Wait Till Next Year

Commentary

This year had its ups and downs: up for Honda, BMW and a few others, but down for Detroit. After a great first half, Toyota has been taking some lumps, too.

Total U.S. sales will run about 16 million for 2007, the worst year since 1998.

Back then GM had 29.4% of the market and Ford 24.7%. What a difference a decade makes! But enough about yesterday, what about next year?

Signs are mixed. You know the bad stuff: The housing market is awful and that sinks construction. Loans are tough to get and the weak dollar will push up prices on foreign-made cars; oil prices are hitting record highs and consumers are nervous about bad news they are hearing on many fronts. Some seers say a storm is coming while others think one already has arrived.

But the stock market seems resilient and employment still is strong outside Michigan. Inflation seems under control (despite soaring food and energy prices), the war is likely to wind down with the election, and others say lower interest rates will help everybody.

Let’s look at individual companies:

General Motors’ U.S. market share has been improving for the last few months from earlier in the year and it beat Toyota in global sales last quarter. You hate to get over-enthusiastic, but it might be pulling out of its spin.

GM’s new cross/utility vehicles, the Chevrolet Malibu, plus its first-rate pickups and SUVs might push share up to 25% or 26%. Don’t bet the house on it, but the turnaround just might be here.

Toyota has hit a few speed bumps, including quality problems and the loss of some key executives. More challenges likely are coming, not so much because Godzilla is slipping, but because the competition is getting better.

So will Toyota stay No. 2 in the U.S. and grow next year? Yes, and if the road does gets rougher, Toyota, with cash to spare, will throw around marketing money to keep sales rolling.

As we’ve seen from recent independent quality reports, Ford’s product actually is better than what its falling market share shows. What’s wrong is the auto maker’s strategy and marketing effort. You can’t get rid of everything: Jaguar, Land Rover, Volvo, Mercury and the Ranger small pickup.

Where did Ford get the idea all these products are merely distractions? They are part of its core business. If Ford doesn’t start fixing its problems instead of abandoning them, Chrysler could catch up.

Meanwhile, Chrysler’s new managers have made some terrific hires this year, and the company’s sales are close to last year’s levels. But marketing at Chrysler still boils down to “Put another spiff on the hood,” and the incentives wipe out potential profit.

The test for the new managers in 2008 will be to sharpen the product and learn to sell. I think they’re on the verge of a good start.

Honda is after some of Toyota’s market and is making its move. The new Accord looks good and should make for more share gains next year.

BMW should have a terrific year with the new 1-Series, despite the muscular euro.

Nissan will run strong, too, with its Altima sedan and the new Rogue. Mazda and Mitsubishi are looking healthier, too.

Hyundai will have a problem because it’s running out of American managers to blame for mistakes made at headquarters in South Korea.

But the biggest issue is total industry volume. It helps to have climbing market share, but the industry total is key. Since 1998 sales have run between 16.6 and 17.4 million until this year when the number is sinking to nearer 16 million.

Look for some recovery, not to 17 million U.S. sales, but 16.4 million. The positives for 2008 outweigh the negatives, and lots of tempting ’08 models are ready to debut. A better year is coming.

Jerry Flint is a columnist for, and former senior editor of, Forbes Magazine.