Flint: Next Year—Better or Worse?

Jerry FlintThat ugly word “recession” is being heard in the land. On financial TV shows they talk of a coming recession all the time. The columnist Dan Dorfman says it will be worse than recession.


If times are bad, we know the auto business will suffer. In particular ourDetroit companies will suffer because they are terribly weak right now. And the new wave of layoffs indicates Detroit is preparing for a storm.

Here's the difference: at Ford, with its 16 percent of the market, a 16.5 million units year means 2,640,000 car and truck sales. At 15.5 million units it's 2,480,000. That may be the difference between selling and approaching a profit, or wild incentives to move the metal.

Are bad times coming, or are we dealing with TV hype, another “end of the world as we know it” story? Earth warming may be old hat, so do they need something else to scare us?

It's true that housing is sick and creditors are losing billions, that new construction is slack, that oil has pushed near $100 a barrel and we're paying $3.50 for 93-octane gas in the East, and $4 a gallon doesn't seem that far away. But as I write this the stock market is up for the day, oil is down to about $91 a barrel, and unemployment and all the other economic indicators seem fine.

More important to me, the best stock market predictor I know, Bob Brinker (maybe you hear him on the radio on weekends) says he sees no evidence that a recession will come despite all the scare talk by the media. Bob may be wrong, of course, but had I followed his advice for the past decade I would be filthy rich today.

Go with Bob

I go with Bob. I see no signs of a recession. So let's get to car sales.

This year after 10 months, the overall number is down 350,000 cars and trucks from last year. This indicates that full year sales will be in the neighborhood of 16.2-16.1 million units, versus 16.6 million last year.

Next year I would predict a gain, ten percent or so, back toward 16.3 million. Let me say that no one really knows and plenty think the business could tank. But I don't see such signs and this is my best guess, no boom but no bust. Let's look at individual companies to see why:

There's good news at General Motors. GM’s market share has been climbing since midyear, and new products are coming, the Malibu and a Chevy crossover called the Traverse next year. There are some new small crossovers, the Vue for Saturn and the Vibe from Pontiac, plus the new Cadillac CTS and some hybrid SUVs. That's a good lineup of new stuff and I see more GM market share gains, maybe to 25 percent or a touch more for the year. It may not sound like the old days of 50-percent market share, but at the end of June this year the number was 23 percent.

We'll see if Ford’s new Flex crossover, an improved Focus and the newly renamed Taurus and Sable will help sales in Dearborn. But the most important news is the good talk about Ford quality. I believe the Ford lineup is better than 16 percent of sales it gets, that the failure has been in selling or marketing. The new marketing boss, from Toyota, Jim Farley, might change that.

Chrysler is cutting production to stop the giveaways, that's good. But they are killing good product, too, like the Pacifica and Dodge Magnum. They weren't selling well, true, but I blame inept sales and marketing. Like at Ford, we've got to wait and see how Jim Press, the ex- Toyota chief in America, does.

At Toyota, heavy is the head that wears the crown. Dumped on by Consumers Reports, by the Union of Concerned Scientists, and by the New York Times Columnist Tom Friedman, Toyota’s in the barrel right now. The losses in the executive ranks mean the second string is on the field. Don't cry for Toyota, the most profitable auto company in the world. But I suspect its market share gains will slow to a near stop next year.

Next year we'll see war between Honda with its new Accord and Toyota's Camry for the title of the best-selling car in America . Honda really is the fuel-economy king, and we will have to wait another couple years for the exciting stuff: the promised small diesel and the special-bodied (like the Prius) hybrid.

All taken into account, there are still big questions I can’t answer here or now. Any one could change the market dramatically. Am I right on the overall market—will it grow a bit, or are the doomsayers on target? Will the higher gasoline prices make GM's hybrid SUVs more saleable? And how will those higher fuel prices change the product results?

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