2001 Detroit Show Newsmakers II

January 19, 2001

A friend in Washington

“I don’t think (President Bush) will stir the pot,” is the reading from General Motors Chairman Jack Smith. But that doesn’t necessarily mean the auto industry will have it easy under the new administration.

Smith doesn’t expect to see the government toughen existing fuel-economy standards during the next four years, but he also would be surprised if any of the existing federal regulations are relaxed. Like many in Detroit, the GM Chairman is keeping fingers crossed that there will be a new tax credit for high-mileage vehicles—which Smith believes would increase demand for gasoline-electric hybrids.

Along with another rise in fuel prices, demand for hybrids “could flow in the direction of one million” a year in the latter half of this decade, Smith suggested.

Hybrids aren’t the only vehicles where GM is having a tough time making a good business case. “It’s tough to make money on small cars. You need them” to attract first-time buyers who a maker like GM hopes will eventually move upmarket, but “You don’t want to go broke with them.”

Smith noted that GM is aggressively developing a new small car that could stand up to Japanese and Korean competition. It’s being jointly developed with Suzuki, one of General Motors’ Japanese affiliates. Production is still several years off, but will take place at the CAMI plant GM and Suzuki operate in Canada.

Big and bold Nissan

The Alpha-T concept truck is a clear indication of the direction being taken by Nissan Motor Co., says the automaker’s multi-national CEO, Carlos Ghosn. “It’s pretty bold,” he asserted to TCC, adding that it “talks the most about our business.”

Nissan’s business has improved dramatically since Ghosn unveiled his sweeping cost-cutting program in October 1998. The company is back in the black—though it still has huge debts to clear off its balance sheet. “I’m very confident,” said the Brazilian-born Ghosn. “You won’t have any surprises. We’ll deliver what we said we’ll deliver.”

The U.S. is playing a critical role in Nissan’s revival, though eventually Ghosn expects business to pick up in other parts of the world, including the slumping Japanese home market—where he expects Nissan to post its first market share gain in 27 years.

The radical Alpha-T will be toned down by the time Nissan’s first full-size pickup goes into production at the company’s new Mississippi assembly line. About the same time, we’ll get to see the reborn Z-car. A prototype shown at the North American International Auto Show was far less retro than earlier concept versions, and Ghosn is confident that with a little more tweaking, the production Z will be “a money-maker, and it’s going to bring the brand back.”

What, me worry?

“I’m personally a bit surprised by all this talk of recession. It could be a self-fulfilling prophecy that could push us into crisis, laments Juergen Hubbert, the DaimlerChrysler board member in charge of Mercedes-Benz.

Whichever way the overall market heads, Hubbert confidently predicted to TheCarConnection that his Mercedes brand will continue making gains in the coming year. The automaker is going after a wide range of new consumers with products like the C-Class wagon—unveiled in Detroit—and the C-Class coupe—shown a week earlier in Los Angeles.

Over the last 15 years, the luxury marque has drastically expanded its offerings, introducing small cars, such as the A- and C-Class; sport-utes, compact roadsters and mid-line convertibles. That’s led some analysts to question whether Mercedes will tarnish its own tri-star by making its products just a little too commonplace. But Hubbert is confident that won’t happen. “The brand is still very exclusive.” If anything, he argues, “there are still some additional segments we can go into.”

Even though his former Mercedes colleague, Dieter Zetsche, is now running Chrysler, Hubbert insisted “you will not see much more” blending of the two brands than is in place already—and that’s not very much. There will be more behind the scenes support, and some sharing of components, but “you must be careful…with brand image.”

Eventually, all the various DaimlerChrysler brands—which also include Hyundai and Mitsubishi—will adopt common electrical systems, Hubbert noted. That will allow Mercedes to serve as the technical innovator, and then, as costs come down, high-tech features will be shared with the rest of the company.

Changing the equation

Costs will have to come down significantly before hybrids and other, new “green” powertrains become commonplace, asserts GM President and CEO Rick Wagoner. To help drive down costs, the automaker is developing a new hybrid drive system, dubbed ParadiGM, that can plug into passenger cars and light trucks, just like a conventional gasoline engine. “This technology has the chance to change the equation,” he told TCC.

Rick Wagoner detroit 2001

Rick Wagoner detroit 2001

In a wide-ranging interview, Wagoner said that he’s satisfied with the organization that now exists after a decade of often-massive changes at GM. “I don’t want to give the perspective we’re throwing things out and starting new, because great companies don’t do that. But occasionally, you need a bolt from the blue,” said GM CEO Wagoner.

December did bring a few bolts, with the announcement that there’d be major production cuts in Europe; and that the century-old Oldsmobile division would be dropped. At the time, Wagoner hinted that at least one other U.S. division is in the red, though he wouldn’t say which one. Will it also be eliminated? “We haven’t put anyone else on notice. (But) ultimately, if you can’t make a business case out of something, you’ve got to make a tough call.”

Long criticized for its stodgy styling, GM has been aggressively trying to remake its image, rolling out an array of concept cars last year and again for 2001. At least six of the previous crop will be going into production, and “we’ll do some” of the 2001 concepts, as well, Wagoner hinted. Which ones? He won’t say, though the Chevrolet Borrego is considered a hot prospect, as is the sleek Buick Bengal.

Rotary redux

The rotary engine helped build Mazda—and the automaker is betting it will help rebuild the long-moribund marque. Mazda rolled out a prototype of the upcoming RX-8, an unusually roomy sports car featuring not only a rotary engine, but rear “suicide” doors to make it easy to actually use the rear seats.

The RX-8 should have a major “halo effect” and draw in customers for Mazda’s other models, which all too often have slipped off the consumer radar screen, suggested Mark Fields, the Japanese carmaker’s CEO. That’s going to be useful when Mazda’s mainstream 626 is relaunched next year.

Mazda RX-8 Concept

Mazda RX-8 Concept

This is a “transition year for us,” said the surprisingly youthful Fields. Mazda is struggling to pull itself out of the red, though the strong yen has been costing it plenty on exports to Europe and the U.S.—over $1.1 billion over the last two years alone.

Under Fields, the carmaker has been slashing away at costs and capacity. With the closing of one of its home Hiroshima plants next September, Japanese capacity will be reduced by 25 percent, putting it back “in line with reality,” said Fields. Meanwhile, the white-collar count is also on its way down, with 18 percent of the salaried workforce slated to be cut by April.

Fragmentation in the marketplace

Call it the ultimate payoff of the “me” generation. Consumers want vehicles that precisely match their personal needs and desires, said Martin Inglis, head of Ford Motor Co.’s North American automotive operations. “It changes the economics of the industry.”

Furthering this trend towards automotive personalization is the fact that there are more and more products chasing a shrinking U.S. market. So the challenge, said Inglis, is for a manufacturer to maintain its economies of scale while producing more models going after lower volumes.

This transition is coming at a doubly difficult time, with the U.S. market likely to post at least a one-million-unit drop this year. “The absolute drop is horrific,” said Inglis, though he quickly added that, “what you’re left with is pretty good.”

Inglis actually sees a silver lining to the downturn. The torrid pace of production last year was made more challenging by the roll-out of a record number of new Ford cars and trucks. With resources spread thin, the automaker faced a number of launch problems, including five well-publicized recalls of the new Escape during its first few months on the market.

“When you’re working like that, you have very little time to recover,” Inglis said. With fewer launches and less overtime on the books, Ford is taking great pains to prevent a recurrence in 2001.

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