Forecasting auto winners - and losers - for 2007

Looking in the rear view mirror often provides a glimpse into the future, says Fortune's Alex Taylor.

By Alex Taylor III, Fortune senior editor

NEW YORK (Fortune) -- If you are trying to handicap how the world's automakers will perform in the US this year, there is no better place to start than looking at how they did in 2006.

Focusing on the past means you can't get carried away by auto show dreams of sexy concept cars and beguiling new models that may never reach market. And while the industry's high fixed costs mean that profits and losses can swing wildly from one year to the next, performance in the marketplace is easier to predict.

Sales of old models tend to deteriorate at a foreseeable rate, while sales of new ones are constrained by the capacity of the plants where they are built and the speed at which production can be ramped up. Reputations in this business take a long time to change, so last year's frog isn't likely to be transformed into a princess overnight.

Looking at sales numbers compiled by Automotive News, a couple of trends are clear. 2006 was a disaster for domestic producers and there is no relief in sight. Six of GM's (Charts) brands lost ground , as did six of Ford's (Charts) (Ford, Lincoln, Mercury, Volvo, Jaguar and Aston Martin) and all three of DaimlerChrysler's (Charts) U.S. brands (Chrysler, Dodge, and Jeep).

Saturn provided one ray of hope. After a long slide, it boosted its sales six percent on the back of well-received new models, like the Aura sedan and Sky roadster. For all its troubles, Saturn has always had a strong dealer network and a good image. As it continues to fill out its product line with vehicles like the seven-passenger Outlook, it should continue to grow.

The tidings are less favorable for older, more neglected brands like Buick, Pontiac, Mercury and Lincoln. They are the automotive equivalents of Lifebuoy soap and Uneeda biscuit - out of date and out of touch. New models like the Buick Lucerne, Mercury Milan and Lincoln Zephyr are improvements but they weren't enough to lift sales above a year ago. All these brands suffer from aging buyers, a tired product line and a ragged dealer organization. Given the crowded marketplace and the availability of more attractive options, it is difficult to see a growth path for them.

Luxury brands remain strong, with BMW, Mercedes, Audi and Lexus all gaining ground. Despite occasional diversions, these manufacturers deliver consistently on their brand promise and their customers appreciate that.

Most disappointment focuses on Jaguar, which has produced poorly-designed models that strayed too far from Jag's traditional elegance. Jag has fallen so far that it is in need of a multi-year, multi-product, multi-billion dollar overhaul, whether by cash-strapped Ford or a well-heeled new owner.

Ford's new CEO Alan Mulally has not committed himself to keeping Jag or its more profitable partner Land Rover.

Expect continued strong performance from 2006 winners like Toyota (Charts), whose sales were up an incredible 13.7 percent, and Honda (Charts), which improved a more modest 4.4 percent. And look for Nissan (Charts) and its luxury partner Infiniti to rebound from their mediocre performance in '06 when all of their models seemed to age at once. Nissan has tastefully updated the popular Altima sedan and the Infiniti G35, and is bringing out new variations like the Altima coupe.

Among the 2006 winners, some will have a hard time repeating in 2007. Hummer bounced up 26.1 percent last year on the strength of the smaller and less expensive H3 but it will face more difficult comparisons this year.

Likewise, Suzuki got a nice lift from spiking gasoline prices but may have a more difficult time now that gas prices have fallen below $2 a gallon in some places.

And don't expect to see any revival for truck-based SUVs like Ford Explorer, that were once the profit engine of the industry. For all except special-purpose duties like towing or serious off-roading, they have been replaced by car-based crossovers - like Toyota's Highlander - that are much more adept at day-to-day functions like car-pooling and shopping.

A big swing in gas prices, a further collapse in real estate or a significant change in the economy could affect the magnitude of changes in 2007 but not the direction. Strong companies have a way of persevering in good times or bad.

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.