The End of Detroit

by Micheline Maynard

  Two years later, Honda stepped up with its own freshened Accord, with a comfortable interior, a cleanly designed exterior and, like the Camry, enviable fuel economy. Taurus clung to the lead, but the bar had been raised and Taurus was feeling the heat. Unlike the Taurus, whose sales had to be boosted, the Camry and Accord were selling without incentives and virtually without discounts. Toyota and Honda stayed away from doing all but minimal rental car business, which allowed them to protect the image of their cars along with their profits.

  To fight back, Ford executives chose to gamble with an all-new version of the Taurus, due in late 1995, 10 years after the original. A sign reading “Beat Camry” hung on the wall of the conference room where the leaders of Taurus’s development team, which included 700 engineers and designers, met to work on the next-generation Taurus. The team, whose story is told vividly in the book Car, by Mary Walton, decided that the new Taurus had to be as as revolutionary as the original Taurus had been when it first reached the market in 1985. “They thought they had to re-create the magic of that first Taurus,” said Brauer at Edmunds.com. Seeing how well Toyota had done with the Camry, and how the Accord had also been able to rise in size and price from earlier versions, Ford officials decided that the next-generation Taurus would also be positioned as a more upscale model, moving it away from the reputation it had gained as a bargain car.

  The approach was meant to attract the upper-middle-class baby boomers who had been defecting back to the Japanese. And it would help restore the profits on Taurus, which had dwindled to virtually nothing due to the incentives and steep discounts. Ford was certain that the formula of a higher-priced, dramatically different-looking car was just what it needed to beat back the competition and keep Taurus on top.

  The result was one of the biggest mistakes in Ford’s history. From an aesthetically pleasing, if now mundane-looking, aerodynamic car, the new Taurus seemed to have gone overboard on ovals. The ovoid shapes were everywhere—oval taillights, oval dials, an oval grille, oval rear windows. It had gone from jelly bean to egg, from simply modern to completely Jetsons. “They tried to use progressive styling as a shortcut, instead of honing an otherwise proven formula,” Kagay said. More than the styling, however, was a marketing miscalculation that stalled the Taurus before it even hit the market. As development of the new Taurus proceeded, company officials were determined that Taurus had to remain the country’s best-selling car. So Ford’s marketing arm laid on every trick they could think of to expand Taurus’s sales. They poured more Tauruses into rental car fleets. They piled on incentives, such as rebates and discounted lease deals, hoping to attract as many customers as they could. In the months right before the new Taurus was introduced, the offers got even more generous, with payments of as little as $199 a month on a Taurus lease, and rebates of $500 or more per car.

  The deals worked in one unfortunate sense: Having heard and read all the ads for Taurus bargains, customers came to understand that the Taurus could always be had for a song—exactly the opposite of the upscale image that Ford wanted to achieve. When the new version came out, car shoppers came into dealerships expecting to get the same deals as before. What they found was a double disappointment: First, the looks of the Taurus had changed dramatically from the familiar car that had become such a beloved family sedan. It was as if a teddy bear had put on spandex and a wig. Because its appearance had changed so much, the Taurus also seemed smaller than the vehicle it replaced, and customers complained that the new version wasn’t as roomy inside. And the new Taurus cost hundreds to thousands of dollars more than its predecessor. The cheapest version cost close to $20,000, and once options were loaded on the car, the price approached $23,000. That was a steep price for a family car in the mid-1990s—still more than some Camry and Accord models cost today.

  Thus, instead of a comfortable car that could be purchased at a reasonable price, the Taurus had become smaller, more expensive and less eye-pleasing. Dealers, who had ordered thousands of the cars in advance, weren’t happy. But Ford provided them with an alternative that would prove to be another blow to Taurus. By the time the restyled Taurus reached the market, another Ford vehicle was entering its second generation: the Explorer. Introduced in 1990, Explorer had broken new ground in the SUV market. Until then, sport utilities emphasized their practicality and usefulness. The focus was primarily on the ways they could be used to traverse difficult territory and to transport camping gear and other equipment. The few people who bought them for regular driving gravitated to Jeeps, and the best-heeled moved to Range Rovers.

