December 29, 2009
Tuesday

The year 2009 was undeniably one of the worst in the auto industry's history, and we're not just talking about the bankruptcies of General Motors and Chrysler and the overall poor sales.

There were shuttered nameplates such as Saturn, Pontiac and possibly Saab. There were longtime car dealerships forced to close. There were sudden reversals in fortune for brands like Toyota, which, along with plunging sales, was plagued with recalls and safety issues.

There also were unexpected sales flops like Honda's $19,800 hybrid Insight.

According to trade publication Automotive News, Honda initially hoped to sell 90,000 this sales year, then downsized that goal to 60,000 because of the poor economy. Since the launch in March, only 17,530 have been sold, which equals an annual sales rate of about 25,000.

Meanwhile, Edmunds.Com predicts car and light truck sales this year will total only about 10.4 million, the lowest level since 1970 when the country's had 70 million fewer residents.

To illustrate just how bad car sales were, consider that the auto industry sold 16 million units per year during most of the mid-2000s, Edmunds said. From 2007 to 2009, sales dropped 36.4 percent.

The biggest auto news of the year -- developments that showed how much things have changed -- were the bankruptcies of GM and Chrysler.

Since then, things have been looking up for both companies.

GM emerged from bankruptcy with only $17 billion in debt, including $6.7 billion owed to the U.S. government. The government gave the company a total of $52 billion in exchange for a 61 percent equity stake in GM.

GM announced in November that it had generated $3.3 billion in cash in the third quarter and said repayments would start early on its federal loans. The third largest U.S. automaker also unveiled of a five-year plan that called for revamping the Dodge and Chrysler brands, a newly created Ram brand for its truck line, and a wealth of new technology and cost savings, thanks to Fiat.

Chrysler CEO Sergio Marchionne said the company has $5.7 billion in cash and added $1.7 billion since it left bankruptcy June 10.

Success stories in 2009 included Hyundai, Kia, Subaru, Buick and Ford.

"Through the first 11 months of 2009, Hyundai's market share was 4.3 percent. Compare that to a year ago for them when the market share was 3.1 percent. The Kia brand market share was up to 3.0 versus 2.1 percent," said independent auto analyst Tom Libby, who is based in Detroit.

Subaru market share jumped from 1.4 percent for the first 11 months of 2008 to 2.1 percent this year, and Volkswagen market share went from 21.7 percent last year in the first 11 months to 2.1 percent.

"Hyundai had a lot of innovative marketing programs, but they also had new products like the Hyundai Genesis sedan and coupe. Kia had new products too with the Forte and the Soul, and Subaru had a new Legacy sedan, new Outback wagon and a new Forester that was much more competitive. Volkswagen had the mid-sized CC sedan and the diesel Jetta," Libby said.

There were image winners, too.

Buick, once known for big, nondescript sedans aimed at the older crowd, has one of the sexiest, most glamorous sedans on the market, its new LaCrosse. Now an upscale sedan competing with Lexus, the LaCrosse has uniformly won applause from auto writers, and it is now a candidate for the North American Car of the Year.

And then there's Ford.

A decision Ford CEO Alan Mulally made during his first months on the job proved to be a momentous one, and may pay dividends down the road.

In 2006, Mulally arrived from Boeing and decided to "bet the farm" on the company's future. He wanted at least $17 billion to design and build smaller, more fuel efficient cars, and wanted to focus only on the Ford, Mercury and Lincoln brands.

So he went to 40 banks and raised $23.5 billion, putting up all of Ford's buildings, stock, intellectual property, stakes in foreign auto makers and even its trademark blue logo as collateral. When GM and Chrysler were awash in red ink and struggling to stay out of bankruptcy, Ford had money in the bank.

Ford was rewarded richly for not borrowing taxpayer money and not going into bankruptcy as its crosstown rivals did. Sales jumped and Ford models hit the bestseller chart in many market segments, most importantly in the intermediate segment where its Ford Fusion became one of the top two or three selling models.

Of course, having the right products and more on the way has also helped.

"They have the new Taurus, the Flex, the Fusion hybrid, the Lincoln MKS, the refreshed Ford Mustang, the Milan hybrid, and they have a lot of product still to come," Libby said. "They've got a new Explorer coming that I've heard anecdotally is gorgeous, and they've got 12 derivatives from the new Ford Focus platform coming too."

SitNews ©2009
Stories In The News
Ketchikan, Alaska

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