Blow Your Horn, DetroitDavid Welch
As if Detroit carmakers didn't have enough to worry about with huge retiree costs and falling SUV sales, now they have another problem: After years of softness, the passenger car market is showing a few flickering signs of picking up. And that's where Detroit's image is weakest.
Get a load of these numbers: In September, when gas prices jumped and the employee price deals that recently helped move so many trucks petered out, passenger car sales jumped 6.3%. Sales of light trucks fell 17%. For the month, car sales were 48.5% of the market, up from about 45% -- a number that has held steady in the past couple of years.
This is bad news for the Big Three because foreign carmakers, especially those from Japan and Korea, have come to dominate this market. The myth is that General Motors (GM), Ford (F), and DaimlerChrysler's (DCX) Chrysler Group can't build reliable, fuel-efficient, or attractive passenger cars. But while it's clear that the Japanese and, increasingly, Korean auto makers Hyundai and Kia have some of the best cars in their segments, American carmakers also have some good models.
What they don't have is image -- especially among those who are really worried about fuel economy. Part of that comes from the fact that Toyota (TOY) and Honda (HMC) beat Detroit by several years in coming out with hybrids. But Detroit also has not invested as much money in their passenger cars, and until recently it didn't prioritize them as much when it came to design and technology.
Honda and Toyota have long been leaders in using overhead cam technology and transmissions with more gears, which make cars more fuel efficient. And Honda and Toyota came out with good, small SUVs ahead of Detroit. The Japanese have used these innovations to stake a claim that they're sophisticated, 21st century companies while their rivals are rusty dinosaurs.
Truth is, Detroit has some good passenger cars that boast quality and fuel economy that beat some Toyota models. But many consumers don't know it -- and plenty of them don't care. American models are in many cases just as good -- but have not leapfrogged the likes of Toyota and Honda with enough styling and technology to make loyal Japanese owners go domestic. Another big problem: Cars from Toyota, Honda, and Nissan (NSANY) usually have better resale values, and Internet research has educated more consumers about that.
"DELIGHT OR DIE."
GM has some bragging rights when it comes to fuel economy. The Chevrolet Impala and Malibu sedans are more efficient than many competing models. GM's powertrain engineers may be the best in the industry when it comes to wringing better fuel numbers out of even the oldest engines. "We're exceptionally good on fuel economy and exceptionally good on value," says Paul Ballew, GM's executive director of global market and industry analysis. "Do we need to get that message out? Yes, we do."
For that matter, so do GM's crosstown rivals. Ford emphasized fuel economy when it brought out its 500 midsize sedan, giving it a six-speed transmission that helps the car get 24 miles per gallon (city and highway combined). Chrysler's popular 300 has a V-8 engine that shuts four cylinders down when cruising for highway mileage of 27 mpg.
The problem is that among those cars, only the 300 has really grabbed the attention of consumers. And it did so because the styling is bold enough to turn heads. The Impala, Malibu, and 500 wear very conservative sheet metal. Inside, their cabins aren't as well appointed as Toyota's Camry. Nor do they have the quality image of cars from Toyota and Honda.
In other words, domestic models with a good fuel-economy story do exist. But if the rest of the car doesn't really break through with the mass market, it will be tough to capitalize. Dan Gorrell, the automotive partner with Strategic Visions, which does research on why consumers gravitate to different cars, is fond of saying, "Delight or die is what Detroit has to live by."
If you go to the West Coast and check out the "Tuner" crowd -- a coterie of young car buffs who tune up the horsepower of their cars and trick them out with spoilers, flashy paint, and trim -- you'll see that they favor mostly Japanese cars. Honda, Subaru, and even lowly Mitsubishi have done well among the Tuners.
Chrysler showed it can do it with the 300. Ford's midsize Fusion will hit the market soon. Car and Driver Editor-in-Chief Csaba Csere, one of the industry's top car critics, told me it's a credible competitor to foreign models.
GM can do it. Behind G. Richard Wagoner Jr. at GM's stand at the Frankfurt Auto Show were some Opel models with bold, athletic styling that's catching on in Europe. The Opel Astra is a hit, and its Astra OPC model -- a compact amped up with 240 horsepower -- would be great on the West Coast hot-rod scene. Eventually, a car similar to the Astra OPC will be sold by Saturn, but not until late in the decade.
YEARS OF CONVINCING.
The trouble is, to change their image, domestic carmakers need stylish, fun cars right now. Consumers will overlook sins like weaker brand image or even lower resale values if the styling is hot enough. In the meantime, carmakers can only keep advertising their fuel-efficiency gains and hope buyers take notice.
That's the scary fact for Detroit: Even though they can build the right cars, it will probably take years to convince many among the buying public who think Detroit can only build big trucks. And unless gasoline prices fall soon, Motown doesn't have years.