Too many American car buyers are simply fed up with the vehicles that Detroit has tried to peddle to them. Millions of customers, loyal to GM for generations, finally got tired of tinny doors, keys that didn’t fit both the door and the trunk, and instrument panels that simply looked cheap. Despite the improvements that Detroit has made, despite all its vows and promises, the list of flaws in its cars continues to exceed that of its rivals.
On the other hand, Toyota, Honda and the others realize full well that they cannot claim victory—that they can never do so. For as Detroit has shown, it is all too easy to lose one’s advantage. The Japanese carmakers are frightened by the emergence of the resurgent Korean auto companies, such as Hyundai and Kia. The Koreans are battling for the hearts of the children of the Japanese and German consumers that they captured. These young buyers don’t want to buy the same vehicles that Mom and Dad owned unless they can be convinced that these cars are what best fit their needs. And so Toyota created a whole new operation, called Scion, aimed at what it refers to as Generation Y buyers, confronting what it sees as a potential image problem long before it actually is in danger of losing sales.
No one dares to write off Detroit, however. Anger—as well as lost profits—is driving GM, Ford and Chrysler into action. Already this decade, Ford and DaimlerChrysler have replaced their chief executives and their top management. A Ford is back at the helm of Ford for the first time in 22 years. GM, which dominated the industry for so many years, has been forced to bring in fresh talent from outside. GM, Ford and Chrysler are spending vast amounts of money to develop new vehicles that they vow, yet again, will be their best ever and will provide the resounding answer to the imports on American ground.
But changing faces and making promises cannot change an attitude of indifference that has long grown among consumers. For too many years, Detroit companies’ primary tactic for fighting back has been to shift consumers’ attention to the future, while leveraging their past as a sentimental weapon that they have used to obscure the deficiencies of the present. But though consumers might appreciate the vehicles of the past, and express curiosity about what’s coming down the road, they are focused, more than ever, on the present. The advent of the Internet has given them more access than ever before to information about the cars they are interested in. Comparing cars is easier than ever. Such mysteries as leasing, invoice prices and used car values are explained at the stroke of a few keys.
Rather than listen solely to Detroit, consumers now listen to each other. In an age of data, one of the most important criteria in buying a car is word of mouth. And what customers seem to be telling each other—in person, in e-mail and on the Internet—is that there are better choices than vehicles from Detroit. Satisfied customers have become the best selling tool foreign manufacturers could ever have. And they realize it, which is why they are so completely focused on consumers. No matter what GM, Ford and Chrysler have used in their attempt to fend off foreign competition, consumers’ own resolve has been the one weapon that GM, Ford and Chrysler seem powerless to defend themselves against, for all their years of unquestioned industrial might.
CHAPTER TWO
A FALLEN COMRADE
THE DETROIT AUTO SHOW at times brings to mind the May Day military parades that were a perennial feature of the old Soviet Union. The two weeks at the beginning of every January mark the American automobile industry’s time to show off all its prestige and might. In the past, the show has attracted presidents and senators, celebrities, talk-show hosts and every manner of corporate leaders, all drawn by a glittering array of vehicles to the Cobo Convention Center on the banks of the ice-strewn Detroit River. The 2003 show was no exception. Strolling the cavernous hall, it was hard to know where to cast one’s eyes first. “A Proud and Primal Roar,” the New York Times headline announced. It seemed to sum it up best. General Motors, Ford and Chrysler had thrust deep into their very core to come up with vehicles that marked the essence of their being as American companies and that represented the message that they wanted their audience to understand: We still have it and don’t you forget it.
At one end of the show floor was the sprawling GM display, whose highlight was the gleaming Cadillac Sixteen, an expression of the ultimate in late-middle-aged male testosterone. Its proud creator was GM’s vice chairman, Bob Lutz, who at age 71 had outlasted virtually his entire generation of industry executives to end up triumphantly as Detroit’s best-known automotive figure. The Sixteen was only the latest exercise in automotive fantasy that had come to life under Lutz’s direction, and one that he had long wanted to produce.
