The End of Detroit

by Micheline Maynard

  The excitement that surrounded the T-bird when it debuted as a concept car in 1999 seemed exactly in line with the new era that had begun at Ford, where just months before Ford and Nasser had taken charge. The industry vibrated with speculation that the pair was intent on making Ford the biggest American company within a few years. Its rising market share had surpassed that of GM, whose share was sinking. The T-bird was just the kind of vehicle that would set Ford apart, with its heritage as a sports car, its instantly recognizable name and especially the pretty styling that the concept car displayed.

  But the T-bird didn’t fly the way Ford expected. Two more auto shows and three agonizing years would pass before Ford got the vehicle to dealers. By then, the excitement that Ford had fanned so successfully with the original concept car had died out. Ford dealers had waiting lists for the T-bird but had a terrible time filling orders. Production was delayed several times, and when Ford’s Wixom, Michigan, plant finally began building the car, it had to shut down the assembly line when it discovered that an engine fan could catch fire. The experience was particularly upsetting to customers who had bought their cars through the Neiman Marcus Christmas catalogue, which made it the featured vehicle in its 2000 Christmas Book. Though they had not been given a firm delivery date for their cars, many were under the impression that the Neiman Marcus T-birds would be the first that Ford built. Some were still waiting for their automobiles in fall 2001, after dealers had received their regular allotment of T-birds, and several dozen didn’t have the cars when the next Christmas catalogue was published. (Neiman Marcus made sure that it had the complete supply of its next Christmas car, the Lexus SC 430, on hand before they went on sale.)

  Once it went on sale, the T-bird received mixed reviews. Though raters liked the car’s appearance, they were disappointed by its lack of power and its soft handling. Ford had been trying to capture the boulevard ride that the early T-birds had boasted. But by 2002, T-bird had lots of competition from other two-seaters, such as the SC 430 and BMW’s Z-3 sports car. Because it was competing with those fast cars, customers had certain expectations. People getting behind the wheel of a T-bird wanted to punch the accelerator and go. Instead, the car floated down the road, certainly in keeping with the easy ride that Ford intended but not what consumers wanted. Ford insisted that a more powerful engine was coming. But the T-bird never recovered from the bungled launch. By the winter of 2003, a row of brightly colored T-birds sat, covered in snow, out in front of Varsity Ford, the big Michigan dealership that was among the largest in the country. By that spring, only a year after the T-bird’s debut, Ford had bowed to the inevitable and offered rebates on a car that had once been its prize and subsequently said it would be discontinued, although it said it planned to revive the T-bird name again in the future.

  As the T-bird roiled, so did Ford’s management ranks. Far more than GM, so prescribed in behavior as to rival the Pentagon, Ford has always been a company where individuality pays off. When other auto executives seemed drab bean-counters, Ford always had somebody fun to watch within its senior ranks. And, perhaps because of the cult of personality that surrounded its executives, Ford also always seemed to be the most susceptible to management gurus and the flavors of the month that they touted as the way to prosperity. In the 1950s, the Whiz Kids took charge under Henry Ford II, himself an industry legend for his flamboyant lifestyle. In the 1960s and 1970s, Lee Iacocca provided the catalyst for both Ford’s success, with cars like the Mustang, and high drama, when he was fired in 1978 by Henry Ford II, who famously said, “Sometimes you just don’t like somebody.” In the 1980s, Ford brought in W. Edwards Deming, the aging quality expert who had studied Japanese plants after World War II and came up with a set of 14 points that a company’s management should follow to get the most out of its employees. Simultaneously, Ford’s chief executive, Donald Petersen, received vast attention for returning Ford to industry prominence with the Taurus and its other top-quality cars. But Petersen, and then Trotman, and later Nasser all left because of unsettled circumstances and clashes with the Ford family.

