Strolling through the Detroit auto show feels a bit like wandering through a half-empty, carpeted parking garage. Gone are the audacious auto-show concept cars that look like they were made by NASA. The Cobo Center, on the bank of the Detroit River, is instead dotted with conventional-looking cars and trucks—most with hybrid badges slapped on the back. Aside from the occasional splash of thumping music, there’s little trace of the glitz and glamour that were once the hallmarks of this show. This year in Detroit, sex appeal is out, replaced with what seem like cries for help. At General Motors, that meant no pretty models in low-cut dresses, but rather some raucous auto workers and dealers waving signs that read “Here to Stay” and “We’re Electric” as they showed off the latest product line.
It was, if nothing else, a fittingly austere presentation for an industry that’s fallen on the hardest of times. In the U.S., already abysmal sales fell off a cliff last month, dropping 35 per cent. In Canada, where the industry was surprisingly resilient for much of 2008, things have started to crumble too, with sales falling over 20 per cent. Auto analysts say there’s little worth celebrating. “If there’s any optimism it’s just that the market hasn’t gone into total collapse,” says Dennis Virag, president of the Automotive Consulting Group, Inc. in Ann Arbor, Mich. He, like many others taking in the show, predicts things won’t start to turn around until mid-2010.
Even auto executives couldn’t bring themselves to put a rosy spin on the situation. “I think it would be very imprudent to assume that the global car industry, and GM as a part of it, is going to be out of trouble in the very near future,” Robert Lutz, GM’s outspoken vice-chairman of product development, told a small group of Canadian journalists at the show. “This is going to go on until we have some form of economic recovery.”
One might think this would be a time when carmakers might at least try to step up and send a boldly optimistic message. Arguably, there has never been a more critical time for carmakers like GM, Chrysler and Ford to prove that the birthplace of the automobile can still shoot for the moon. That’s the point of a car show, after all: to inspire buyers with the best, even most outlandish vehicles engineers can dream up. But this is an industry that spent most of the fall begging for a taxpayer-funded lifeline, and calculating the odds of bankruptcy. It has been forced to hangar its private jets and grovel in front of politicians. Much as it might want to dream big, there is an equally pressing imperative to show the public that the days of extravagance (not to mention gas-guzzling vehicles) are gone, at least for now. And so, at a time when what the auto world could really use is a good party, it got more of a funeral—and it was as bleak as the winter storm that swept through the city on the eve of the show’s opening.
As if that atmosphere weren’t daunting enough, car companies are under immense pressure to show that they’re going lean and green. Enter yet another Catch-22. That means offering already reluctant consumers cars they don’t seem to want: hybrids (which are thousands of dollars more expensive than traditional cars) and even electric-powered vehicles (a still-unproven technology that relies on lengthy recharge times).
Today, hybrid sales are a tiny fraction of the market—just two per cent. The most successful hybrid model, the Toyota Prius, has sold just over one million units since it was introduced in 1997. Over that time, Toyota has sold almost 100 million cars in total. The popularity of hybrids seems unlikely to take off unless gas prices start to soar again. “Ninety-eight per cent of Canadian consumers and American consumers are saying no thanks to hybrids. Will that segment grow? I think it will,” says Reid Bigland, president of Chrysler Canada, on the show floor. But any dramatic shift could be a few years away, he adds. That makes planning a product lineup for the future incredibly difficult. “The only thing we know for sure is that the government is going to mandate ever more fuel-efficient vehicles,” says Lutz. “But we’re not sure we can make the public buy them.”
And yet, at press event after press event, the U.S. carmakers put the spotlight on their greenest, most fuel-efficient cars: from the Chevy Volt and the new luxury electric concept, the Cadillac Converj over at GM, to Chrysler’s sporty Circuit electric car and Ford’s new, more fuel-efficient engine, the Ecoboost. Car companies are looking toward “a green, global, high-tech future,” as Ford’s executive chairman, William Ford, put it. Executives are convinced this will be a sizable market at some point in the future. But will it be the near-term saviour they need? Unlikely. With gas prices back well below $1 per litre, one of the biggest sellers at GM is the mammoth Tahoe SUV, says Lutz.
This conundrum was writ large in the basement of the convention centre, where organizers had set up a mini test track, lined with transplanted pine trees and rows of tulips. Designed to show off the latest electric vehicles, it was really just a showcase for hybrid SUVs and pickups. Monsters like the four-door GMC Sierra pickup and the Cadillac Escalade were lined up in front of the track with scarcely a car in sight. They made for a curious combination of what Detroit would like to be selling (SUVs) and what politicians and activists are telling them to sell (hybrids).
Some car companies are better poised than others to meet the challenge ahead. The biggest foreign presence at the show was Toyota, with its bright, open display, centred around its new Prius: the king of the hybrids. And there is some glimmer of optimism here, too. While GM left their Canadian executives at home, Toyota was on the PR offensive, hosting Canadian media at an upscale steak house in the Caesars Hotel in Windsor, Ont., across the river from Detroit, where it talked up the new Prius and its “1,000 patents under the hood.” Never mind that Prius sales fell an alarming 45 per cent in December. It was a rare case of an automaker subtly injecting a little sunlight through the gloom. “What makes a difference is that wow factor, something that grabs my imagination and says, I’ve never seen that before and I want it,” says Toyota Canada managing director Stephen Beatty.
Others, like Nissan and Mitsubishi, skipped Detroit altogether, leaving vast stretches of empty carpeting inside the Cobo Center. Honda, meanwhile, didn’t hold any press events and didn’t unveil any surprises. Also absent: Suzuki, Ferrari, Rolls-Royce, Land Rover and Porsche. It speaks to just how grim the situation has become, say analysts. “It’s not just a Detroit phenomenon but an entire industry phenomenon,” says Stephen Popiel, vice-president of Synovate Motoresearch in Toronto. “Everyone is retrenching and saving as much money as they can.”
Putting on a brave face, carmakers prefer to chalk up this year’s show as a sign of the times. Last year, Chrysler raised the bar on gimmicks when it drove 120 head of cattle down the street in front of the Cobo Center to promote a new pickup truck. It was also well-known for the bar and restaurant it set up for journalists in an old fire hall across from the show. That ended this year. “We’re being a lot more responsible this year and recognizing the current economic times in not only Canada but in particular in the U.S.,” says Chrysler’s Bigland. “We’re keeping the focus on the vehicles and the technology we have in our vehicles.”
But analysts say all this austerity is in fact much more calculated. It is really about reassuring politicians and the investment community that the industry is serious about mending its ways, says James Rubenstein, an auto analyst and professor at Miami University in Ohio. These are the people companies like GM and Chrysler will have to lean on if they hope to survive the downturn, not consumers who aren’t going to be buying cars in big numbers. “The perception has to be, we’re dead serious. We’re not going away but we’ve gotten the message that we have to change radically,” says Rubenstein.
So this year’s show may put Detroit in the good graces of U.S. and Canadian lawmakers. But ultimately, it has stuck the automakers between a rock and a hard place. With no uplifting message about their long-term viability, consumers can hardly feel inspired to go out and buy their cars, even if they do have a few potential winners on its hands. (The new Ford Taurus and the Cadillac SRX crossover stood out as a couple of American-sized cars that don’t scrimp on power.) And with auto workers staging a small protest outside the Cobo Center on the show’s opening day, it’s clear that the industry’s focus now isn’t really on the cars. Detroit can’t please everybody, and right now, it’s pleasing no one.