2005 Detroit Auto Show, Part VI

January 9, 2005

2005 Detroit Auto Show Index by TCC Team (1/8/2005)

Return of the Four-Door Convertible?

2005 ASC Concept

2005 ASC Concept

It’s been nearly four decades since a major manufacturer – Lincoln – last produced a four-door convertible. But is there another one heading to market in the near future? Tucked away from the crowds in the back end of the lower level at Detroit ’s Cobo Hall, supplier ASC is displaying a prototype of a four-door ragtop 300C. Though not formally authorized by Chrysler Group, the automaker is keeping a close eye on the project, CEO Dieter Zetsche told TheCarConnection.com. “We would not go for a camel,” said Zetsche, “but what we saw looks pretty nice.” The next step, he said, is to get the show car up to the Chrysler Technical Center, in Auburn Hills, “and see, technically, what it will do. It has to be a solid, strong body,” especially if it’s going to handle all the power of the popular Hemi engine. While Zetsche wasn’t ready to say if he’d like to do a production version, he hinted that “We are a fast company, and there wouldn’t be a chance to do this if it were to take more than four years.” Chrysler isn’t the only automaker intrigued by the idea of a four-door convertible. Its German sibling, Mercedes-Benz, is reportedly exploring its options. Bentley, meanwhile, originally considered making a four-door version of its prototype Arnage Drophead, but ultimately settled for a more conventional, two-door convertible.

Workforce Cuts Misinterpreted, Says GM

General Motors will rely largely on attrition to eliminate about 8000 jobs in 2005, CEO Rick Wagoner announced during an auto show meeting with reporters. But he quickly asserted that the cuts will largely be the result of attrition, not big layoffs, as had been reported by the Detroit Free Press. The paper had indicated GM was planning to trim seven percent of its U.S. workforce, which would have been well beyond what Wagoner insisted is in store. Adjusting for new hires and those brought back to the company payroll, a GM spokesman said ongoing headcount cuts have and will be close to five percent annually. Indeed, added Wagoner, the automaker has been steadily trimming back its workforce for several years as it finds ways to improve productivity. “What we’re planning is not anything new.” There have been rumors circulating in Detroit for months that a more significant cutback was in the works, and a well-placed source told TheCarConnection one such plan was under consideration late last year. Further cuts could follow, Wagoner did admit, possibly at the field sales level. And some layoffs may yet result from factory closures and cutbacks. At the end of the third quarter of 2004, GM’s U.S. hourly workforce stood at 112,000, down from 119,000 at the end of September 2003. The white-collar rolls, according to a report by the Associated Press, fell from 40,000 to 38,000 during the same period.

Toyota Decision Soon on U.S. Hybrid Build

Toyota Motor Co. is still struggling to get out from under a backlog of up to eight months for its Prius hybrid, though CEO Fujio Cho said that recent increases in production are paying off. “Within the year 2005, we will be able to eliminate all these backorders,” he said during an interview at the Detroit auto show. That would suggest that Toyota is in position to meet its goal of selling 300,000 hybrid-electric vehicles, or HEVs, this year. That should include at least 100,000 copies of the Prius in the U.S., another 70,000 in Japan and 10,000 in Europe. Meanwhile, the automaker is launching gasoline-electric spinoffs of the Lexus RX and Toyota Highlander. Over the long-term, added top American executive, Jim Press, “It’s safe to say, ( Toyota will add) a whole lot more hybrids.” And that would mean still more production increases. There is no question, CEO Cho acknowledged, that Toyota will eventually produce hybrids in a U.S. plant. And it is now studying what product to start with and where it would go. “By the middle of the year,” said Cho, “we’d like to reach some conclusion.”

Zetsche: From Hunted to Hunter

There were plenty of smiles as industry executives posed for the cameras in Detroit this week, but while many seemed strained, there was a sense of jubilation at Chrysler Group, which has just wrapped up its best year since announcing its turnaround plan three years ago. The 300 won kudos as North American Car of the Year on the auto show’s opening day, and demand for the sedan and Magnum wagons are selling so well the company will add a third shift at its suburban Toronto assembly plant. “Four years ago, we were among the weakest companies and the predators were going for our throat,” said CEOP Dieter Zetsche. “Now we’re the fastest of the prey, and by 2007, we want to be one of the predators.” That doesn’t mean there aren’t plenty of challenges facing the U.S. side of DaimlerChrysler AG, said Zetsche’s second-in-command, Tom LaSorda. There are healthcare costs and rising commodity prices, for example, making it all the more critical to continue cutting costs and improving productivity. Then there are all those new products on tap, including the Dodge Charger sedan unveiled in Detroit . Chrysler must keep those introductions on track, said COO LaSorda. But for now, at least, the momentum is moving in the right direction, he added, and products like the 300 are helping to draw a new generation of buyers into Chrysler showrooms.

