As Car Sales Slump, Can One Of The Big Three Pull Out Of A Flat Spin?

Stocks:  (GM)(F)(DCX)(TM)(HMC)

In flying, going into a flat spin is about the worst news a pilot can get. As the aviation spec books say: "It is very difficult to recover from a flat spin because there is little or no smooth airflow over the control surfaces"

Well, the Big Three are just about there. Experts predict that December will be another tough month for the domestics in their home market. Sales should be particularly rough for Ford. GM and Chrysler are expected to be little better than flat with December of last year. Toyota and Honda may well have more market share gains.

Part of the solution to the problem, according to the conventional wisdom in the Motor City, is that cutting back on fleet sales and large incentives may drive down unit volume but each car sold should yield a better margin. The US car companies end up being smaller but modestly profitable. Or, so the theory goes.

The real question for Wall St. is whether any of the three firms can surprise the markets by getting its share and operating margins to move up. Ford and GM stocks probably have a poor 2007 factored in. That would be a year with dropping market share and large cost cuts.

But, if everything happened as forecast, no one would ever make any money in the market. There would be no surprises. The market woud be omniscient and completely efficient.

The only company that would seem to have the management to pull off real product and sales improvement is GM. Self-proclaimed car wizard Bob Lutz has been the company’s Vice Chairman. He is the "car man" at GM, and designing new, successful cars falls to him.

Lutz is engineering the launch of new SUVs and cars for brands like Chevy. If he works some magic, GM could be the car company surprise of 2007. If not, he’s 74 and can retire.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.