  Ford, however, had seen how popular those vehicles were and experimented in the 1980s with a smaller version of its big Bronco SUV, called the Bronco II. Built on a truck chassis, the Bronco II’s quality was subpar and its ride was uncomfortable, yet it offered a window into a potential market—namely, an SUV that could substitute for a car. Ford tapped into that market with Explorer, which by the mid-1990s was outselling many of the cars in Ford’s lineup.

  This was made abundantly clear when the new Taurus reached showrooms. Should consumers shake their heads in dismay at its radical new design and higher price, dealers could walk them over to an Explorer and suggest they give it a try. Some versions of the Explorer were even more expensive than the Taurus, but that seemed okay, given just how much bigger a vehicle the buyers were getting. Dealers were delighted to convince customers to make the switch, since profits on the Explorer were in the thousands of dollars, versus a few hundred on the Taurus. And customers were happy, both because SUVs were becoming chic and because they could avoid the hassle of shopping elsewhere. “They didn’t even have to leave the showroom,” said Brauer.

  The defections from Taurus were immediate. By 1997, Taurus had slipped from first place to third in the best-selling-car list, behind the Camry and the Accord. Ford seemed to take forever to respond to dealers’ complaints that the car cost too much, most likely because it simply didn’t want to admit that its gamble to go upscale had been wrong. It eventually did make a cheaper version available, but despite the uproar over the car’s dramatic styling, it left the Taurus’s appearance alone. Changing it right away would have meant millions of dollars in unbudgeted engineering expense. And by then, Ford had other priorities on its hands—namely, trucks. Jacques Nasser, who had become head of the Ford Automotive Group and was angling to become CEO, was convinced that the auto company needed to push full-bore into the SUV market. He saw all kinds of opportunities: Full-sized SUVs, bigger than Explorer—a vision that eventually led to the Expedition and the gargantuan Excursion. Small SUVs, such as the vehicle that Ford would call the Escape. Luxury SUVs, like the Lincoln Navigator. He also came up with an Explorer clone for Mercury called the Mountaineer. The company was SUV crazy, and its engineering resources were deployed to focus primarily on trucks.

  As a result the Taurus, badly in need of attention, got left behind. “They thought totally corporate. They said, ‘We’ve got all these truck products coming out, and they’re going to be high margin,’” said a former Ford executive who is familiar with the decisions that were made on the Taurus. “They said, ‘We can just let the Taurus sit there.’” Because of the company’s obsession with trucks and its unwillingness to save its best-selling car, it took Ford five years, until the year 2000, to do anything about the styling that had been such an immediate disaster. On its next go-round, Ford calmed down the Taurus’s appearance, removing the ovals and simplifying the interior, so that the car had a cleaner, understated look. It had cut back somewhat its flood of sales to fleets and rental car agencies, which had sliced into the car’s profitability and destroyed its carefully crafted image.

  But the changes hardly mattered by this time, because Taurus had long since been eclipsed again by the imports. In 2002, the Camry once again reigned as the nation’s best-selling car, a title it has held since capturing it from Taurus in 1997. Accord was slightly behind, while Taurus trailed the pair by thousands of sales. Its sales in 2002 were nea
rly 100,000 fewer than at its peak. Ford executives belatedly admitted that they had made a major mistake. Speaking to journalists at the Chicago Auto Show in 2003, Ford executive vice president Jim Padilla said Taurus didn’t deserve what Ford had done to it, saluting the car as if it were a fallen comrade.

