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Old 02-12-2007, 01:14 PM   #1
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Default Brighter times ahead for automakers

Brighter times ahead for automakers


Analysts who track new model introductions say Chrysler, Nissan and Honda are looking good

NEW YORK (Fortune) -- A couple of big automakers are due to report fourth-quarter and year-end results this week and the numbers won't be pretty. Chrysler is expected to announce a billion dollar loss for 2006 as it presents another restructuring plan that could bring the elimination of thousands of jobs. At General Motors, meanwhile, analysts are looking for a multi-billion dollar loss - better than 2005's horrific results but plenty of red ink none the same.

Yet in the ever-changing car business, last year's results are nothing more than a glimpse at the rear-view mirror. Wall Street securities analysts are coming up with new ways to peer through the windshield at the road ahead and get a better sense of how automakers will perform in the future. An increasingly popular measure is to make a close reading of information that the car companies traditionally hold close to their chests - the schedule of new model introductions.

Since cars get totally reengineered only every seven or eight years - some less frequently than that - periodic facelifts are essential to maintaining public interest and freshness in the marketplace. But few auto companies maintain a regular program of redesigns. Sometimes niche models clog the schedule, requiring a lot of work with very little payoff. Or companies may try to save money by keeping an old model going for another year. Other times, they get thrown off course by a belt-tightening, or internal dispute, or indecision about a car's future.

With the exception of some outright flops, new models almost always drive sales, profits and, with them, share prices. Customers flock to showrooms to see the new metal and dealers can charge top dollar. "New product is an increasingly important factor on market share, overall company performance, and stock performance," writes Citigroup analyst Jon Rogers. He's even figured out the right time to buy: His analysis indicates that automaker shares tend to outperform two quarters ahead of the time when their model lineup is at its youngest.

So who's looking sharp? Well, Chrysler (Charts) for one. "DaimlerChrysler's global new product pipeline gives them the best chance of gaining share in 2007," says analyst Ron Tadross of Bank of America. The big news at Chrysler is the launch of the new Dodge and Chrysler minivans first shown at the Detroit auto show in January. They will be accompanied by a Dodge version of the Sebring midsized sedan called the Avenger, as well as a Sebring hardtop convertible.

The news is less positive for GM (Charts). Despite big 2006 losses, Rogers believes GM's best months of new model launches may be behind it. "GM's product cycle advantage expires next quarter" writes Rogers, with the completion of the rollout of its full-size pickup truck line. By the fourth quarter of this year, GM's new product launches will lag the industry average and remain there all the way through 2008.

Across town, Ford isn't much better off. It is going through a multi-year product drought that won't end until half way through 2008 when its percentage of new models breaks above the industry average. The redo of its popular F-150 pickup truck will be the catalyst there

Whose product pipeline pumps the most consistently? The answer is Honda (Charts). From 2005 through 2009, it manages to replace more of its lineup than the industry average. Honda has relatively few models in its portfolio, preferring to rely on a couple of big sellers like the Accord and Civic, so it doesn't get distracted. The Accord gets its next makeover later in 2007.

More productive this year - though less consistent overall - is Nissan (Charts). A paucity of new models in 2006 led to the company's announcement of a profit shortfall early in February. But a flood of redesigns, led by the Altima coupe and a refreshed Murano, should help CEO Carlos Ghosn solve his company's performance problem.

After hitting a new product gusher in 2005, Toyota (Charts) reins in its output for the next two years, operating right around the industry average. But since it is expected to earn $13 billion this fiscal year, no one is too concerned. As one analyst puts it, "If cars were a fashion business, Toyota would be toast. I can't remember the last time someone asked me if I had seen the new Toyota." High ratings for quality and reliability are what has propelled Toyota to near the top of the sales charts.
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Old 02-12-2007, 01:39 PM   #2
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Fiat has been very upfront about when new models will be coming out. They usually have a schedule in investor presentations that are then released to the public. They have a month/year, make, vehicle segment and usually the model name for 4 to 5 years out. I think it works well and Fiat stock has done very well the past few years. I think it also emphasizes that they aren't going to be a company that puts off new models or gets them out late.
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