If there's one thing we learned about the auto business in 2011, it's that predictions can only take you so far.
Consider: Exactly one year ago today, I wrote an article like this one, looking at how I expected 2011 to shake out for the major auto companies. I got quite a bit right, as it turned out, and there's nothing in that article that makes me wince in hindsight, but I -- like every other prognosticator -- missed the biggest development of all: the natural disasters that would cripple Japanese automakers' production for months.
Some developments are just impossible to forecast -- and if I'm sure of anything, it's that we'll see more of those in the coming year. So with that tsunami-sized disclaimer in mind, what's likely to be in store for 2012?
Predictions for your perusal
Here are some of the themes I expect to see unfolding (and expect to be writing about) in the months to come:
- Ford muddles through, again. Ford (NYSE: F) is nearing the endpoint of its turnaround plan, and should see continued incremental improvements in margins and profits as its newly globalized product lineup starts to bear fruit. Expect the company to continue on course, with sales, profits, and the stock price all rising -- but probably not dramatically, as the stock continues its ongoing shift from "daring turnaround play" to "boring blue chip."
- Toyota continues its ongoing recovery. Between 2010's recall scandals and last year's natural disasters, it has been a rough couple of years for Toyota (NYSE: TM), long the Japanese market leader. But things have been picking up lately: The new Camry is doing well with Toyota fans (and won Consumer Reports' favor, a critical endorsement), supplies and sales of the Corolla have regained lost ground, and the company is introducing new variations of the popular Prius hybrid that should go over well with customers here and in Japan. But that said, I don't see Toyota regaining its global-sales-leader crown anytime soon: The competition is much stronger than it was back in 2007, when Toyota seemed to be coasting to global dominance.
- GM's rise continues, slowly. General Motors (NYSE: GM) certainly had its share of challenges in 2011, but its new managers have made it clear that they have a plan for success -- and it's a good one. From a product perspective, GM's turnaround is about where Ford's was in 2009, minus the crushing debt: some strong products, some less-strong ones, lots of consolidation and improvements still under way. The real fruits of that work may not be visible until 2013 or 2014, and the company's share price may linger in the meantime, but incremental progress and continued organizational shakeouts should give hope to long-term investors in 2012.
- Honda won't turn the corner -- yet. Even aside from the natural disasters that crippled its production in 2011, Honda (NYSE: HMC) has had a big problem: boring products that don't match up well with competitors'. Honda President Takanobu Ito recently said the company will revamp its product-development process in hopes of generating more "distinctive" vehicles, but that will take some time -- like, a couple of years -- to bear fruit. Expect the company to recover to a diminished market position in 2012, as many longtime Honda loyalists fill their garages with Hyundai and Ford products instead -- but also expect it to start making some noise toward the end of the year, as it begins to show early examples of its overhauled product line.
- Tesla shines, for a while. Electric-car upstart Tesla Motors (Nasdaq: TSLA) is facing its moment of truth in 2011: the launch of the Model S sedan, the company's first mainstream car. The company has executed well so far, and I expect that to continue: The launch should be a success as the eager Tesla true-believers finally get their long-awaited new cars. But as I've said elsewhere, it's what comes next that matters most -- will the Model S find success in the mass market, once the first 10,000 or so early-adopters have snapped up the initial production? We may not know for sure until 2013, but I'm not overly optimistic. Momentum seems to be shifting away from electric cars, and that may hurt Tesla's chances even if its execution is flawless.
One last thought: From today's vantage point, the biggest variable in all of this is the one I'm not comfortable forecasting, namely the direction of the global economy. Automakers are cyclical industrial firms, and their fortunes -- and stock prices -- rise and fall with economic cycles. If the economy goes back down the tubes, everyone's profits will be squeezed. But if the slow recovery's trajectory continues, most of the key players will continue to see incremental improvements in sales and profits, just as in 2011.
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