  Already gone from many buyers’ shopping lists, the Taurus is destined to never again hold the crown as the nation’s best-selling car. Ford is converting one of the factories that built the Taurus to produce the Freestyle, its first entry into the market for crossover vehicles, a kind of SUV that is a combination car and truck that it plans to introduce in 2004 as one of three models it has slated to compete for family buyers. But once again, Ford will trail its competition. The Japanese are already setting the pace with crossover vehicles like the Toyota Highlander and the Lexus RX 330, which are in their second generation, the Honda Pilot and the Nissan Murano, while Chrysler brought out the Pacifica in 2003. Later this decade, Ford also will introduce a family sedan, the Ford 500, and plans a hybrid-electric vehicle, the Futura, counting on those two vehicles and the Freestyle to fill the place in the market that Taurus alone once occupied.

  Soon to be extinct, the Taurus is already a museum piece. The first one sits on display at the Henry Ford Museum and Greenfield Village in Dearborn, just a couple of blocks away from the styling studio where the first Taurus came to light 20 years ago. A sign tells the story of how Detroit once beat the Japanese and how the Taurus saved Ford from disaster. But the display doesn’t go on to say how Ford then lost the game because it did not have the determination or focus to keep playing. It chose easy profits over difficult success. To a Japanese company, the outcome would have been no question. For proof, simply look at the latest Accords and Camrys, which remain stellar vehicles even as Honda and Toyota have expanded their focus into truck sales. Said Kagay, “Ford went from building a hit to misguided hubris. What does all of this say? To be humble is virtuous. And Ford forgot that.”

  CHAPTER THREE

  TWO PATHS TO THE

  SAME CONCLUSION

  TO THE AMERICAN CONSUMER, Toyota and Honda have become such interchangeable symbols of automotive reliability and quality that it’s sometimes hard to tell them apart. They’re often mentioned in the same breath—Toyota-and-Honda, all run together—as if they were one big company instead of two. They certainly have a lot in common. Toyota, the fourth-biggest seller in the United States, and Honda, the fifth biggest, are both based in Japan, where they rank No. 1 and No. 2 in size. They are both fiercely independent companies with clear operating philosophies that have endured for decades, a sharp contrast to the tendency of Detroit companies to follow the whims of whichever executive is at the top. While executives can certainly accelerate or shift the direction at Toyota and Honda, as is true in the case of their current management, the basic underlying values remain in place at each company no matter who is in charge. Despite the merger-and-acquisition craze that swept the automobile industry and indeed the business world during the past decade, both Toyota and Honda have stood steadfastly alone, although they have both participated in joint ventures with other companies when it met their needs.

  The similarities extend to the showroom, as well. Both Honda’s and Toyota’s lineups in the United States feature cars and trucks that are known less for flashy styling than for their understated appearance and solid craftsmanship, although both have been experimenting lately with trendsetting vehicles aimed at Generation X consumers. Over the past two decades, both have built a network of factories in the American Midwest and South, which now produce the majority of vehicles that they sell in the United States. Toyota and Honda each got into the car business long after most of their global competitors. Ford and General Motors were already assembling cars at plants in Japan before Toyota built its first vehicle in 1936. Honda began as a motorcycle company after World War II. It didn’t produce its first cars in Japan until 1966, and did not export cars to the United States until the 1970s. When both Toyota and Honda originally brought their vehicles to America, neither one was taken seriously as real competition for Detroit’s automobiles. In retrospect, Detroit’s indifferent attitude toward them gave the Japanese companies valuable time to get on their feet and hone their approach with American consumers.

  But the perception that Toyota and Honda are carbon copies of each other is wrong. They have very different approaches toward developing vehicles, different corporate personalities and different strategies for global growth. Toyota is most like a traditional auto company, aiming to meet the needs of all kinds of customers with a broad lineup of cars and trucks. Honda has pursued a path all its own, picking its spots in the marketplace, introducing vehicles only when it is sure that they will stand out from the competition. Today, Honda’s founding family plays no role in the company, while the Toyoda family remains an active participant in the company that bears its name, and someday soon could see one of the family again named to the chairman’s job. What these companies share is a drive and determination to stay true to their mission, as they see it, which in the end focuses squarely on the customer.