GM Playing Catch-Up on Hybrids

“We know we’re late,” acknowledged General Motors product chief and vice chairman Bob Lutz, when asked about the automaker’s slow launch of hybrid vehicles. But he insisted that’s simply because “We play our own game,” and have wanted to make sure there’s a real business case to make for the high-mileage technology. GM’s initial take was that the added cost and complexity of hybrids, “was not going to be worthwhile,” said Lutz, but he admitted, “We forgot the emotional impact and the fact that a lot of people out there want to make an environmental statement.” GM is now pushing to catch up to competitors like Honda and Toyota, and the U.S. maker approved a joint venture, late last year, with DaimlerChrysler, to produce a super-efficient, dual-stage hybrid system. “As the world’s largest car company, GM cannot not be there,” Lutz said he realized, even if a profitable business case for hybrids “is very, very questionable.”

Consumers Wary—And For Good Reason, Says Lutz

There’s a gap between customer perception and reality, insisted General Motors Vice Chairman Bob Lutz, and the automaker only has itself to blame. “It comes from 20 years of not doing the right thing. But at some point, we have to get that behind us.” The company’s vice chairman said during a Detroit auto show briefing, that GM quality has shot up substantially in recent years, noting that four of the U.S. manufacturer’s divisions did better than Toyota in the most recent J.D. Power & Associates Initial Quality Survey. The only way to close the customer perception gap, he conceded, is “to do superior products with a high degree of customer acceptance.” And then wait until the message gets out to consumers.

VW Looking at Smaller SUV

Volkswagen is reeling from a sharp 15-percent slide in U.S. sales last year. Volumes that peaked at 330,000 vehicles in 2002, dropped to just 256,000 cars and light trucks in 2004. But the automaker’s U.S. boss, Len Hunt, is betting that a flood of new products, creative incentives and aggressive quality control efforts will “stabilize” the situation this year, and start rebuilding momentum in 2006. VW rolled out its Ragster concept at this week’s Detroit auto show, and pulled the covers off an all-new Jetta in Los Angeles earlier this month. The company plans to deliver nine new models to U.S. showrooms over the next 18 months, including next-generation versions of the Jetta, Passat and Golf, and an updated Beetle. Beyond that, stressed Hunt, “We need more SUVs, and we’re working on a smaller one,” when compared to the current Touareg, which would likely hit market in 2007. Hunt also confirmed that a sports car is being worked on “very seriously,” though he cautioned that this is not an approved program.

VW’s sales slide resulted from a variety of factors, suggested Hunt, including poor planning. The automaker has tended to launch a variety of products in a quick burst, such as the one planned for the next 18 months. Then it sits back and waits for awhile before adding new models or refreshing old ones. Adjusting that “cadence” is a high priority, Hunt added, so that there’ll always be new models ready to reach U.S. shores. Meanwhile, quality control problems also hurt the automaker, especially those that took awhile to fix. A suspension problem affecting several models took almost five years to resolve. But a new “root cause analysis team” has been created to speed things up. If a potential quality problem turns up, the team heads into the field to see how serious the situation is. The target, said Hunt, is to take no more than “18 weeks from analysis to fix.”

Ford Toe-to-Toe on Residuals

“We think we can go toe-to-toe with anybody and it’s time we put that firepower to work in the car segment,” asserted Greg Smith, Ford Motor Co.’s President of the Americas . Strong sales of the Five Hundred sedan and Freestyle crossover have buoyed the automaker’s optimism, as have the soaring residual values of those new cars. While a discussion of  residuals might make some folks cross their eyes, the term is significant because it refers to what a vehicle is worth when it’s turned or traded back in. And on a product in this price range, that translates into significant money. The old Taurus sedan was running in the low-30 percent range, meaning it was worth little more than 30 percent of sticker price after three years. According to ALG, the bible of used car values, a Freestyle with all-wheel-drive is expected to be worth around 50 percent, and a comparable Five Hundred around 47 percent after 36 months. For a consumer, that means about $100 difference in the monthly payment when leasing the newer car – or about $3,500 at trade-in. The new Fords seem to be holding their value well above some other recent Big Three offerings. ALG puts the estimated residual value for both the new Pontiac G6 and Buick LaCrosse at just 36 percent after three years. Such gaps, industry officials note, can force a manufacturer to back even a brand-new vehicle up with hefty incentives.

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