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News and Reviews

Big Three automakers shift into high gear

Detroit-based manufacturers aim to make comeback with new model passenger cars

By GREG KEENAN
AUTO INDUSTRY REPORTER
Monday, January 10, 2005 - Page A3

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DETROIT -- If 2004 was the year of the car for North American automakers, this year will be déjà vu all over again, judging by the displays of shiny new metal that began yesterday at the North American International Auto Show.

New passenger cars dominated the annual automotive shindig for DaimlerChrysler, Ford and General Motors a year ago as they vowed to win back some of the hundreds of thousands of North American drivers who deserted them for BMW, Honda, Nissan, Toyota and others.

The 2005 version of the show kicked off here yesterday amid the realization that despite all those new car contenders -- a Ford Mustang here, a Chevrolet Corvette there and a Chrysler 300 down the street -- the three Detroit-based companies still couldn't get out of reverse in the passenger car market.

So the second consecutive year of the car begins with a rebirth of the mighty 1960s muscular Dodge Charger from Chrysler, a new series of mid-sized cars from Ford, a new offering in the same segment from GM's Saturn division, plus Saturn's first sporty car.

GM took the wraps off a facelift of its Impala sedan last week at the Los Angeles Auto Show. The Charger and the Impala are important for Canada because both are made at assembly plants in the country's auto-assembly heartland in Southern Ontario.

With 2005 providing a full year of sales of the cars introduced last year, and the vehicles shown here arriving at dealerships in the next few months or, at worst, by next fall, this is a crucial year for Chrysler, Ford and GM.

"This year truly is going to be the year," when the Detroit-based three will be judged on whether they can make a comeback in passenger cars, said veteran industry analyst Joe Phillippi, who heads AutoTrends Consulting in Short Hills, N.J.

Mr. Phillippi has paced the show floor of Detroit's Cobo Hall convention centre along the banks of the Detroit River more times than he cares to remember and joined the 5,000 or so reporters who jammed vehicle introductions on the first of three media days yesterday.

The formula for success is simple on the surface, he said: "If the product is right, it'll work."

There's no doubt the three Detroit-based companies have much work to do.

In Canada last year, Honda sold more passenger cars than Chrysler and Ford combined. The Honda Civic sedan was the bestselling car in Canada. Sales of that one vehicle surpassed those of all the cars Chrysler offers and sales of all Ford cars.

The battle on the car side of the business is just one example of what David Cole, chairman of a leading automotive think tank, the Center for Automotive Research in Ann Arbor, Mich., labels "a perfect storm" that is buffeting all car companies.

"It's a very frenetic, wild, crazy time," Prof. Cole said.

First is hyper-competition, borne out by the fact that here in Detroit and at other shows later this year across North America, automakers from South Korea to Germany will introduce more than 50 new or completely redesigned models.

While they do that, they keep a watchful eye on China. Economic growth is creating a great market opportunity for car companies, but the boom in the world's most populous country has also sent prices soaring for the steel, aluminum, plastics and other commodities that go into a vehicle.

While those costs surge, automakers face consumers who want more out of their new car or truck-navigation systems, two or three rows of seats that fold into the floor, self-dimming mirrors, all-wheel drive, better fuel economy -- but refuse to pay more than they did for the vehicle they're trading in. Or they want an interest-free loan or thousands of dollars in rebates before they drive off a dealer's lot.

"Very few people are making money in this business," Prof. Cole said.

The one area where Chrysler, Ford and GM are making money is in the slice of the market they still dominate -- the truck side of the ledger, which includes sport-utility vehicles, minivans and pickups.

Those are the segments their offshore-based rivals are targeting.

This morning, Honda will unveil the production version of its first pickup-like vehicle, a sport-utility truck called the Ridgeline.

It's another important Canadian vehicle because it will be assembled at the automaker's plant in Alliston, Ont.

Toyota will unveil a new SUV for its luxury Lexus brand and Mercedes-Benz showed off a redesigned version of its M-class SUV.

That push by the likes of Honda, Nissan, Toyota and others into trucks worries Canadian Auto Workers union president Buzz Hargrove.

Mr. Hargrove has already noted how Chrysler, Ford and GM's share of the passenger car market in Canada declined last year to less than 40 per cent, the lowest level yet.

His fear is that the success the offshore companies have had on the car side will be repeated in trucks, which would be a severe blow to the more than 40,000 auto-assembly CAW members in the Ontario cities of Windsor, Oakville and Oshawa.

"That's a real long-term concern about the industry as we know it," he said.








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