Dream Machines

Sales-hungry auto makers are innovating at full speed -- and giving buyers the power to shape their vehicles


The news out of Detroit has been dismal -- a steady drumbeat of job cuts, shuttered factories, and dwindling market share. But lost amid the bad news is another phenomenon, one that's visible at any showroom in the land: There's a new golden age of automotive design and technology dawning.

As fierce global competition drives manufacturers to load up vehicles with once-exotic technologies and to offer more sophisticated styling for the masses, consumers are seeing an explosion of car choices. Aided by advances in manufacturing and spurred by the recognition that standout design is a competitive necessity, the number of car models, niche vehicles, and options is multiplying at a dizzying rate. Even proletarian brands like Saturn are trying to make a fashion statement with cars like the new Sky roadster, a budget-priced stunner for which General Motors Corp. (GM ) developed a special low-cost frame that allows maximum style at a minimum cost. As auto makers embrace the push toward personalization, consumers are gaining the ability to tailor a car purchase to suit their individual lifestyle -- and getting a lot more automotive bang for the buck.

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The all-out effort to meet demands for cars that reflect consumers' personalities represents nothing less than a reshaping of the automotive industry's future. "The all-purpose family car is a dying breed," says Art Spinella, president of CNW Marketing Research in Bandon, Ore. Technology affords a previously unknown level of variety: Japanese-style flexible assembly lines employ smart robots that can weld lots of different body parts onto modular platforms, thus permitting many variations on the same chassis. Advances in computer design and materials science mean a car can go from clay model to dealer floor in less than two years. It adds up to a marketplace where customers' dreams of personalization reign supreme, and where auto engineers and designers can create affordable cars that look like they ought to be on the auto show circuit.

The latest cars are also more of an electronic extension of their wired drivers. Many new models can integrate an iPod, wireless phone, and laptop into a slick communications module. Auto makers are adding sensors to control car stability, and are splurging on collision warnings, in-dash communication centers, and "smart engines" that squeeze out more power and economy. The automobile is "going through a technological revolution that is the most profound in the last 100 years," says James E. Press, president of Toyota Motor Corp.'s (TM ) North American operations.

BusinessWeek's first annual car guide sorts through the creative chaos to zero in on the most important advances awaiting consumers. Partnering with J.D. Power & Associates Inc. (like BusinessWeek, a unit of The McGraw-Hill Companies) allowed us to tap its extensive database and match demographic profiles of car buyers with cars best suited to their wants and needs. Power also helped uncover hidden car bargains on the market. And our Frankfurt bureau explored the hot market in Europe for stylish, and increasingly performance-driven, compact cars. One of these pocket rockets is available in the U.S., and more may follow. But their real impact may be to inspire U.S. auto makers to design compacts with enough head-turning appeal and upscale features to convince Americans suffering from high gas prices that bigger isn't necessarily better.

The wealth of choices for car buyers is just going to grow. In 1999, U.S. consumers had 250 models to pick from. By 2008 the number will rise to 330, according to Global Insight Inc., a Waltham, Mass., researcher. That accounts for new car-like SUV crossovers such as the Mercedes R-Class, niche models like Pontiac's Solstice roadster, inspired muscle cars like Chrysler's forthcoming Dodge Challenger, and juiced-up compacts for young hot-rodders. The battle for market share is sure to spark yet more innovation: "Competitive pressure means carmakers are compelled to add features, lower prices, and push technology," says Jeff Schuster, chief forecaster for Power. "Consumers get the benefit."

To show what all the competition has yielded thus far, this guide focuses on four key fronts: safety, electronics, performance, and fuel economy. And with consumers increasingly able to customize vehicles with just a few clicks of a mouse, it also examines the rapidly changing car-buying experience.


Advanced new safety systems don't just help drivers react to trouble, they help them avoid it. Most cars come with anti-lock braking systems (ABS), and more of today's cars feature side-impact air bags. But consumers can find autos with even better-performing electronic stability controls. ESC systems let cars do things like automatically modulate the brakes and ease off the throttle when the car's tires start to lose grip. Philip Headley, head technology engineer for Continental Teves, a maker of auto safety gear, says these "active safety systems that can avoid accidents are the next revolution."

The "active" part comes down to computers that can make their own decisions. Take "intelligent cruise control," now in a few premium cars. It shoots out scanning beams to detect when a driver is closing in too fast on the vehicle ahead. Some systems warn a driver, but others actually engage the brakes. BMW is working on a more intelligent four-wheel-drive system, one which tells a car that is veering out of control to redistribute torque and power between the front and back wheels to help regain control. Crash avoidance systems can react faster than humans can, stopping a car about 20 feet sooner, says Priya Prassad, Ford's technology fellow for safety research.