  In previous times, Ford simply picked up and went on under whoever the new chief executive was. But the brain drain that occurred when Nasser left meant Bill Ford had to rely on a team of elder statesmen whom he nicknamed his “grumpy old men.” They included Carl Reichardt, the retired chief executive of Wells Fargo, who agreed to serve as vice chairman in charge of Ford Financial Services, and Allan Gilmour, who had retired as Ford’s chief financial officer in 1994 but returned at Bill Ford’s request to once again serve as CFO. Another such senior executive was the chief operating officer, Nicholas V. Scheele, who had run Jaguar, and to whom fell the day-to-day responsibility of leading the turnaround effort.

  Scheele, an ebullient British executive who had been knighted by Queen Elizabeth, loved to expound about the wonders of Ford’s vehicles, and he could spin marvelous yarns about the car business. But throughout 2002 and 2003 he was rumored to clash with David Thursfield, the taciturn, no-nonsense head of Ford’s international and purchasing operations, over the pace and form of the revitalization plan. Thursfield could be as chilly in demeanor as Scheele was warm. (When he cut his finger to the bone over Christmas 2002, Thursfield darkly joked that in the view of some of his colleagues, he was “too mean to bleed.”) Thursfield, who had directed a restructuring at Ford of Europe in the late 1990s, reportedly wanted to push Ford faster to achieve its cost-cutting targets; Scheele argued for a more measured approach. While waiting for direction, Ford’s market share continued to slip, with the company losing another 1.5 percentage points in 2002. There were times when it seemed as if GM, sensing weakness at its rival in Dearborn, was deliberately bombarding the market with incentives in a bid to push Ford over the brink. GM executives denied that that was their aim.

  But the incentives at GM and the management turmoil at Ford diverted press attention away from Ford’s efforts in the marketplace, where it will have to prove that its comeback strategy is sound. The first and most important test came in 2003 with the new F-series pickup trucks. Along with them, Ford planned to introduce the Freestar minivan, a replacement for the Windstar; the Freestyle sport wagon, its competitor for the Pacifica; and the new Ford 500 family sedan, which would replace the Taurus. There will be another generation of the Mustang and a revival of the Ford GT, a limited-edition sports car drawing on Ford’s 1960s racing heritage. But it isn’t clear whether they will be enough to fend off GM, Chrysler and the numerous imports, and help the company boost its share. The deluge of coverage leading up to the Ford centennial questioned whether they would. “A Century at Ford, But Will It Be a Happy Birthday?” asked the Financial Times. Meanwhile, Newsweek depicted Bill Ford as a conflicted CEO who had turned to sleeping pills and tranquilizers to ease his worries about the company. The denouement came from The Economist, which in the week of the Ford centennial displayed a rusted Ford pickup on its cover.

  Undoubtedly, Ford would have far preferred more interviews like the ones Edsel Ford did in the months leading up to the centennial celebration. The son of Henry Ford II, Edsel Ford had spent years at the auto company, working in a series of marketing and sales jobs, and had once been thought to be a contender for the job his cousin ultimately landed. But he had wound up as president of Ford Credit, spending most of his time smoothing relations with Ford’s dealers. Ultimately, Trotman told him that he would receive no more promotions. Thus, he left Ford in 1999 (although he kept his board seat) in order to pursue his own business interests, including corporate aviation, and to play a leading role in national and local charitable causes.

  Unfailingly jovial, with a down-to-earth manner and infinite patience, he showed off classic Fords on a New York City street to the hosts of Fox & Friends, and sat chatting one evening about company history with public television’s Charlie Rose, making no mention of unpleasant issues like the Explorer or the financial crisis that faced his family’s company. It was as if, by dint of the family’s histo
rical significance, Ford could make all the questions about its future fall away and be supplanted by images of its marvelous past. But the approach seemed much like the commercials that Detroit companies love to run, filled with footage meant to trigger memories of the era when they sold Americans their dream cars. All the fond memories of the past do not change Ford’s present. And unless it can address the competitive challenge that it faces from GM, Chrysler and the imports, its next 100 years may be bumpy indeed.

  CHAPTER TEN

  WHAT DO CUSTOMERS

  REALLY WANT?

