Monday, 22 January 2007

Declining gasoline prices will not lead to gas-guzzler revival, says BusinessWeek

The struggle of today’s American auto manufacturers has been attributed, by many, to the high price of gasoline. Since domestics have relied on gas-guzzling trucks and SUVs, so the conventional wisdom says, the steep increase in petroleum prices has put these automakers at a significant disadvantage. Conversely, an easing of fuel bills, as experienced recently, should cause truck and SUV sales to revive and thus reverse the fortunes of Detroit’s Big Three.

But according to a recent BusinessWeek article, consumers are not yet ready to jump back on the large vehicle wagon, even if oil is cheap. Falling substantially from its $78.40 per barrel peak in July of 2006, crude oil dipped below $50.00/barrel last week for the first time in 20 months. Analysts have speculated prices will remain low, especially considering the warm winter weather that characterized the beginning of the northeastern United States’ cold season.

What has shifted drastically is the content of auto manufacturer lineups. New products – particularly car-based “crossover utility vehicles” and economy-oriented compacts – are now accounting for sales once claimed by large and midsize vehicles. Market share of compact cars was 31.2 percent last year, up from 27.9 percent in 2005. Midsize vehicles gave up 2.4 percentage points from 2005 to 2006 (now accounting for 40.4 percent), while large vehicles fell to 28.5 percent of market share (from 29.3 percent in 2005). The compact crossover segment was the fast selling part of the market, according to dealer turn rates in 2006.

Also new is a consumer awareness that recognizes the volatility of gas costs. According to Bob Schnorbus, chief economist for J.D. Power and Associates, “consumers have fundamentally changed their perception of the importance of fuel prices in their purchasing decisions and will continue to shy away from larger vehicles.” Tom Libby, senior director of industry analysis for J.D. Power, emphasizes, “regardless of gas prices, we’re not going to see Explorer sales go back up to 400,000 annually. Never.” Libby also says that for a major shift in buying patterns to occur, a serious fuel price readjustment must remain constant for at least 12 months.

Analysis: Car companies need people to buy vehicles into which major research and development dollars have been invested. Were consumers to give up their fuel-efficient criteria in the next few years, many manufacturers would suffer damaging consequence. General Motors’s CEO Rick Wagoner recently advocated the embracement of alternative fuels regardless of petroleum prices, indicating that in addition to Wagoner caring about the earth’s energy supply, the success of GM may heavily rely on car buyers feeling similarly.

Source: BusinessWeek
Image: Ford media [2007 Ford Excursion]

Posted by industry at 1:27 PM in Editorial
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Friday, 5 January 2007

Ford Motor Company considers Taurus “revival,” recognizes historical value of nameplate

This past fall 2006 The View from Inside reported that the Ford Taurus passenger sedan and station wagon were headed out of production for good. Once America’s best selling passenger car, the Taurus filled garage ports to the tune of 410,000 units in 1992. Five consecutive years as the best seller ended in 1996, as the Toyota Camry overtook the Taurus in 1997. Many blame an unfavorable redesign in 1996 on the Taurus’s decline, and after that Ford stopped investing in the model as sport utility vehicles quickly gained popularity and showed profitability.

But having debuted late in 1985 as an ‘86 model, Taurus achieved a 21-year tenure and is recognized by name – both positively and negatively – today by a large portion of the car buying population. In contrast, only about 30 percent of the mid-size car buyers know the name “Fusion,” a new-for-2006 mid-size sedan, according to Ford’s marketing general manager Barry Engle. The Fusion, along with the yet-to-be-embraced Ford Five Hundred full-size sedan, are both often cited as Taurus replacements.

David Kiley of BusinessWeek has speculated that the Taurus nameplate could make a comeback. Although characterized by Kiley as a “rental donkey” for the last part of its life, Taurus nonetheless has over two decades under its belt. Customers also recognize the dominance Taurus once achieved. Kiley quotes Engle, in reference to the Fusion or Five Hundred being renamed Taurus, as saying, “stranger things have happened.”

Analysis: Ford’s current vehicle naming parameters do not really “allow” the Taurus moniker, unless the manufacturer distinguishes Taurus a classic nameplate incapable of being altered. Save the fleet-popular Crown Victoria sedan and iconic Mustang coupe/convertible, all Ford cars utilize “F” model designations, including the Focus, Fusion, Freestyle, Freestar and Five Hundred. SUVs embrace “E,” from Edge to Explorer to Escape. And of course, the F-series pickup line remains a staple model range. Apparently, even ailing American automakers can appreciate alliteration.

Sources: BusinessWeek and Bloomberg
Image: Ford media

Posted by industry at 3:01 PM in Editorial
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Friday, 29 December 2006

Online Chevrolet Camaro curiosity ripens, but where is the car?