Drivers like Nicole Montague of Menlo Park, Calif. appreciate the technology. Montague got intelligent cruise control as part of the navigation package for the 2005 Infinity FX 35 all-wheel-drive SUV that she and her husband Brian Ruder, a venture capitalist, leased in October. "Instead of having to concentrate on not getting into an accident while disabling cruise control and keeping an eye on my son, the car does it automatically," says the 34-year-old yoga instructor.

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The 2006 Acura RL sedan and several Lexus, Mercedes, and Cadillac models have crash avoidance systems tied in with adaptive cruise control. As they get close to another car, an alarm will sound and all but the Lexus models will brake if a collision seems imminent. With the latest technology, "a car is thinking ahead and acting ahead," even if a driver isn't, says Shiro Monzaki, a top Toyota engineer.

Auto makers say they can save lives with other new features like lane departure warnings. Paired with intelligent cruise control, that could take accident avoidance to a new level. Nissan Motor Co.'s (NSANY ) Infiniti M45 sedan and FX 45 SUV sound an alert when a vehicle drifts into another lane. Volvo sells cars in Europe that warn drivers when another car moves into their blind spot. Volvos will have the feature in the U.S. in a year or two, says Prassad. The next generation of lane departure warnings, which Nissan currently sells in Japan, actually nudge the steering wheel gently to keep a car in its lane. Audi's "lane assist" feature, due out in 2007, sends vibrations through the steering wheel and sounds a warning drone. Another Audi system uses radar sensors built into the bumper to warn drivers of fast-approaching cars in the left lane, and triggers a warning alert in the rear view mirror if the driver makes a move to pass.

For a glimpse of the future, there's the new Mercedes S-Class, an $86,000 showcase of driver aids. Its Pre-Safe system is similar to the intelligent cruise control of the Acura and Lexus but has an extra "uh-oh" feature. If the computer decides the car is headed for a crash, it brakes, rolls up windows, closes the sunroof, tightens seat belts, and moves seats into the safest position. The car also has infrared night vision, which helps a driver better see pedestrians or a deer not yet in the headlights.

Consumers who want the latest features may need to fork out $500 to $3,000 for adaptive cruise control or ESC systems, according to consumer-research site Edmunds.com. But the gear should get less expensive over time. ESC systems are standard in most luxury models, but proletarian rides like the Buick LaCrosse and Toyota Camry offer them as an option for $500 or more. GM offers its StabiliTrak system on 30% of current models and says it will be standard on the entire range by 2010.


As autos become ever more wired, manufacturers are struggling to do a better job of integrating onboard devices. To complicate matters, drivers want music players, PDAs, and other devices synchronized with their auto's entertainment system. Andreas Zielke, a Berlin-based analyst for McKinsey & Co., cites a study by his firm predicting that electronics in cars will jump from 20% of the cost of building a car today to 40% by 2015.

A cautionary tale comes from BMW. When BMW rolled out its iDrive system in 2002, the in-dash command center created a stir. The idea of using a PC-like central menu to control audio, temperature, and navigation functions seemed clever. But drivers were befuddled by the complex interface. BMW has since simplified iDrive in the 5 Series, which debuted last year. And Audi's version in the A6 and A8 sedans is pretty easy to use. The systems are popular in Europe, but companies like Cadillac and Lexus are keeping their distance: "iDrive-type systems are a distraction," maintains Toyota's Press.

The hot new trend is sensible integration of a car's information, audio-video, and communication functions. Honda Motor Co.'s (HMC ) funky Element was the first to have a built-in iPod dock. Toyota's Scion xA, xB, and tC models let drivers manage their portable players via the car stereo, a feature also on some BMWs. Meanwhile, DaimlerChrysler, Honda, and Toyota lead the way in efforts to add Bluetooth connectivity and ports for laptops.

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GM is also pushing the envelope with its OnStar service, expanding it from basic roadway assistance to accepting voice-recognition commands. The subscription service already uses voice commands for cell-phone calls or to get stock prices. Lexus' next LS 460 sedan will have voice controls, too. Scott Nelson, an analyst for Honda's planning group in Torrance, Calif., says: "In a few years, voice-recognition will be good enough to let you say, 'Find me a Beatles tune,' and the stereo will search satellite radio or programmed music and find one."

With the price of electronic components falling, it's not surprising that "black box" technology, which records data on jets, is showing up in cars. GM's a leader here, with 100,000 subscribers signed up for a feature that runs hundreds of vehicle tests to diagnose trouble. If there's a problem, a signal goes to an OnStar center, which sends owners an e-mail. BMW is starting a similar system using satellite feeds from its navigation unit. In the future, carmakers may hawk software updates that let drivers retune cars or optimize performance for long trips.


