Reuters Summit-Auto market will stabilise in 2010-Moody's

(For other news from the Reuters Autos Summit, click here)

* World market seen stabilising next year, up 2 pct

* Overcapacity still a problem in Europe

* Scrapping schemes to become gradually less effective

By Gilles Guillaume and Helen Massy-Beresford

PARIS, Nov 4 (Reuters) - The worst of the automotive industry crisis is over, and world sales are set to stabilise next year, a Moody's analyst told the Reuters Auto Summit on Wednesday.

However, European manufacturers, which have been brought back from the brink by government support measures, still need to solve the problem of excess production capacity and take steps to improve operating profitability if they are to keep their investment ratings, Falk Frey, senior vice president corporate finance, said.

"Our concern is that price pressure will accelerate because of oversupply and overcapacity and the negative price effect resulting from the underlying trend toward cheaper, smaller cars, as well as the need to reduce CO2 emissions and tax schemes that favour cars with lower emissions," Frey said.