Successful product launches in the automotive industry are all about timing. Release a vehicle when the public is already enthusiastic for that particular model and/or segment, and watch the showroom sales accumulate. Miss the frenzied period, however, and witness dealer inventories pile up. Foresight is critical, as demand changes quickly and consumers are willing to relax brand allegiances to satisfy their current vehicular tastes.

Were it released today, the all-new Chevrolet Camaro would likely create a lot of buzz. As proof, Yahoo.com’s “buzz log” blog has compiled lists of top Yahoo search phrases including the years “2007” and “2008” as criteria. For the coming year, “2007 Camaro” ranks number 10 among top inquiries, while for 2008 the number one distinction goes to “2008 Camaro.” Most of the 2008 top searches involve cars, while the 2007 queries range from sporting events to holidays to video games.

But in a press release from August of 2006, General Motors indicates that the new Chevy Camaro will not come to market until the first quarter of 2009. When the original concept debuted at the 2006 North American International Auto Show in Detroit this past January, many journalists and enthusiasts rejoiced. The long celebrated Camaro, having been on hiatus since 2002, was back in super attractive retro form. The consensus was that if GM could build the production car to look just like the concept, the company would have a winner in its stable.

However, that show was a full year ago. Production of the new Camaro will not begin for two years, and we won’t see the vehicle on roadways for maybe 26 or 27 months. Will enthusiasm remain strong in the coming years? Or will industry trends shift drastically and marginalize the new Camaro before it even debuts? What factors dictated that the first quarter of 2009 was the appropriate release period? Ford showed its retro-1960s Mustang at the 2004 Detroit Auto Show and the classic car was released as a 2005 model.

To be fair, General Motors, or any domestic U.S. manufacturer for that matter, cannot afford to release a product prematurely and face glitches that should have been addressed before production. We’ve seen delays recently – think Ford Edge – intended to fine-tune vehicles critical to manufacturers’ success. But in the case of the Edge, Ford is trying to convince the public that the crossover SUV is America’s new mainstream vehicle. The Edge doesn’t just represent Ford, but instead defines the entire crossover segment.

Conversely, General Motors does not need to convince anyone that the pony-car Camaro’s place in the Chevrolet product portfolio is warranted. The nameplate has been around since 1967 and has always been embraced by enthusiasts. Reviving the Ford Mustang-fighter is a no-brainer. So is having the car in dealership lots when interest peaks.

Sources: GM media and Yahoo buzz log
Image: GM media

Posted by industry at 3:03 PM in Editorial
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Friday, 1 December 2006

Sedan segment stylish once again, but challenges automakers’ design strategies

In the last decade or so mainstream sedans have gone out of fashion. The formerly dominant four-door passenger cars have been displaced by trucks, sport utility vehicles and recently, crossover SUVs. As popularity has waned, so has manufacturer investment in the segment. The available offerings, especially from Japanese and American automakers, have generally been considered boring appliances.

As reported by The Detroit News, however, the sedan body style is poised for a resurgence. Led by the edgy Chrysler 300 released almost three years ago, sedans are once again being embraced by automotive enthusiasts and mainstream consumers as more sensible and visually appealing alternatives to larger vehicles. The trick for manufacturers then is to lure buyers into their showrooms as competition in the segment grows. Attractive styling is the first step.

Recent popular midsize sedans, including the Toyota Camry, Honda Accord, Nissan Altima and Chevrolet Malibu, have often been accused of being uninspiring machines. They go from point A to point B without hassle but fail to drop jaws while cruising the boulevards. Buyers embrace these vehicles as reasonable transportation solutions but usually do not aspire to own them. That said, the midsize passenger segment is ripe to be redefined by a stylish new breed of automobile.

Some progress has been made. Ford’s new Fusion sedan has been praised as finely executed. The all-new 2007 Nissan Altima is striking, mimicking the upscale Infiniti G35 sedan in many respects. Saturn’s new Aura sedan, while redefining the company, also competes well among the competition and will eventually arrive with a hybrid powertrain. Cadillac’s corporate design philosophy infuses the CTS, STS and DTS models with flair, but Caddy can hardly be considered a mainstream company.

Winning the sedan battle requires a multi-tiered attack, at least according to J Mays, Ford’s design chief. First, car enthusiasts demanding a classic American rear-wheel-drive layout must be addressed. Next, mainstream consumers seeking efficiency, pleasant styling and often front- or all-wheel-drive configurations should be targeted. Finally, consumers still attracted to crossovers and SUVs need to be wooed back to the passenger car segment. "We're recommitted to design leadership from the top down," said Mays. “This has been a place where the American automakers have an opportunity. Honda and Toyota designs are boring."

