On the economic downturn, the future of Detroit, bailouts and why people won’t buy hybrids
Reid Bigland, Chrysler Canada’s President, spoke to Associate Editor Colin Campbell at the North American International Auto Show in Detroit.
Q: The auto show is much more subdued this year. Are you consciously trying to get a message out that you’re being responsible and offering new, greener cars?
A: Lean and green is probably the tag line for us this year. I don’t know if it’s a conscious effort or that we’re just being a lot more responsible this year and recognizing the current economic times. We’re keeping the focus on the vehicles and the technology in our vehicles. If you want to see great cars, Detroit is still the place to come. If you want glitz, you go to Las Vegas. You’re not going to see cars suspended from the ceiling or climbing the walls that you have in the past. Not this year.
Q: Ultimately, you need to figure out how to inspire people to buy cars.
A: We’ve got a good program on the street right now in Canada: no payments for 90 days, which is timely as people are struggling with their Christmas bills.
Q: How do you plan to use the funding you got from the federal and Ontario governments?
A: The funding will be used to just help us withstand what has been an unprecedented downturn in new vehicle sales, primarily in the United States. Eighty-five percent of what we build is exported to the U.S. and we’re feeling the pinch up here.
Q: Government money has traditionally come with strings, where you guarantee to keep a certain number of jobs or plants open. Is that part of it?
A: We’re going to work through that right now with the Canadian government. And we’re looking to discuss just how we can make this Canadian jurisdiction a competitive manufacturing and automotive jurisdiction. [We’re] looking at things like border infrastructure, regulations, taxes and making sure Canada can compete long-term on a global scale with respect to manufacturing. I think there’s a way for a manufacturing employee to make $40 or $50 an hour, fully burdened after CPP and UI, and compete with a jurisdiction that pays someone $40 a day. But we’ve got to work collaboratively and we’ve got to work smart.
Q: How do you get people to buy again?
A: 2008 was Chrysler Canada’s second best sales year in five years. So, consumers are buying our cars. One of the impediments right now is the availability of credit. The credit markets both from a leasing perspective, which has almost disappeared in Canada for many manufacturers including ourselves, is taking a lot of consumers out of the marketplace. And then the tightness of retail financing as well. We’ve got about 35 per cent of our customers struggling to get financing. Although the Canadian marketplace last month was down 21 percent, we feel the demand was much stronger than the industry reflected.
Q: Are you optimistic about the coming year, two years, however long it takes to recover? Obviously you know there are people who say the Detroit Three could become the Detroit Two, or One.
A: It’s going to be tough this next few months for sure. I’m realistic in that regard. But I am optimistic because we started our restructuring back in February ’07. We got a good jump on this downturn. We’ve reduced employment at Chrysler by 32,000 people. We’ve shut down two assembly plants in the United States. We’ve closed our Vancouver, Winnipeg and Moncton parts distribution centers. We’re shutting down our Chrysler financial operations in Calgary, Windsor and Montreal and consolidating in Toronto. We’ve positioned our fixed-cost base to a point where we’re able to withstand a relatively low U.S automobile industry. With the injection of cash from the U.S. government and Canadian government, I think we’re going to be okay. This slowdown is not going to last forever. Eventually it will turn around and when it does we’re going to be well positioned to capitalize.
Q: In five years, are people going to be driving minivans and trucks or are we seriously moving to a point where we’ll be driving electric cars?
A: We’re obviously putting a lot of chips into leap-frogging the pure hybrid technology and going more to pure electric technology. We think that has a lot of promise. In the Canadian market, I think it’ll be a few years before there’s a dramatic shift. In Canada, about 40 percent of the market is small and compact cars. The second largest segment is pickup trucks at about 16 percent. The third is the minivan. We think we’re well positioned to capitalize on what is 65 percent of the Canadian marketplace. Will that shift a little bit? I think there’ll be some movement, but it’s going to remain relatively stable. The biggest impact is going to be fuel prices.
Q: So people are not buying hybrids.
A: That’s one of the biggest misconceptions out there. People think the next breakthrough is hybrid. GM has more hybrids on the road than any manufacturer out there. The name of the game is to build cars that consumers want to buy. Consumers right now do not want to buy hybrid vehicles. With fuel prices going from $147 a barrel down to $40, hybrid sales are eroding.
Q: So why do we all come to an auto show to look at hybrid cars?
A: Who knows what the future holds. Environmental awareness is top of mind for people. Although, I would argue that as the economy has come down people are becoming a little less concerned. The classic case, and what all automakers need to figure out, is that what a consumer wants and what a consumer is prepared to pay for are often two different things. What a consumer wants could fill Cobo Hall (the site of the Detroit auto show). What a consumer is prepared to pay for we could put on a sticky note. It’s finding that balance.
Q: What’s your favourite car here?
A: The new Dodge Circuit is one of the favourites. That car: zero to 60 in five seconds, 100 per cent electric. So the operating costs are low, but unlike some electric vehicles, there’s absolutely no compromise on performance.