It was the strangest Detroit Show for years, as the Big Three scaled back the celebrations and pulled on the hair shirts. But Mark ‘Coolbear’ Bursa isn’t convinced they’re offering the right answers to their problems.
Breaking news… The TV in the corner starts flashing, and CNN is cutting away from its wall-to-wall Barack Obama newsathon. Something Big Has Happened.
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I’m in the bar at Detroit Metro Airport, waiting for my flight home after an eventful – and cold – week at the Detroit Show. And the Breaking News is just what I need to see – a US Airways Airbus has crashed into the Hudson River in New York City…
The crash turns out to be a major feelgood story – the pilot’s exceptional skills ensure that everybody gets out alive. As the story unfolds, we see the passengers being led to safety. Most are calm; some smiling and even whooping. A CNN talking head psychologist burbles away: “They’ve been through major trauma… this will hit them later… right now, they’re in denial”.
The same could be said for the Big Three US automakers at the Detroit Show. They’ve slammed into the economic crisis as hard as the Airbus hit the flock of geese that took out its engines. But judging from their performance at the show, you’d think they’d just hit some mild turbulence.
We learned that Chrysler won’t be broken up, and its plants aren’t for sale. GM won’t be shedding any brands, and its workers are just great. Ford is doing just fine and dandy, thank you, with market share rising every month. And they’ve all got super electric car programmes in the works that will save the day. Confident, or, as the man says, in denial?
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By GlobalDataOK, so the elaborate Detroit Show stands were replaced with more minimal affairs. Corporate hospitality was off the menu, with parties cancelled and no sign of the traditional free lunch on the GM stand.
Of course, given the hoo-ha over their executive jets, the Big Three couldn’t be seen to be glad-handing the hacks, or hiring rock stars and supermodels to promote their product. And somewhere in Michigan, there’s a warehouse full of elaborately-printed press kits that were hastily replaced with more modest versions.
Then again, Detroit minus the razzmatazz actually made for a better show in some ways. Less ostentatious stands made it easier to see the cars and talk to the executives. Detroit effectively reset the counter to 1992 – immediately before Bob Lutz famously drove the new Jeep Grand Cherokee through a plate-glass window and into the Cobo Hall.
From that point, it was open season, with ever-more elaborate stunts as the Big Three sought to out-do each other. This is the road that led to 2008’s ill-advised ‘cattle drive’ on the streets outside the show.
Ah, the cattle drive. Jim Press’s ill-judged ‘cow czar’ quip didn’t go down well. In fact, Chrysler addressed so few of the media’s concerns at its Sunday press conference that it had to call another one a few days later, at which we were reassured that the company was not selling Jeep to Renault, or handing over some of its US plants to Magna, as Reuters had reported.
Hands up who believes this? Tom LaSorda and Jim Press may genuinely believe this to be true. But the decisions are not theirs – they will be made by Cerberus. And what was the source of the Reuters rumours? Not us, say Chrysler. Renault and Magna issued flat denials. The fingers point to un-named sources in Cerberus.
Renault clearly covets Jeep. It would fit the brand portfolio; it would give the Renault-Nissan alliance a boost in the US; you could even sell Jeeps through the Nissan dealer network. Equally you can understand why Carlos Ghosn is loath to show his hand when the possibility of Chapter 11 exists, which could offer a much more advantageous deal.
What would Chrysler be worth without Jeep? Could it survive? Would anybody want it? A GM-Chrysler merger has been mooted – but of the three Chrysler brands, surely Jeep is the one that would play a major role for its new owner, just as it did for Chrysler when it bought AMC 20-odd years ago. The non-Jeep bits of AMC struggled on for a few years under Chrysler, rebranded Eagle, until being quietly dropped.
Chrysler as a brand has some global recognition; Dodge is a pure American play, one of several brands that have no reach outside North America. Surely the US market shake-up has to signal the end of the line for most or all of these: Pontiac, Buick, Dodge, GMC, Mercury, Saturn.
Could any of them transition to a global brand, like Chevrolet? GM has got it right with Chevy – what would be the point of creating more global brands? Buick has only survived for this long because it plays well in China for historical reasons. In the US, your typical Buick owner is the American equivalent of a UK Rover owner. A dwindling breed. Driving in to the show last week, I followed a Buick. The driver was wearing a trilby.
Buick’s range has been hacked back to a handful of models, including the relatively successful Enclave crossover. A new LaCrosse sedan was unveiled at Detroit. So there may be life in Buick yet. GM wants to make a workable franchise out of Buick, GMC and Pontiac – though Pontiac’s role may be limited to a single model.