Analysis:
Yes, striking design is critical, but polarizing styling should be considered extensively before being implemented. The Chrysler 300 is a great example - some find the car breathtaking while others, well, experience it as vomit-inducing. Building the next best selling car requires sound design that does not offend potential buyers. It’s not that consumers are so vain they cannot stand an ugly car, it’s just there are so many options from which to choose. Why drive an unattractive car if you don’t have to? Granted, the 300 has sold well but is hardly the next "top-volume-selling" sedan.

The question of brand and specific model value also arises. For example, if Ford wants to sell a couple hundred thousand Fusions per year, how earth-shattering can the styling really be? A killer Fusion would be great, but would it devalue upscale Mercury Milans and Lincoln MKZs, cars that share its platform? Lincoln has already announced a more exclusive upcoming design language, so maintaining the value and appeal of that will be crucial to Ford Motor Company as a whole.

Finally, if everyone drives a “hot” car how does that change the standards for expressive styling? Democratizing design will certainly up the automotive ante in terms of looks, but could it also blunt consumers to vehicle beauty as every model looks chic? Most likely, we’ll see an acceleration of design progression as manufacturers scramble to lead the next trend. It will surely be an interesting ride.

Source: The Detroit News

Image (top): DaimlerChrysler media [2007 Chrysler 300 Great American Package]
Image (middle): Ford media [2007 Ford Fusion]

Posted by industry at 11:34 AM in Editorial
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Monday, 13 November 2006

Martin Mulloy, Ford Motor Company vice president of Labor Affairs, addresses Burlington, VT Rotary International club

As part of Ford’s “100 cities in 100 days Acceleration Tour,” Martin Mulloy, vice president of Labor Affairs for Ford Motor Company, addressed the Burlington, Vermont Rotary International Club on Monday, November 13, 2006. Mulloy acknowledged the struggle that Ford is currently withstanding, but highlighted several new products that he believes will lift the automaker back to profitability.

The current U.S. automotive marketplace is no longer dominated by the Big Three - General Motors, Ford and Chrysler - but instead is “up for grabs” by the Big Six, also including Honda, Nissan and Toyota, emphasized Mulloy. Today manufacturers are challenged by increasing gasoline prices and the rising cost of steel.

American car companies in particular must accommodate huge health care costs that, according to Mulloy, account for $1,400 for every new domestic vehicle. The source of this health care deficit is the large bank of retired employees; currently there is one active Ford employee for every 1.5 retired workers. Mulloy described the cost of health care as “a real threat to manufacturing,” and emphasized the need for better policy related to American production. Tomorrow, November 14, the CEOs from GM, Ford and Chrysler are scheduled to meet with President George W. Bush to discuss this issue and others.

Among the vehicles highlighted by Mulloy were the Ford Fusion sedan, Ford Edge and Lincoln MKX crossovers, Ford Shelby GT500 sports car, Ford Super Duty pickup, Ford Escape SUV and Ford F-150 light-duty pickup truck. Mulloy sees crossovers as vehicles of the future and drives a Lincoln MKX himself. He consistently referred to both the Edge and MKX as “killer products.”

Some of the presentation was directed to hybrid technology and alternative fuels, although actual alternative fuel driven vehicles were not emphasized. Mulloy sees E85 ethanol as a viable future resource, citing America’s corn-producing farmland as the grand supplier of the necessary raw materials. When asked about electricity to power vehicles, Mulloy responded, “if you make batteries sustainable, you have a shot.” He did recognize the need for alternatives, stating, “as long as petrol is expensive, there has to be an alternative.”

Analysis: Mulloy’s most striking statement regarded the Ford F-150, America’s best selling pickup truck for three decades. Described as “the flagship of our company,” Mulloy believes the truck will continue to be Ford’s flagship vehicle for at least another decade. While trucks are undoubtedly essential to many Americans for work and utility, their sales in the leisure marketplace are highly volatile in the face of rising energy costs. If Ford wants to be a leader in energy efficiency the company had better find a way to integrate alternative fuels into the “flagship” Ford F-150.

Several audience members asked more directed questions regarding fuel-efficient vehicles and alternative energy sources. One member stated in simple terms, "I want an 80 mpg vehicle; if you give me one I will buy it." Mulloy responded by offering a test drive in the Ford Escape Hybrid, a vehicle that achieves an EPA rated 36 city and 31 highway miles per gallon as a FWD SUV. Another inquired, "how does Ford teach the consumer to be less consumptive," and thus make more efficient choices? Mulloy answered by saying consumers make decisions with sales, and that those decisions ultimately influence the direction of car companies in terms of alternative fuel solutions.

Source and image: Bob George/Dealer.com

Posted by industry at 2:24 PM in Editorial
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