  MARK SANDLIN, a 28-year-old graphic designer who lives in Everett, Washington, is just the kind of buyer that auto companies long to attract. He grew up loving cars and still treasures his case of Hot Wheels that he collected when he was a kid. His enthusiasm was fueled by his father, who owned more than 30 different models when Sandlin was young—domestics, imports, sedans, pickups, you name it. He’s an avid Web surfer, constantly checking out various automotive sites and dropping into car discussions. On weekends, Sandlin will stop in at car dealerships to see what the latest models look like, fending off salespeople who descend on him like locusts, eager for his business. “I say, ‘Quit it, I know more about cars than you do,’” Sandlin said. Through his knowledge of design, he can analyze every concept car that GM and Ford have put on display at auto shows over the past few years, such as the Ford 49 and the Chevrolet Nomad.

  Sandlin is excited that Bob Lutz has taken charge of GM’s product development, and he’s glad that Lincoln is trying to make its interiors more luxurious. But Sandlin has no interest in owning a Detroit automobile. He drives a Volkswagen Jetta, his second import, bought after trading in a Honda Accord coupe. His wife still drives a 1995 Accord, and his friends own Subarus and Toyota Corollas. “There isn’t any American car that evokes any kind of passionate response from me at all. So many of them have been so bean-counterized that they just make you yawn,” Sandlin said. What does it symbolize that he and so many other American consumers are buying cars with import nameplates? Sandlin shrugs. “I think it says we’re tired of Detroit making crap,” he said. “I think the domestic companies are learning that they can’t just support their business by waving a flag anymore. People want something to be proud of while they’re waving their flag.”

  Lou Nunez, who lives in the New Jersey suburbs outside New York City, isn’t a car expert like Sandlin, but he has always believed in Detroit, having come from a family of Ford owners. He set out specifically to buy another Ford in 1999, aiming to use up more than $1,000 in credits on a Ford Visa card. Nunez, 42, took home a Ford Contour SE Sport Edition, which joined his brother’s 1998 Contour in the family’s stable of Fords. But a week after Nunez bought his Contour, the compact would not start and had to be towed back to the dealer. Then, when the car was three years old, the speedometer stopped working, requiring a $350 repair. That happened a few months after the air-conditioning died in the middle of a hot New Jersey summer, requiring a new shot of coolant. In addition, his Contour is afflicted with excessive wind noise on the highway, as well as “mysterious creaks, groans and rattles” from the dashboard, he said.

  Nunez decided to get rid of his Contour “before it really caused me headaches” and took the car to a used-car lot for an appraisal, only to find out that a car for which he had paid $18,820 four years earlier was worth less than $3,500. A key reason was that Ford had sold countless Contours over the years at deep discount prices to rental car companies. They, in turn, unloaded them onto the used-car market. Some dealers even refused to look his car over. “One guy said to me, ‘Look, I’m not buying this. I’ve had a Contour sitting on my lot for more than six months,’” Nunez recalled. In spring 2003, Nunez broke with family tradition and set out to shop for a Subaru Outback. He figures the car will be reliable, since one of his neighbors has owned one for a dozen years with no major problems. Nunez, who runs the information help desk at a local college, said the experience with his Contour has erased his loyalty to Ford. “Ford, as far as I’m concerned, just has not been loyal to their customers,” he said.

  Sandlin, in Washington State, and Nunez, in New Jersey, each live in a state where customers are buying imports at a faster rate than the national average, a trend that is accelerating with each passing month. The growth is greatest on both the East and West Coasts, and increasingly in western and southern states. It is as if the imports took a map of the country, colored in two sides of it and then began coloring in the adjoining states. The pattern is just like the import companies’ strategy for eating into Detroit’s market share: The imports are nibbling at the edges as the traditional American companies cling to their core strength, the industrial heartland. To be sure, Detroit companies have not lost their grip on the states where they’ve always been strong.