GM is attached to the brand – provider in the past of muscle cars such as the GTO and Firebird – but creating a modern equivalent of one of these would cost money. There were no Pontiacs in GM’s press day car parade – if Pontiac has a future, it’s going to be a very quiet one.
The utilitarian GMC brand is the ‘sleeper’ here. It doesn’t do anything that Chevy doesn’t – most of its range of SUVs and pick-ups are just badge-engineered Chevys anyway. So GMC costs virtually nothing in R&D terms. And GM believes that the GMC buyer is brand loyal to the extent that if GMC ceased to exist, those buyers wouldn’t automatically switch allegiance to Chevy.
So GM has concluded that it needs a second network in parallel to Chevy, based round GMC and containing a rag-bag of Buicks and Pontiacs. Might this work better as a Chrysler-GMC network?
Of course, GM has a third volume network: Saturn. This has turned out to be the most vulnerable of all the GM brands – before Detroit, it looked odds-on for closure. But the position seems to have changed. Rick Wagoner has met with Saturn dealers; suddenly the future looks rosier.
There are several reasons for this. Firstly, GM hasn’t forgotten the US$1bn it cost to shut Oldsmobile. And right now, GM simply doesn’t have a spare billion bucks to splash. Secondly, Saturn has an exceptional dealer network. The brand was only created in 1990 as an experiment in retailing. It was established along ‘true’ franchise principles – no dealer name; uniform buildings; no-haggle pricing. The problem initially was lousy product – only recently has that been addressed, with the arrival of Opel or Daewoo-sourced designs.
Saturn also has a very loyal customer base, and is moving toward a voguishly ‘green’ market position. Unlike, say, Buick, Saturn looks like a 21st century brand – axing it would be an unkind cut.
There’s another reason GM might be loath to cull Saturn. What if that excellent network – with or without the brand – fell into someone else’s hands? For instance, an ambitious Chinese automaker? Someone like BYD or Brilliance could at a stroke acquire a fully-fledged distribution network. This fear could well account for GM’s anxieties over shutting Saturn (which did feature in the press day parade, incidentally).
The upshot is that the only brands that look likely to leave GM’s portfolio are Hummer (what were they thinking when they bought it in the first place?) and the hapless Saab, 20 years a GM brand this year and with no more of a product range now than in 1989.
Saab is a wasted opportunity. Its buyers are closest to Audi’s – understated, stylish professionals. Yet while VW has pumped billions into Audi, plugging every niche known to mankind, Saab has been left to bumble along. By 2010, Audi will have 42 separate models. Saab has two, and one of them is well over a decade old.
GM clearly isn’t going to give Saab the TLC it needs – the question is, who will? Its likely fate is either closure or nationalisation by the Swedish government. It could end up owned by an emerging markets automaker – like Jaguar, or Rover. The best case scenario would be someone like Fiat’s Sergio Marchionnne or Renault’s Carlos Ghosn seeing the Audi-esque potential of the brand. But that would be a long shot, and an expensive one.
And if either Sergio or Carlos fancies a bit of Swedish, there’s another, safer option in Volvo. Ford remains open to offers, and Renault has carried a torch for Volvo since its failed ‘90s takeover bid.
Ah, Ford. The Ford press conference was perhaps the most bizarre event of the Detroit Show. In sharp contrast to GM’s happy-clappy half-hour, or Chrysler’s gallows humour, Alan Mulally and Bill Ford simply grinned and stared down the crisis. Everything. Is. Fine.
Having extracted itself from the Government bailout (which presumably means Al can still use the Gulfstream to go home to Seattle at the weekend), Ford is looking reasonably confident. There’s been some luck involved – small cars like Fiesta and Ka coming on stream at a time of austerity has helped – and also some good decisions, such as reviving the Taurus nameplate. Back in ‘92, while Bob Lutz was defenestrating the Cobo Hall, Ford drove a fleet of Tauruses up and down Jefferson Avenue to celebrate the car toppling the Honda Accord as America’s best-selling car.
It was a short-lived victory, as Toyota soon overtook Taurus with Camry, which has remained top seller ever since. A disastrous second-generation Taurus led to the demise of the nameplate in favour of 500 but Taurus was revived (after dealer complaints) at mid-life update time, and the next generation unveiled in Detroit looks like it might give Camry, and GM’s excellent Chevy Malibu, a run for its money.
But even Ford is shy of cutting brands. Poor old Mercury was tucked into a tiny, overlooked stand. Its range of warmed-over Fords looks increasingly anachronistic; its target audience drives a BMW or a Lexus.
At least Ford says it’s not beholden to the US government for a bailout. For Chrysler and GM, it’s a case of submitting a plan of action by February 17, and waiting for another cheque on 31 March.
Time to snap out of denial and face reality.
Mark Bursa