Years earlier, Lutz had sketched something that looked very much like the Sixteen on the back of a menu during a dinner at Die Ente Vom Lehel, the elegant restaurant in the Hotel Nassauer Hof in Wiesbaden, Germany, near Frankfurt. At the time, Lutz was the president of Chrysler, which was known for risk taking, spunk and its ability to stretch development dollars farther than any other firm in the industry. The fact that this led to vehicles with subpar quality, and that Chrysler’s success was really based on the popularity of its Jeeps and minivans, was rarely discussed. The sketch was meant to show where Lutz would go if he had the resources to develop his ultimate dream car. It would have been a step beyond the Dodge Viper, the low-slung, sexy two-seater that jump-started Chrysler’s image after its second brush with bankruptcy in the late 1980s.
Chrysler, in third place among the American companies, did not have the money or the inclination to produce Lutz’s dream car. So he gave away the sketch to a journalist as a souvenir. But GM, where he had been given virtually a free hand since arriving in the late summer of 2001, had the resources and, moreover, the need for such an image-builder. With Lutz in charge of product development, GM wasn’t about to let luxury car makers, like Mercedes and Bentley and Rolls-Royce, get away with dominating the market for ultraluxury cars costing $150,000 and more.
Lutz fairly burst with cockiness and machismo as he showed off the Sixteen to the flocks of visiting executives and journalists. They crowded around the car, with its 16-cylinder, 1,000-horsepower engine and long, low-slung body, as he lounged, beaming, against the car body amid the popping of flashbulbs. Lutz had particular reason to preen, for his face that week stared out from the pages of Newsweek. GM’s Detroit bureau chief, Keith Naughton, had been allowed to follow the development of the Sixteen during the past year. GM insiders whispered that Lutz would have landed on the cover of the magazine if not for a pesky political crisis in North Korea that bumped him in favor of the dictator Kim Jung Il.
The mere fact that GM would try to compete in such a hallowed segment of the market sparked waves of enthusiasm for its bravado. But the Sixteen wasn’t the only such eye-catching car from Detroit. Ford had rolled out its own wave of vehicles, attempting to camouflage the fact that it had just been through one of the worst years in its history. Only a few years earlier, Ford had been in the spotlight at this show with a new version of the venerable Thunderbird. Now it was trying to leverage nostalgia once again. Its Mustang concept car, painted in dark teal, was modeled after the gutsy high-powered Mustangs of the 1970s, with their loud engines and getaway power. In fact, this concept version looked so much like the classic cars that passersby had to look twice to discern that it was a new model.
Its long hood and racing body seemed to reach back to a more glorious time, when the vroom-vroom-VROOM of engines and the squeal of tires could be heard on wide boulevards across the country late into summer nights. This Mustang drew such scrutiny among journalists that the company had to occasionally cordon off the car so that maintenance men in jumpsuits could wipe the fingerprints off its glistening sheet metal. The buzz about the Mustang overshadowed a more important vehicle—in fact, a far more important vehicle—that Ford also was unveiling at this show. The year 2003 ushered in the latest version of Ford’s F-series pickup, which has been the best-selling vehicle in the country, car or truck, for the past 25 years. Yet this latest generation had come t
o life under a cloud. Just a few months before, Chrysler had introduced a restyled Dodge Ram pickup to a stronger reception than Ford had expected. Meanwhile, GM was pouring on rebates in advance of a face-lift on the Chevrolet Silverado and GMC Sierra, hoping that the incredible deals would lure customers away from Ford’s trucks.
Feeling the competition bear down on its most critical vehicle, and knowing that it could not risk a defeat, Ford spent billions to revamp the F-series, so much that its costs soared more than $1,000 a vehicle above the investment it had made on the previous version. In another, more free-spending era, Ford might have been able to impress both Wall Street and its buyers with the attention it was giving the new F-series. But the cost increases came at a time when most auto companies were boasting that they were able to cut their product spending on each succeeding generation, thanks to computer-aided design and manufacturing techniques that were speeding up the development process. Ford looked wasteful for having gone in the opposite direction, especially when it had lost $6 billion over the past two years. So Ford instead chose to put its spotlight on the Mustang, and in light of the attention that the Sixteen was getting, the decision gave it a chance to say, “Look, we have something exciting, too.”
