Fear and Loathing and Green Tech in Detroit

U.S. carmakers at the Detroit auto show have a green agenda. But is it enough to get them back into the black?

Skip the razzle-dazzle, the pretty girls, and the shrimp cocktail. This year's Detroit auto show should by rights be a sober affair. After years of weak sales and shrinking profits, dealers, stockholders, consumers, and critics want to hear what Ford (F), General Motors (GM), and Chrysler are going to do to dig themselves out of their hole. Yes, there will be the normal cheerleading from company executives, but their audience is getting fed up. People don't want a party. They want action. They want results. They want better cars.

As with last year's show (BusinessWeek.com, 1/7/07), there is more cause for tension than exhilaration at this year's North American International Auto Show. Some of the new models that made their debut last year in Detroit—notably the overhauled Chevy Malibu (BusinessWeek.com, 1/27/07), and Ford Focus—haven't been around long enough for carmakers or analysts to determine whether they will become hits.

The 2008 Malibu didn't reach showrooms until November. It has been selling briskly but arrived too late to have a significant impact on 2007 sales figures. The Malibu saw a nice little 6.7% jump over December, 2006, to 12,172 units, but overall, 2007 sales for the Malibu dipped 21.7%, according to Automotive News. The Focus was off just over 2% for the year. At the same time, sales of the redesigned Honda Accord (BusinessWeek.com, 11/16/07), which debuted in mid-September, rose 10%, and the Toyota Camry, still the best-selling car in the U.S., edged up 5%, to a staggering 473,108 units.

Everybody Wants a Hybrid

The problems plaguing Detroit last year are long-standing and well documented. Continuing tough competition from imports, high labor costs, quality concerns, a reliance on large sport-utility vehicles and pickups, and a lack of grand-slam new models added up to plant closings, lost jobs, and the lowest sales in nearly a decade. And, given projections for 2008, things look like they could continue to get worse (BusinessWeek.com, 1/3/08) before they get better.

There are some interesting models coming at this year's Detroit auto show, which is open to the public from Jan. 19-27, but based on advance publicity the offerings from Detroit are long on environmentally friendly concept cars and short on actual models likely to be on sale later in the year. One car that will be, the Saturn Vue two-mode hybrid, could be a winner. "Two-mode" refers to the fact that at highway speeds an electric motor helps the conventional, internal combustion engine when towing or climbing steep grades. At low speeds, the system acts like other hybrids, running on all-electric power, all-gasoline power, or both.

The reason behind the Vue's potential success is that demand for hybrids continued to grow exponentially in 2007. This year, especially now that oil prices have broken through the psychological threshold of $100 a barrel (BusinessWeek.com, 1/2/08), they are likely to be even more popular.

Toyota Is Tops in Green Cars

Just how popular? The funny-looking, underpowered, and overpriced Toyota Prius languished in the showrooms for years after its U.S. introduction in 2000 (BusinessWeek.com, 12/21/07). But then Toyota introduced a bigger, better Prius in the fall of 2003, just before gas prices broke $2 per gallon in 2004. The upshot is that in 2007, Toyota sold 181,221 Priuses, an increase of 68.9% over 2006, according to AutoData in Woodcliff Lake, N.J. Not only that but, shocking as it might sound, the runty Prius was one of the Top 10 best-selling cars in the nation in 2007—it came in ninth—the first time a hybrid made the Top 10.

That's the kind of mojo the Big Three need. Toyota has a strong lead, both in building green cars and branding itself as a green car maker, but Ford and GM are pushing to close the gap. This fall, Ford will launch the first in a series of smaller engines it is calling gas turbocharged direct-injection, or GTDI, engines, (BusinessWeek.com, 8/14/08), and GM is spending millions developing hybrid technology (BusinessWeek.com, 11/14/07) aimed at vaulting ahead of Toyota.

The hybrid bandwagon has gotten so crowded that critics such as the Union of Concerned Scientists are warning that the term "hybrid" is being thrown around loosely. The Washington (D.C.) environmental watchdog group says automakers are pushing hybrid technology as a marketing tool, without getting the maximum advantage in fuel efficiency or reduced emissions.

Hybrids No Longer Just a California Fad

Even Toyota gets some of this criticism. The UCS considers the Lexus RX400h (BusinessWeek.com, 7/13/07) from Toyota to be what the group calls a "muscle hybrid," since its electric motor mostly just improves the performance.

Nevertheless, demand for hybrids and other alternate-fuel vehicles can no longer be dismissed as a fad confined to Southern California. Alternate-fuel vehicles are front and center for the Detroit auto show, including fuel cells, battery power, biomass, clean diesels, and a growing variety of hybrid models that combine traditional internal combustion engines with electric motors.

The green theme is so pronounced that the usual macho auto show fare, such as the 620-hp Corvette ZRI (BusinessWeek.com, 12/28/07) looks practically Neanderthal in comparison, even though it incorporates a lot of high technology derived from racing. Naturally, the public will see many more conventionally powered cars than alternate-fuel ones, but the public-relations effort behind the press introduction shows the message automakers are trying to convey.

No National Infrastructure to Deliver Hydrogen

There will be plenty of competition, of course. Toyota will show a hybrid compact pickup called the A-BAT concept (BusinessWeek.com, 12/28/07). Its gasoline-electric hybrid power train is similar to the Toyota Prius.

Other alternative-fuel concepts on display include the fuel-cell-powered Cadillac Provoq, which is a crossover SUV targeted at affluent consumers who want to be "green," but don't want to squeeze themselves into an econobox.

However, there are big issues to overcome before fuel cells can be made widely available, namely the lack of a national infrastructure to deliver hydrogen at retail filling stations. In addition, there are ongoing efforts to improve the cost and performance of both the on-board tanks used to store hydrogen and the batteries used to store electricity in fuel-cell cars.

Strict State Rules Have Hurt Diesels in the Past

So-called clean diesels are another high-mileage alternative. Diesel fuel has the virtue of being widely available at existing gas stations, but diesel passenger cars have not yet lived down their reputation from the 1980s for being noisy, smelly, and underpowered.

Cars like the upcoming Mercedes-Benz GLK from Daimler (DAI) should help start to change that. In Detroit, Mercedes-Benz will show the Vision GLK, a small diesel-powered SUV that will be virtually identical to the production car scheduled to go on sale later this year.

Until this year, stricter state air pollution rules meant diesels could not be sold in New York, California, Massachusetts, Maine, or Vermont, but cleaner diesel fuel and improved technology will allow "50-state" diesels this year. Modern, clean diesels are virtually undetectable, compared with previous technologies.

Chrysler's Jeep Div. will show a diesel model, the Jeep Renegade Concept, in Detroit. It's a hybrid SUV that combines a small diesel engine with battery power.

According to a recent consumer poll on auto shopping Web site myride.com, only 10% of the respondents said "power and performance" will matter most during their next vehicle purchase, while 38% named "gas mileage and environmental friendliness."

The Detroit show will end on Jan. 27, but concern for the environment and for high gas prices will stick around.

Click here to see the highlights of the 2008 Detroit auto show.

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