A stream of consciousness look at the auto industry in 2007. Whew, what a year it was!!!!!!!
Not the Trauma We Expected, but 2007 was Tough
We began the 2007 thinking the year was going to tank into the mid-15,000,000 unit range. That didn’t happen and the industry struggled to just over 16,000,000 units. This reasonably good year was in the face of negative media coverage, a severe housing downturn, a subprime mortgage crisis, soaring gasoline prices, etc.
Saying 2007 at just over 16 million units was a good year will be criticized as nuts, but we have been conditioned since 2000 to think that 17 million is good. It wasn’t too many years ago that 15 million was good. So, 16 million ain’t too bad. Just not what we have become accustomed to. And, by accustomed to, I mean we have plant capacity for many more units. We have dealers in place to sell many more units. We have built our business models and breakeven points on 17 million units and not 16 million.
We began the year with turmoil. Ford was in turmoil and embarking on an aggressive restructuring program with a new CEO at the helm. There were rumors of bankruptcy hovering over Detroit. DaimlerChrysler AG announced that it would off-load its American Chrysler Group and rely on upscale Mercedes-Benz cars, commercial trucks and, of course, Maybach and smart.
Ford Struggles Through 2007
By year end, Ford is still with us and there are some bright spots in its lineup – Fusion, Edge, MKX, MKZ. The Five Hundred, Montego and Freestyle were freshened, got new engines and renamed Taurus, Sable, Taurus X. Well, the upgrades took, but sales did not and Taurus, et.al have languished on dealer lots. I did see a ton of them on Kauai along with a very high number of Dodge Calibers. So, we know that retail sales for the Ford large cars and Crossover are not doing too well. Ford has retained top spot in big truck sales with F-Series remaining the sales leader even with Silverado and Tundra coming on strong and the Dodge Ram pickup offered at fire sale prices. Ford unloaded Aston Martin and spent the year doing due diligence on off-loading Jaguar and Land Rover (probably to India’s Tata Motors). Ford will keep Volvo, however.
To help Ford with sales and marketing, Ford lured Jim Farley to the Company. Formerly Group Vice President of Toyota’s Lexus Division, Farley was a rising star in the Toyota ranks. A friend of the Ford family, Farley appears positioned to challenge Ford’s other young star – Mark Fields – as the heir apparent to Alan Mulally in four or five years.
Now, It’s Chrysler LLC
DaimlerChrysler gave Chrysler Group to Cerberus Capital Management retaining a 19.9% stake. Cerberus promptly named Bob Nardelli – formerly hard charging CEO of Home Depot and General Electric – as CEO of Chrysler LLC. Nardelli’s lack of specific auto industry experience was offset by Cerberus adding highly respected Toyota executive Jim Press as co-COO. Press is working his way through Chrysler’s activities using the revered Toyota Five Whys approach (a question asking method used to explore the cause/effect relationships underlying a particular problem. Ultimately, the goal of applying the 5 Whys method is to determine a root cause of a defect or problem). Five Whys, understandably, has Chrysler vets on edge. They now have to justify everything. Nardelli, Press and Tom LaSorda are facing soft sales, high inventories, sub-par interiors in many cars and an image gap. With $10 billion in loans, Chrysler LLC has some time to prove itself or position itself for a takeover or a parceling out of components (like Jeep, Dodge Truck, Minivans, etc). Oh, yeah, DaimlerChrysler became Daimler AG in October.
General Motors Has Turned the Corner
General Motors appears to have turned the corner. GM has kept its head down during 2007 staying out of the feeding frenzy the media has directed at Ford and Chrysler. Not that there aren’t numerous stories written about GM, it’s just that there hasn’t been the bad news to whet the appetite of journalists.
GM’s products are improving now that the early efforts of Bob Lutz are being seen. While cars like the Saturn Aura and trucks like the Lambda Crossover SUVs and GMT900s have set the tone, Lutz’ real impact has been seen on the 2008 Cadillac CTS and 2008 Chevrolet Malibu. Both of these cars will serve to cement GM’s car lineup for years to come.