But neither the Sixteen nor the Mustang could compete in sound and sheer gutsiness with what Chrysler roared out for the show’s approval: the Dodge Tomahawk. It was not really a car at all, but a motorcycle with 500 horsepower and a 10-cylinder engine. It was ridden onto the floor by Wolfgang Bernhard, Chrysler’s chief operating officer, who had accompanied Chrysler CEO Dieter Zetsche to Detroit from Germany a little over two years before in a desperate attempt to stop the hemorrhaging that had nearly laid the auto company flat. Bernhard sported a black leather jacket and a huge grin as he rode what was essentially the Dodge Viper’s engine on wheels. Crowds instantly materialized, and within hours the Chrysler entry had become the talk of the show.
Even Lutz eventually strolled by with an entourage to look at the knife-precise contours and get a feel for its hard rubber seat. Chrysler had not planned to put the Tomahawk in production at all—it was simply a concept vehicle. But given the reaction, the company announced that it might build a few for $250,000 apiece. “Grown men fall to their knees and weep. I’ve never seen anything like it,” Bernhard told the trade publication Automotive News. It was one of those moments that the American automobile manufacturers would like to freeze in time. For, just a few steps away inside Cobo Center, there was ample proof of the reality that GM, Ford and Chrysler faced outside the convention hall, where they had to compete for buyers with foreign competition.
In the first days of the show, GM had been showing off its wares like a grand pasha waving his jeweled hand over the fruits of his kingdom. But its largesse could not dispel a question lingering in the minds of everyone attending the show: What will the Nissan pickup look like? The question was justified. Only four years before, Nissan had been flat on its back, in danger of going out of business, nearly sunk by more than $30 billion in debt. Its recovery, under the leadership of Carlos Ghosn, had been swift and seemingly miraculous. By shutting plants, slicing costs and overhauling Nissan’s product development operations, Ghosn had wiped out billions of dollars of automotive debt and brought Nissan back to profitability in only three years. Now he was embarked on another ambitious challenge: to expand Nissan’s vehicle lineup, boost its U.S. sales by about 30 percent to 1 million a year, and vault Nissan into position alongside Toyota and Honda in the top tier of Japanese companies.
The big pickup was the centerpiece of the strategy. Toyota had beat Nissan to the full-sized pickup truck market a few years earlier with the Tundra. But it was still big news that a Japanese company was attempting to take on the Detroit companies in the last remaining market that they still dominated. Bigger than the Tundra and as big as the largest Detroit trucks, the Nissan pickup was going to be produced at Nissan’s new $1.5 billion factory in Canton, Mississippi, its second in the United States. Nissan planned to build a big sport utility later on, called the Pathfinder Armada, from the same chassis that it used to build the pickup, as well as a sister SUV for its Infiniti luxury division. Thus, if the pickup failed to live up to expectations, an enormous amount could be lost, not only for Nissan but for the imports’ own reputation.
Nissan’s game plan at the Cobo Convention Center called for the pickup to come barreling down a steep ramp amid exploding fireworks and screech to a fast stop at the bottom. If the special effects failed, the engine stalled or the brakes didn’t work, the truck could easily take out an army of reporters. But everything went gloriously better than even Nissan could have dreamed. Right on schedule, the pickup, which Nissan had named Titan, revved its engine and zoomed down the ramp, hitting its mark perfectly. Big, and burnt orange, it had the unmistakable aura of a hit. Ghosn jumped up from a seat in the audience to illustrate the truck’s features, which sent the crowd buzzing. Its exterior design was gutsy, angled and massive. And Nissan had stuffed a powerful V-8 engine under its hood, which guaranteed that it was able to offer enough performance and towing ability to please almost any pickup user.