Swoopy design and fancy electronics aren't the only way to lure auto shoppers. Manufacturers are also upping cars' performance in a reprise of the horsepower wars of yore. Monsters such as the new Chevrolet Corvette Z06 are wildly out of sync with gas prices, but they fetch a premium. The $65,000 'Vette has a 7-liter, aluminum V-8 based on the factory racing motor. Its 505 horses top exotics like the Lamborghini Gallardo, which sells for $180,000. Chrysler has another hit with the big Hemi engine, which is finding its way into cars like the Dodge Charger and even Jeep SUVs. Power ranges from 330 to 425 hp.

Performance doesn't have to be pricey: Detroit is hawking high-powered bargains for under $40,000. Last year, Pontiac revived the GTO and gave it 350 hp, but the conservative styling met with yawns. This year the car got another 50 horses (base price is $33,000), and sales perked up. Across town, Ford Motor Co. (F ) has a winner in the new Mustang GT. It offers 305 hp for around $27,000 -- and sells loaded for under thirty grand.

But it's not all about brawn. Toyota's new Lexus hybrids -- which emphasize the high-revving acceleration that electric motors can deliver rather than just horsepower -- are getting plenty of interest. Within a couple years, nearly every major carmaker will have a hybrid on the market. Even upstart Hyundai is developing one. "There's a race for horsepower and a race for fuel economy," says GM Vice-Chairman Robert A. Lutz. "It has gone bipolar."

In fact, the next phase of gasoline engine technology is dawning, in the form of direct-injection gas engines. Rather than pump a mix of gas and air into the engine, this technology injects gas in optimum amounts for the kind of power the engine needs. Computer controls decide if the engine needs a lot of the gas for added oomph, or if it should run lean at cruising speeds for better fuel economy. The result: fuel economy rises by as much as 15% and the engine can run faster.

Audi is the clear leader in these engines, which power its A4 and A6 sedans. The $44,000 A6 gets 255 hp -- 30 more than the old model -- and a 10% rise in fuel economy to 20 mpg. Next year, the Audi Q7 SUV will have a direct-injection V-8 that makes 340 hp while getting 20 mpg on the highway with all-wheel drive. BMW has the new fuel-injection advance in its 438-hp, 19-mpg 760i sedan, and will have it in the 3 Series in 2007. Lexus will also use the technology in its IS 350.

Detroit isn't selling direct-injection gas engines yet. But Chrysler and GM were early to introduce engines that shut down half of a cylinder bank for better economy at highway speeds. Chrysler's Hemi started the cylinder-deactivation kick and now gets over 300 hp with 27 mpg on the highway, and the new Chevy Impala SS gets 303 hp with 27 mpg. This month, GM's new large SUV will feature the technology to get close to 20 mpg.


The biggest advance on the fuel-miser front is the hybrid-electric car. Toyota leads the way, and Press says 25% of sales will come from hybrids in the next decade. This year, it will start selling several new hybrids, including the Toyota Highlander SUV and Camry sedan. Lexus will soon launch the GS 450 hybrid, pairing its V-6 engine with an electric motor to get 300 hp and the fuel economy of a compact -- some 33 mpg.

But despite the $2,000 to $8,000 premium buyers pay, many hybrids haven't achieved advertised fuel efficiency in the real world. Still, they'll only improve. A possible breakthrough: a switch to lithium-ion batteries, which could cost less and carry more power than nickel-metal hydride batteries. Engineers say car-worthy versions won't be ready for mass sale for five years, but anything that ups battery juice will cut fuel consumption.

Other advances are showing up in the car-buying experience. The interactive build-your-own features on most auto maker Web sites let consumers pick paint, trim, and other options. BMW's site allows buyers to design their dream car and have the dealer zap the order directly to the factory. Many BMW customers do just that, and can flip-flop on wheels, stereo systems, engines, and other options until just six days before the build date. Getting the car can still take months in the U.S., though, if a model's hot.

Mercedes and Lexus also have top-notch sites, but other carmakers are catching up. As computers get more powerful, consumers may be able to do a virtual walk-around of a car they've configured on the Web. It's an alluring vision. But even without such a seamless experience, consumers have never had more power to turn automotive dreams into metal. And auto makers have never had a better chance to prove that smart design and tech savvy can reinvigorate an industry down on its luck.

By Lee Walczak and David Welch, with Ian Rowley in Tokyo, Gail Edmondson in Frankfurt, and Ann Therese Palmer in Chicago

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