  One way to get a feel for just how different these companies are from each other is to visit their corporate headquarters in Tokyo. Honda’s main office is located in a tall white building on a busy corner in Aoyama, one of the city’s trendiest business districts, kitty-corner from the residence of Japan’s crown prince. It sits squarely above a subway station, amid department stores, hotels, coffee shops and restaurants that are crowded at lunchtime and after work. The Honda building is just as popular a place to visit for people who work nearby. You can order a cappuccino or a light snack at the bar in the Honda headquarters lobby, shop in a boutique stocked with trendy merchandise, such as windbreakers with logos of Honda’s Formula One cars, and look over dozens of Honda vehicles. Shoppers browse in air-conditioned comfort inside the vast lobby; those outside can examine a dozen or so vehicles that are parked on the sidewalk, in a display that changes every day. Here, Japanese office workers from nearby businesses can sit behind the wheel (on the right in Japan), examine the trunk and kick the tires on vehicles like the small Fit, the best-selling subcompact in Japan, or the Mobilio, a tall minivan that is built on the Fit’s chassis. Visitors can pick up brochures about the vehicles or look up information about them on computer screens next to the coffee counter. But there’s no hard sell, and no one ever buys a car here. Instead, buyers are directed to their local dealers.

  When Honda constructed this building 15 years ago, the company’s founder, Soichiro Honda, insisted that the headquarters be earthquake proof, and that the windows be set back from the street, behind balconies, so that broken glass would fall on balcony floors and not shower passersby below, making it one of the safest buildings in Tokyo. That same care extends to the welcome that visitors receive when they arrive for appointments. Unlike the silent formality that marks most Japanese business occasions, where the usual beverage is green tea and sessions start precisely on time, no meeting at Honda begins without an offer of espresso or orange juice or ice water, and a pleasant exchange about Formula One racing or plans for the weekend. And if the schedule slips by a few minutes and a spirited conversation runs overtime, no one seems rattled. As if to illustrate the company’s friendliness, Honda’s robot, Asimo, looks down on the visitors from the reception area, atop a steep flight of stairs in the showroom. About four feet tall and fully functional, without any guide wires or remote controls, Asimo is one of the most familiar and popular figures with Japanese consumers, and he is becoming increasingly familiar to Americans as well from Honda’s lighthearted television commercials. A few lucky guests are greeted personally by Asimo (who spoke only Japanese in 2002, but has since been programmed to speak English) and escorted by him to a bank of elevators for their appointments.

  The cordial atmosphere in Honda’s headquarters is a sharp contrast to the starkness of Toyota’s Tokyo headquarters a 10-minute taxi ride away. Toyota’s imposing, black gla
ss building sits in the shadow of the Tokyo Dome indoor stadium, home to the perennial champion Yomiuri Giants baseball team, whose winning ways have made them Japan’s most-respected but probably least-loved sports team. The closeness to the home of the Giants is apt, for Toyota, too, inspires similar feelings of respect without real affection. Toyota’s executives arrive in chauffeur-driven Crown sedans and disappear down a steep driveway to vanish behind garage doors. There is little to encourage anyone to linger. The leafy manicured park next to the building, though inviting, is generally deserted past the lunch hour. The near-empty lobby holds no such enticements as a coffee bar (the closest Starbucks is a few doors down). Instead, a security guard stands at attention as receptionists greet guests and phone upstairs to double-check their appointment before allowing them to enter. If a visitor is headed for the executive floor, he or she has to change elevators partway up. The corridors are starkly decorated and employees work silently away. The camaraderie at Honda is absent here, replaced by focus and formality. But in a way that’s not surprising, because Toyota has an intensely serious focus. And because of that, it may well be that Toyota, rather than one of its American or European rivals, will become the world’s first truly global automobile company, even though it is based in a country that until about 150 years ago was all but closed to the outside world.