But there were two other features that surprised the audience and showed that Nissan was thinking beyond its competition. Over the past few years, trucks with extended cabs had become the standard among truck buyers. The extended cab gave them an extra row of seats, for passengers or gear. But most extended cabs were configured so that the driver and passenger doors had to be opened all the way out to allow the smaller door to the cab, called the escape door, to be opened. Nissan, however, had installed a special hinge on its escape door that allowed it to be completely opened and laid almost flat against the side of the truck. The escape door could be opened regardless of whether the front doors were open, allowing more convenient access for passengers or cargo. And it closed completely flush with the front doors, allowing for a seamless side to the truck.
Nissan also was planning to offer another customer-friendly feature: a specially coated truck bed. Generally, auto companies’ trucks came with unfinished or scantly painted beds, on the assumption that owners would buy a plastic liner. These liners were one of the easiest ways for dealers and aftermarket shops to make extra money on truck owners, since just about every pickup owner would buy one. But Nissan had developed a technology in which a pebbly graphite coating was sprayed on, offering an easy-to-clean surface without the need for a truck bed. Though company officials expected that some owners would buy a bed anyway, the coating was durable enough that they didn’t need to. The features showed the thought that Nissan had put into its truck on behalf of consumers, while its size and stance were equally impressive, especially given that the only pickups the company had ever manufacturered were small models primarily popular with California surfers. “We will compete with nothing less than our best,” Ghosn declared.
The Nissan pickup became every bit as much of a must-see at the auto show as the Cadillac Sixteen or the Chrysler Tomahawk. The next morning, Ghosn and the truck stared out from the front pages of both the Detroit News and Detroit Free Press, a two-for-two accomplishment that was akin, in the Motor City, to landing on the covers of both Time and Newsweek. And while grown men didn’t weep at the sight of it, it did put a look of anxiety on the face of J. Davis Illingworth, a veteran Toyota executive who had run its Lexus division and who had led the company’s efforts to discern what younger buyers wanted on future vehicles. “It’s impressive,” Illingworth acknowledged, adding that Toyota would have to take Nissan’s pickup into account as it redesigned the Tundra.
Perhaps the best compliment that the truck received was paid by engineers from one of the Detroit auto companies early the next morning. They had headed right for the Nissan pickup, and were caught by security guards with wrenches in their hands and the headlights from the truck lying on the floor as they attempted to dismantle the front end of the truck to figure out how Nissan had put it together.
Clearly, the message that the
Detroit companies were getting from outside the doors of Cobo Center could not be ignored as 2003 began. The American economy was in the doldrums and the stock market was losing more ground. Threat of a war with Iraq hung over the world. Tensions between North and South Korea had reached a dangerous level. Oil prices had climbed due to a lengthening strike in Venezuela. Most important, sales figures for the year just ended revealed that the Big Three companies had again lost market share to foreign manufacturers during 2002, leaving GM, Ford and Chrysler with only 61.7 percent of car and light truck sales, their smallest share in history and down 10 percentage points in just five years. Only GM, among the three, had managed to eke out a gain, picking up 0.2 percent of share, though it had come at a tremendous cost. Throughout 2002, and particularly in December, GM had flooded the market with rebates and zero-interest financing, at a cost of nearly $4,000 for every car and truck that it sold. There were special lease deals, too, as low as $149 a month on a Chevrolet Malibu for family members, and enticements for leaseholders to turn in their cars for new ones. On top of it all, GM offered breathtakingly generous terms to its rental car customers like Enterprise and Hertz, putting an estimated 70,000 more cars than usual into their lots, easily enough to guarantee that it would end the year with a market share gain—albeit, in the end, a minuscule one.
GM’s actions made a perverse kind of sense. Given that so much was at stake, it might have seemed timid had it not taken advantage of every sales trick at its disposal. Unfazed by complaints from their competitors that the incentives were ruining vehicles’ resale value, and warnings from analysts that the constant stream of incentives were conditioning buyers to wait for better and better deals, GM’s chief executive, Rick Wagoner, declared, “It’s time to stop whining and play the game. At GM, we’re going to do what works for us.” (Only two months later, at the Geneva Motor Show in Switzerland, Wagoner admitted that the incentives were losing their pull and that GM needed a “new hook” to get customers into showrooms.)
The End of Detroit Page 4