  In Michigan, the nation’s automobile capital, where more than 1 million people are directly or indirectly employed by the auto companies, domestic brands have an 87.2 percent share. It is possible to sit at a stoplight at the intersection of Telegraph and 12 Mile Roads, two main thoroughfares 20 minutes from the headquarters of each of the Detroit companies, and not see a single import vehicle among two dozen waiting for the light to turn green. Other midwestern states are overwhelmingly loyal to Detroit, too. Domestic vehicles still have two-thirds to three-quarters of the market in Indiana, Minnesota, Wisconsin and even Ohio, despite Honda’s presence there. But that’s to be expected. What is more alarming is that Detroit is losing ground in some of the wealthiest states of the country, with some of the country’s most sought-after buyers.

  Californians have always bought import cars and trucks in droves, attracted by their fuel economy and cleanliness in a state where environmental issues have long been in the forefront. Japanese auto companies made their first inroads there, followed by the Koreans, while European cars with their posh reputations have attracted status-seeking Californians for decades. In almost a reverse picture of what it is like to drive in Detroit, a motorist can sit in a sea of traffic on Interstate 405 in Los Angeles at rush hour and see but one Detroit vehicle—an SUV. But California is no longer the only state where imports have more than 50 percent of the market.

  In California, Connecticut, the District of Columbia and Massachusetts, import nameplates took more than half of all automobile sales in 2001, according to statistics from R. L. Polk & Co., which tracks vehicle registrations. In another 13 states—Arizona, Colorado, Florida, Hawaii, Maryland, New Hampshire, New Jersey, New York, Oregon, Rhode Island, Virginia, Vermont and Washington State—import sales constituted more than 40 percent of the market, above the national average of 38.7 percent. On the flip side, there are only three states where imports made up less than 20 percent of all sales. They are Michigan, of course, plus the two Dakotas, hardly a groundswell of support for the Detroit auto companies.

  Consumers’ switch to imports coincides with the greatest availability of car-buying information that the industry has ever seen. Thanks to the Internet, buyers can tap into more statistics about vehicles than many engineers at the auto companies used to be able to access. This wealth of data is revolutionizing the way people think about vehicles and the way they approach their car and truck purchases. Anwyl, of Edmunds.com, feels the situation has created a whole new dynamic among consumers, car companies and their dealers. “People aren’t as afraid as they used to be” about the car-buying process, Anwyl said. “They feel empowered. Even though car-buying is still a battle, it is a battle that consumers feel they can win.” As recently as five years ago, auto companies did not know what to make of the Web. Some companies saw it only as a marketing tool, a place to stash brochures and dealers’ addresses. Others panicked. For a time in the late 1990s, the industry was awash with predictions that the traditional automobile showroom was headed for the dustbin and customers would be buying cars with a click of their computer mouse. “This Guy Is Outta Here!” a cover story in Business Week declared in 1999.

  That did not exactly
turn out to be the case. Internet purchases are rare, comprising less than 5 percent of all auto sales each year. But Internet research has become the norm. Consumers from all walks of life, from senior citizens to the industry’s youngest buyers, are arriving at showrooms armed with information, already experts on the vehicles they want to buy without being handed a brochure. Some 60 percent of customers research their vehicles on the Internet, whether on the auto companies’ sites or independent sources. Even so, a number of dealers and their parent car companies have been slow to realize the transformation that has occurred, still convinced that their primary job is to sell the sizzle, not the steak.

  For decades, consumers got the bulk of their quality data from magazines like Consumer Reports, which served as a bible for customers who demanded high quality. Dealers got used to shoppers walking in the door with dog-eared copies of the magazine under their arms. Although the magazine barred companies from citing its reviews, and still does, a favorable rating in the publication could lead to the “Consumer Reports effect,” triggering a sales increase of as much as 25 percent in the year after the review appeared. The magazine’s repeated endorsement of Toyota and Honda vehicles throughout the 1970s and 1980s helped launch those brands in the United States. Likewise, its declaration of the Suzuki Samurai as unsafe led to the small SUV’s demise and triggered an angry lawsuit from the Japanese company. But Consumer Reports was far from the only source of information: For generations, car enthusiasts have turned to magazines like Motor Trend, Car & Driver, Road & Track, Popular Mechanics and, more recently, Automobile for their opinions and for their wildly entertaining articles.