Automotive winners and losers for 2007


As car sales slump, the weak get weaker but the strong continue to thrive, says Fortune's Alex Taylor.

October 12 2007: 12:59 PM EDT


NEW YORK (Fortune) -- With the 2008 model year now upon us, its a good time to look back at the first nine months of calendar 2007 to see who the champs and chumps are. The names may not surprise you but the amount of movement might.

The auto industry as a whole has been disappointing, with sales in the U.S. down 4.5% through September. The subprime mortgage collapse gets most of the blame. If you are worried about seeing your house foreclosed, you probably aren't going to be out shopping for a new car. Others, who used their homes like ATMs, are finding refinancing difficult to impossible. Auto sales have been particularly weak in California and Florida, two of the hardest-hit housing markets.


Among the ten major manufacturers, only four have lost ground this year -- the Detroit Three and Volkswagen. No surprises there. Ford is the big loser as it undergoes a wrenching restructuring at the hands of a novice CEO. Its sales are down 13.3% so far this year. New marketing boss Jim Farley, recruited from Toyota (Charts) on Thursday, has a lot of work to do.

On the upside, the import brands were big winners, with BMW leading the way, followed by Nissan (Charts). Shorn of Chrysler, Mercedes is showing a little strength, too, with sales up 1.8%.


High-impact new models moved the needle significantly for a couple of makes that had been languishing. Lincoln's sales have risen 14.5% this year and it is closing the gap with its moderately-priced dealer mate Mercury. Expect to see Mercury to go the way of Plymouth and Oldsmobile in a few years. Saturn, which has been totally revamped by the injection of Opel models to its lineup, is up 11.7%, though that is probably less than the folks at General Motors (Charts, Fortune 500) would like.

A shortage of dealer traffic has plunged several other brands deep into the loss column. Jaguar, still suffering from a series of disastrous product and design errors, has seen its sales plummet 27.2% this year. At Buick, meanwhile, even the arrival of the acclaimed Enclave crossover vehicle hasn't been enough to keep sales of this one-time doctors favorite from falling 24.7%.

Digging deeper into the data, truck sales continue to outpace car sales despite the seeming permanence of $3 gasoline. Car sales are down 4.5% versus a decline of only 1.4% for trucks. Much of that is due to the soaring popularity of crossover vehicles, which are counted as trucks even though they are engineered like cars. But Honda's CR-V, a crossover, now outsells the Ford Explorer, a traditional truck-based SUV.

At the model level, the plight of the Detroit Three is vivid. In September, as Automotive News points out, only nine of its 41 nameplates saw sales go up in September. The good news is that two recently redesigned models, the Cadillac CTS and the Chrysler Sebring are selling strongly.

Less encouraging has been the response to the old Ford 500 that was renamed Taurus earlier this year. The move was supposed to boost buyer recognition of the vehicle but Ford (Charts, Fortune 500) has sold about half as many cars under the new name as it did under the old one.

What do the early returns from the 2008 model year portend? Nothing very encouraging. With sales headed below 16 million units for the first time in eight years in calendar 2007, there are predictions they could fall even further next year.

Analysts at UBS see "a growing risk that U.S. volumes will tumble further given the problems in housing and the difficulty faced by many consumers in accessing credit." It is using a 10% cut to forecast U.S. volumes for each manufacturer.

Still, several high-volume cars have been totally reengineered for 2008 and could create some showroom

 

Interesting story. So the Sebring is selling strongly? I wonder what is causing what models are causing it to sell so strongly. I bet the Limited model sales is what is helping the Sebring sell better than the previous model. The previous Sebring was overall a good looking car, its weaknesses were it did not have a competitive powertrain and the interior was too similar to the Stratus's. Although the 3.5L may not be as powerful as much of its competition, the new 6-speed is helping to keep it competitive and helps to keep the gap smaller.

I'm somewhat surprised to hear the Taurus is failing worse than the Five Hundred. The new Taurus is a pretty nice car, the main problem is once again the styling. It doesn't exactly cause a person's heart to race, let alone encourage you to keep on eyes on it. The other problem is although the power is certainly an improvement from the previous model and the fuel economy is quite impressive for its class, it still can't hold a candle to the LX cars let alone the W-body cars in the category of performance.

It isn't surprising that Mercury is having trouble, not only is the difference between Mercury and Ford becoming less and less apparent, but the appearance of the different Mercury models is becoming difficult to tell them appart. Ford needs to change their strategy with Mercury before they decide to drop them. They need to make them a direct competitor with Toyota and Honda in luxury and interior offerings while offering the performance of Nissan, while Ford needs to compete with just the performance end of the market. Ford should focus more on being a domestic, performance competitor. Lincoln needs to try to catch back up with Cadillac's performance.

Buick needs to decide that if they are going to position themselves as being Lexus's domestic equal, they need to put in the effort to meet that benchmark. First of all, they need to abandon the 96-07 Taurus styling on the LaCrosse and start featuring some of the best technology GM has to offer in all of their models without threatening Cadillac's sales. The 240hp version of the "High Feature" engine combined with their old 4-speed isn't the best they have to offer. To help distinguish themselves they should keep as many models FWD as possible as long as the torque-steer isn't too excessive and should consider looking into AWD.

The new Malibu looks like it will be quite competitive. It appears that Honda is making a mistake with the new Accord. They are not planning on offering a 6-speed automatic which has become the norm for new models. This could cost them.