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Automobile Industry on the Road to Recovery?

January 12, 2010 at 12:00 AM EDT
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In Detroit, automakers hope to lure customers back into showrooms with new models and better financing options. Are consumers ready?

DIANE EASTABROOK: In Detroit, size suddenly matters. At the North American International Auto Show, GM rolled out the GMC Granite concept. The tiny sport utility is a dramatic departure from the brand’s typical mammoth trucks. If it ever comes to market, it will feature a four-cylinder displacement engine and will be more fuel-efficient than larger sports utilities and crossovers.

GM North America president Mark Reuss calls it the wave of the future.

MARK REUSS, president, GM North America: You don’t have to go to a car that you find inside of a cereal box size-wise here to get the fuel economy and fun to drive and the safety and all that stuff. We’re doing that.

DIANE EASTABROOK: Over at Toyota, there’s the FT-CH concept, a scale- down version of the Prius. Toyota isn’t sure yet if it will build the car, but, if it does, the company says it would be more fuel-efficient and less expensive than the Prius. Vice President Robert Carter thinks the tiny hybrid could capture less affluent buyers.

ROBERT CARTER, vice president, Toyota Motor Sales: There are consumers out there that are telling us that they would like a vehicle a little bit more compact, more in line with a Corolla-sized vehicle, versus Prius, which is similar to a Camry-sized vehicle.

DIANE EASTABROOK: This dramatic downsizing reflects an industry and an economy struggling to recover from one of the worst recessions in three decades. Two U.S. auto companies, GM and Chrysler, went bankrupt last year and needed a bailout from Washington. That brought government leaders like House Speaker Nancy Pelosi to the show floor to see what the industry is trying to do to turn itself around.

Even though the U.S. lost its title last year as the largest buyer of vehicles to China, it still remains an important market for manufactures. So, they’re racing to build more fuel-efficient products Americans will want and can afford.

Ford has perhaps the best advantage with Focus. It’s already been a hit with consumers and gets a face-lift next year. The new Focus will have a new two-liter engine that offers more horsepower than the current model and should have slightly better fuel economy. Manufacturers typically don’t estimate fuel economy on a vehicle until it’s ready to come to market.

Ford admits avoiding a government bailout has helped it attract customers away from GM and Chrysler. But president of the Americas, Mark Fields, thinks product has more to do with the company’s success.

MARK FIELDS, president of the Americas, Ford: At the end of the day, customers are going to buy our product not because we didn’t take government money. It’s because, when they look at our products, the value, the design, the safety, the fuel economy, all those kind of things, more and more customers are coming into our showroom and saying, I choose Ford.

DIANE EASTABROOK: This show is as much about what isn’t here as what is here. Gone are iconic GM brands like Pontiac, Saturn, Saab, and Hummer, all victims of the company’s recent bankruptcy.

General Motors is now focused on its remaining brands, Chevrolet, GMC, Buick, and Cadillac. Reuss thinks the company will lure consumers back to dealerships if it repays the government part of its money by midyear.

MARK REUSS: This is a second chance. I’m personally grateful for this. I know all the employees of GM are really grateful for the opportunity. We will not disappoint. I’m a taxpayer, too, by the way. So, I want to pay — pay back the taxpayer, too. And everybody in this company all the way through it wants to do that, too.

DIANE EASTABROOK: Chrysler, which also came out of bankruptcy last year, is at the show, but doesn’t have anything new to show. Fiat now has a majority stake in the company and plans to roll out new Chrysler products in a couple of years based on its platforms.

One other noticeable change this year, a lack of glitz. Except for Volkswagen’s rollout of a Compact Coupe featuring dancers, the show was short on flash and futuristic products.

That disappointed “Motor Trend”‘s Detroit editor, Todd Lassa.

TODD LASSA, Detroit editor, “Motor Trend”: The pie-in-the-sky stuff gave us kind of a good idea of where the auto companies were headed or what they were thinking about. And they would get a reaction from people who came here during the public days.

I think a lot of us will — will end up missing that. On the other hand, given what General Motors and Chrysler went through this year and given what the entire auto industry has been through in the last year, I should say, I think a little bit more of a down-to-earth attitude is what you would expect and what we’re getting this year.

DIANE EASTABROOK: Analysts think will be a recovery year for the auto industry. They estimate automakers could end up selling about 11.5 million vehicles in the U.S. this year. That’s about a million more than last year. By then, Lassa is optimistic those pie-in-the-sky concepts he likes will come back.