* Q3 auto results get underway next week
* Scrapping schemes seen boosting Q3 sales
* Investors look out for long-term clues
As a boost from state-sponsored schemes to help consumers replace old vehicles with newer ones tapers off, investors will be looking at the auto sector's longer-term prospects when European carmakers and suppliers post third-quarter results in the coming weeks.
Governments around the world introduced so-called scrappage incentive schemes earlier this year to stimulate demand for new cars and help automakers who were badly hit by the global financial crisis, while at the same time removing environmentally-unfriendly vehicles from the roads.
Analysts do not expect a repeat of the good news on cash flow that was seen with first-half results in July, when production moved up a gear as the scrappage schemes kicked in.
Instead they will look for updates on cost-cutting and how companies plan to negotiate the end of the scrappage schemes in some markets.
There'll probably be a much longer-term focus than at a normal set of quarterly results, said Credit Suisse analyst Stuart Pearson.
Companies have reduced their inventories and cut costs in the face of the economic downturn, and without the benefit of the scrappage stimuli, more pragmatic views on automakers' finances and prospects are likely to come into focus.
Those big working capital moves are already behind us, and from here on in generating cash gets a bit tougher, said Pearson.
Nomura analyst Michael Tyndall agreed, noting that carmakers' predictions for the fourth quarter were likely to be positive. However, uncertainty around 2010 remains, particularly for the volume makers who are likely to see a pay-back effect from scrapping incentives in terms of both sales and pricing.
In contrast, premium automakers may be more optimistic about a gradual recovery, he added.
Presentations by German carmakers, BMW (BMWG.DE) Mercedes parent Daimler (DAIGn.DE) and Volkswagen (VOWG.DE), which also owns the Audi brand, take place towards the end of the month.
They are likely to be viewed through the prism of the end of that market's highly successful scrapping scheme in August.
Analysts expect new car sales in Germany -- which rose 21 percent in September -- to crash around the start of next year, because of a time lag between drivers placing orders and cars being delivered.
People still think the low point in terms of volumes will be next year, Pearson said.
For Italy's Fiat (FIA.MI), the first European carmaker to report, on Wednesday Oct. 21, investors will be looking for clues on CEO Sergio Marchionne's plans for 20 percent-owned subsidiary Chrysler, ahead of the presentation of a five-year plan for the U.S. automaker on November 4. [ID:nL7616710]
Fiat itself is seen posting a healthy set of results, boosted by its exposure to the robust Brazilian market and by scrappage schemes in major European markets like Germany and France.
Cassa Lombarda analysts forecast third-quarter sales of 10.3 billion euros ($15.37 billion) at the group, with results weak but still adequate in a difficult market.
In France, where the government has promised a gradual end to car scrapping incentives, PSA Peugeot Citroen is expected to post sales of 13.1 billion euros, a 3 percent year-on-year increase, according to UBS analyst Philippe Houchois.
For Renault, attention is likely to focus on the problems the carmaker is facing with its struggling Russian partner Avtovaz (AVAZ.MM). Investors will want to know if Renault will make a fresh injection of cash, or simply write off payments it was due to receive in return for technology from the maker of Ladas.
Auto suppliers' third-quarter publications will also be scrutinised. French car parts maker Valeo (VLOF.PA) is expected to post third-quarter sales of 1.9 billion euros and an operating profit of 29 million euros on October 20, Houchois said in a research note.
We'll be looking at how they've benefitted from increased production during the third quarter, and how they can manage any uncertainty in outlook, said Credit Suisse's Pearson.
We think Valeo could beat consensus numbers given the ongoing effect from the scrapping incentives and the end of the de-stocking, UBS's Houchois said.
Investors will also want more clarity on new CEO Jacques Aschenbroich's strategic plan for the company.
At the Frankfurt Auto Show in September he said a plan set out by his predecessor to sell significant assets had been dropped.
French counterpart Faurecia is expected to post sales of 2.7 billion euros for the quarter, Houchois said. (Editing by David Holmes and Rupert Winchester) ($1=.6710 Euro)