive gear backlash” from JTEKT parts.

The supplier says it provided components that met all of GM’s requirements and calls the problems a “noise issue” that doesn’t affect a driver’s control of the vehicle. JTEKT says it continues to supply the parts to GM, which has changed some specifications.

Light-vehicle production could increase by 500,000 units from this year to 17 million in 2010, even if sales remain weak, because automakers will need to replenish depleted inventories, says J.D. Power and Associates.

The research firm says this year’s 21% drop in output succeeded in shrinking bloated inventories. But Power says increased output next year won’t solve the problem of Europe’s estimated seven million units of excess capacity. The firm estimates that capacity utilization now averages about 60%, with some big factories operating at only 20% of capacity.