California Autos Examiner

Tuesday, November 20, 2007

2008 Could Be Bleak for US Auto Sales, GM Stock Drops to 17 Month Low: But I'm Still Bullish on GM

Many analysts are pessimistic about 2008 auto sales. One executive is predicting 14.5 million in sales, a number that hasn't been seen since 1993. That's just one person's take, most manufacturers peg 2008 to come in between 15.5 million to 16 million. The dour sentiments stem mostly from 2007's massive mortgage losses but certainly energy costs are contributing to the mood. The fear is that consumers will be either spooked or simply not have the resources and will put off major purchases such as new cars.

Monday's bearish environment led to GM's slide of $2.48, or 8.5 percent, to $26.79 at 4:22 p.m. in New York Stock Exchange composite trading for the biggest drop among the 30 companies in the Dow Jones Industrial Average. It was GM's largest one-day plunge since Oct. 10, 2005. Monday's drop comes on top of the 39 billion dollar quarterly loss that GM announced on November 7 and its subsequent undermining of GM's share price.

Certainly 2008 will be tough sledding for all auto manufacturers. Whether it's to the level that some bears predict remains to be seen. However, when it comes to GM I am feeling good vibrations. For one thing, the company is piling on the awards: 2007 North American Car AND Truck of the Year, 2007 Green Car of the Year and 2008 Motor Trend Car of the Year are just some of the titles that come to mind. The Enclave/Acadia/Outlook are off to the races and the Chevrolet Traverse will be out of the gates soon. The 2008 CTS is selling extremely well and the 2008 Malibu is garnering very favorable reviews. Saturn continues to flesh out its lineup with the January 2008 release of the Ion replacement Astra and is rumored to be getting the next generation Opel Vectra wagon. Also in the future for Saturn should be a Opel Zafira based crossover to slot beneath the Outlook. Saturn should also score the next generation Opel Corsa a few years further down the line. Pontiac will soon have the RWD G8 sedan and a recent Automotive News article hints that the brand will also get a wagon and ute (think El Camino) to complete the G8 lineup. Cadillac will be getting a small crossover currently rumored to be called the BRX and Saab will get a version called the 9-4x. Cadillac will also be fleshing out its CTS lineup with a coupe and sport wagon. Chevrolet will have the launch of its Camaro in 2009, a new Impala should be on the way and the brand should also score a Zafira variant of it's own. The Chevrolet Beat will take on the A-class segment around the globe and it's my belief that it will be sold here as well. GM is also working on the serial-plug in hybrid Volt and fuel cell technologies. There are also side bets in flex fuel and Homogeneous Charge Compression Ignition.

Although some models listed above may not come to fruition due to fuel economy or exchange rates, the bottom line is that GM's pipeline is chocked full. The above list is just a sampling of what is on GM's platter.

GM is engineering all of its future platforms to meet US crash standards. This is a very important step because it gives the company the flexibility to quickly bring cars to our market should the need arise. Take for example the new Opel Corsa that GM co-developed with Fiat. When they were engineering that car, I doubt that the US market showed up on the radar. Now that fuel prices are shooting upwards, it would be nice if GM could quickly bring this attractive car to our shores. However, the Corsa doesn't meet US crash standards so it's a no-go. The next generation Corsa will meet US standards and will more than likely make it here. In the future, GM will be able to respond to market shift much more deftly.

Certainly there are points to quibble with. Although a new light duty diesel is nearing production, there are no 50-state legal passenger car options at the ready. If GM can wrestle big gains from HCCI and get it into production form, then the extra expense of diesels may not be needed. However, if the winds start to blow in diesel's direction, GM may have to play catch up to get 50 state legal diesels into passenger cars. There are many cars in GM's fleet that have yet to be redesigned, so they lack the styling and interior refinements that its newest models offer. I also believe that GM is somewhat behind in technologies such as Bluetooth, keyless ignition and active headrests. The technology side is key to help get GM some traction in states like California. Even if the take rate is low, GM needs to impress buyers that they do have comparable features. The lack of active headrests (except for Saab, which really lead the field in the area) will be reflected in IIHS tests that are placing a lot of emphasis on rear impacts.

GM's domestic counterparts are improving as well, but I don't see such a flurry of activity. On the Ford side, I am not that impressed with the Lincoln MKS. I haven't driven the car, so I really can't reach any final conclusions, but looking at it from all angles and sitting in the driver's seat I can't say that I saw anything special. The Flex crossover shows promise and I really hope that the next F150 is a strong pillar for the brand. As for Chrysler, its new owners need to be given time to settle in. I like the ideas that are being floated about cleaning up brand identities and killing lackluster models. I am very keen to see what sort of concepts Chrysler will be showing off next year.

Now some folks may think that I've been drinking too much GM Kool-Aid and it is true that I have had access to GM's executives more so than any other car maker. Kudos to GM for reaching out to the social media community: it justly deserves to reap the rewards. Regardless of GM's outreach, the bottom line is that its products are vastly improved and its future models will add even more polish.

At the end of the day, it all comes down to product. You can be knocking on death's door one day and then a groundbreaking vehicle will pump your coffers full the next. Ford or Chrysler could pull a rabbit out of the hat, as they have done before, but I have yet to see a vehicle capable of doing that from either company. On the other hand, I have seen GM's rabbits and let me tell you folks, those rabbits are busy.

No comments: