Twelve months ago, almost no one would have guessed that at the end of 2010 Ford Motor Co. would be the second-most profitable car company in the world.
It's been that kind of year - a year of surprise developments. The automotive world has also been through a year of bold predictions and stunning stumbles. And let's not overlook several once-emerging auto makers who in 2010 became firmly established as serious, ferocious competitors.
General Motors came to the financial marketplace with an initial public offering that was over-subscribed and completely successful (surprise development). Volkswagen reaffirmed its goal of becoming the biggest car company in the world by 2018 (bold prediction). Toyota and Honda saw their sales plummet in Canada (stunning stumbles). And once-overlooked players such as Hyundai, Audi and Subaru enjoyed spectacular years in every way imaginable (serious, ferocious competitors).
Then there's the loonie. Parity with the U.S. greenback is the new reality and that has had enormous implications for new-car pricing in Canada - positive implications for price-conscious consumers, in fact.
Yes, 2010 was quite the year. If 2010 taught us anything, it is that 2011 is bound to be unpredictable, too. Here's what I'd judge to be the top 10 automotive stories of 2010:
1. DETROIT MAKES A COMEBACK
Detroit's auto makers have a future. Who'da thunk?
Where once they thought the world revolved around them, in 2010 Motor City's car makers made serious strides towards reinventing themselves with business and product plans for a global marketplace where they must enter and compete. Ford is clearly the furthest along and it shows on the bottom line where Ford is immensely profitable.
General Motors is making money too, and did a successful share offering in November. Chrysler, now managed by Italy's Fiat, is profitable on an operating basis and is launching 16 new or refurbished models this year.
You and I may yet get back all of the $7.1-billion (U.S.) the Canadian Government provided in the U.S.-led GM bailout in June, 2009; Ontario provided $3.5-billion. Perhaps most shocking of all, Morgan Stanley analyst Stuart Pearson recently told investors, "Chrysler may prove to be one of 2011's most surprising success stories."
The solipsistic mindset that once dominated Detroit's auto makers has, at least on the surface, been replaced by a outward-looking world view laced with both opportunities and challenges. Detroit's revival was the automotive story of 2010.
2. THE LOONIE: PARITY IS THE NEW REALITY
As the Canadian loonie climbs to par and perhaps beyond with the American greenback, cars get cheaper and cheaper. At the end of 2010, after so many months of near-parity, the Canadian new-car marketplace is rich in sales sweeteners - cash-back deals and cheap financing offers.
It looks like we should get accustomed to a loonie of equal or better value versus the greenback. "Parity is the new reality," Scotiabank's currency strategist Camilla Sutton told the Globe earlier this year.
As 2011 dawns, expect car prices in Canada - at least on a real transaction basis - to remain stable or even go down as the loonie stays strong.
3. ONCE-IMPERVIOUS JAPANESE CAR MAKERS TAKE BIG HITS
I would argue that Toyota had the worst year in its history. But Honda is having its problems, too. Both have suffered a significant drop in sales this year.
Toyota's troubles had been building for years, with the tipping point actually coming in late 2009. The massive recall of millions and millions of vehicles, a record $48.8-million (U.S.) in fines to the U.S. government for a slow response to problems with sticking gas pedals, and the seemingly endless series of recalls since, have seriously damaged the Toyota brand. It will take years for Toyota to recover.
As for Honda, here's the question at the end of 2010: Has the company risked its future by drastically slashing costs and freezing investment? Remember, Honda already trails its rivals in key product segments and technologies. Honda has been muddling along for years - almost resting on its laurels, rather than pushing the envelope with new designs and technologies.
4. NO LOVE FOR SUBCOMPACTS
Over the next half-dozen years, the auto industry will flood the marketplace with fuel-efficient traditional cars loaded with technologies designed to squeeze every kilometre out of a litre of fuel. Yet here's the oddity in Canada: sales of subcompacts such as the Toyota Yaris and Honda Fit fell about 20 per cent in 2010. As the year wound down, just two of the top 10 best-selling cars in Canada were fuel-efficient little grocery getters - the Hyundai Accent at No. 6 and the No. 10 Nissan Versa.
While sales of fuel-efficient cars tanked, light truck sales - especially pickup trucks - boomed in 2010. The tanking of subcompact sales was a real shocker in 2010.
5. NEW AND IMPORTANT PLAYERS EMERGE, FROM HYUNDAI TO SUBARU TO AUDI
Let's start with Subaru, the rational brand. More Canadians than ever embraced Subaru in 2010. Some argue that Subaru is benefiting from the difficult economic times. This is when buyers migrate to cars with impeccable crash-test scores, top-notch quality and world-class resale values.
That's what Subaru offers. Not surprisingly, through the end of November, Canadian sales were up 21 per cent, and Subaru Canada vice-president Ted Lalka sees sales ending this month at about 27,500, an all-time record.
Then there is Hyundai. The South Korean auto maker grew up in 2010, showing a willingness to take on the world's top-tier auto makers with high quality, sharp designs and world-class technology. As 2011 dawns, Automotive News reports that Hyundai is about to unveil a global branding strategy based on the concept of "modern premium."
Audi, the luxury brand of the Volkswagen Group, is on track to meet its goal of becoming the world's No. 1 premium auto maker by sales no later than 2015. A string of new models, from the gorgeous A8 sedan to the delightful R8 Spyder convertible, has pushed Audi into the forefront of the luxury segment.
6. VOLKSWAGEN PUSHES FOR THE TOP
Volkswagen AG is a sprawling automotive group with divisions as diverse as Bentley in Britain, Lamborghini in Italy and Porsche in Germany. This year, VW spent a lot of energy telling the world it would become the largest auto maker in the world by volume by 2018.
To achieve what VW calls "Strategy 2018," the German auto maker is realigning its lineup to address North American tastes specifically. The sixth-generation 2011 Jetta, starting at $15,875, moved down market this year to take on other compacts like the Toyota Corolla, Mazda3 and Honda Civic.
All during 2010, VW boss Martin Winterkorn was anything but shy about the group's goal of becoming the world's biggest auto maker by sales, if not by profitability. VW is aiming to sell more than 10 million vehicles by 2018 and fully dethrone Toyota as the world's biggest car company by sales volume.
7. LONG LIVE FOUR-BANGERS
The 2010 John Cooper Works World Championship 50 is a perfect example of a trend that gained serious traction in 2010: the emergence of great new four-cylinder engines. At 211 horsepower, this Mini is fast: 0-100 km/h in 6.7 seconds thanks to a fancy twin-scroll turbocharger that juices the 1.6-litre four-banger under the hood.
More and more, auto makers are turning to four-cylinder engines to meet fleet-wide fuel economy rules and to save money. The 2011 Ford Explorer will be offered with a turbocharged four-cylinder engine that has more performance than the former six-cylinder, yet delivers a 30 per cent fuel economy improvement. The mid-size Hyundai Sonata is selling well with a 2.4-litre, direct-injection four that is the strongest in its class: 200 horsepower. The Regal from General Motors Buick division comes here with the choice of a 182-horsepower four-cylinder or a 220-horsepower turbo version.
Canadians have been tuned into this for a while now. More than 60 per cent of all passenger cars sold here come with a four-cylinder engine. What's interesting is how Americans are changing their buying habits in this area. In 2010, nearly half of all new vehicles sold in the U.S. came with a four-cylinder under the hood, according to J. D. Power & Associates.
8. CHINESE AUTO MAKERS GO GLOBAL WITH VOLVO
Does Volvo have a future? I'm asked that question all the time. Volvo CEO Stefan Jacoby told us late in the year that, yes, Volvo is around for the long haul now that the new Geely ownership from China is in place. Apparently there are deep pockets there. Volvo will need to dig into them.
Volvo's story over the past decade is all about boom and bust. In 2007, Volvo sales hit a record 458,323. Then sales slumped to 334,808 last year. Sales aside, Volvo hasn't turned a profit since 2005. In Canada, Volvo has almost disappeared. In short, Volvo has been a disaster for the last five years. We'll now see what Volvo can do as a global auto maker with Chinese ownership - an historic first, by the way.
9. ELECTRIC CARS
Nissan began selling its Leaf electric vehicle (EV) in 2010, as did General Motors with its Chevrolet Volt extended range EV. Both are coming to Canada in 2011, so we watched the arrival of them carefully.
Okay, now most sensible people would concede that electric vehicles must sell on their merits as so-called "real cars" - cars that are practical, affordable and, above all, utterly lacking in compromises.
But it's the affordable piece of the story that will make or break EVs. Nissan is arguing the Leaf should be less expensive to drive than a gasoline car: a typical gasoline car getting a combined 8.0 litres/100 km will have an annual fuel cost of $1,800 or $0.08 per km (at $1 a litre). The Leaf? At current electricity rates (averaging $0.06 a kW-hour) the per km cost comes down to $0.009, with annual energy costs coming in at $180 or one-tenth the cost of a comparable gasoline-powered, four-door hatchback. Will that story sell in Canada?
10. THE CHINESE CAR EXPLOSION
In China's capital, Beijing, more than 1,000 new cars hit the road every day. China is now the world's largest passenger-car market. By 2105, J.D. Power expects passenger car sales to hit 13.5 million in China.
That may underestimate the situation. A UBS report entitled "What if everyone in China had a car?" says that just 4 per cent of Chinese over 14 and 1 per cent of Indians have cars. In the U.S., it's 44 per cent and in Japan 46 per cent. There is plenty of crazy growth potential left for car sales in China and India.
The future of the auto industry? By the end of this decade it will start in China.