The future of the automobile will be shaped by the collision of grand strategies and the realities of the marketplace. At the recently concluded North American International Auto Show (NAIAS), held at Cobo Center in Detroit, the struggle between car makers to hold and increase market share was palpable and ferocious.
Like gladiators in a Roman coliseum, the manufacturers are squaring off, and not everyone is going to survive.
On the practical side, there is growing recognition that the era of huge margins from trucks and SUVs, which GM, Ford and Chrysler have depended upon for their profits, is coming to an end. Full-size trucks are now selling only through massive discounts and attractive financial inducements. At the end of the day, these are simply the reductions necessary to make a vehicle price competitive. But once consumers have come to expect these discounts, getting them to buy at sticker price will prove to be nearly impossible.
The Japanese manufacturers have decided they want a piece of this lucrative pie as well, forcing the American manufacturers to add content and keep prices low to combat this formidable threat.
Consider that the all-new 2004 Ford F-150 pickup, quite attractive overall, is said to cost Ford $1,000 more to build than the current model. But Ford does not plan to increase the F-150's MSRP due to competitive market pressures. Assuming they sell 900,000 2004 model F-150s, that $1,000 decrease per vehicle in gross profit margin translates into a $900 million net loss of revenue for Ford. And that's without even considering the impact on overall sales that new entries into the field, such as the Nissan Titan, are going to have.
Ford should focus attention on its full-size passenger cars. The once-proud Ford Taurus suffers from corporate neglect to the point where, in a recent test of nine four-door sedans priced under $25,000 that I participated in for the New York Times, the Taurus felt two or even three generations behind the offerings from Mazda, Toyota and Honda. Perhaps the profits Ford will forfeit on the truck side of the equation can be recovered by making passenger cars more attractive.
In addition to the new F-150, Ford showed the Mustang GT concept. Evolutionary rather than revolutionary, it incorporates many of the successful styling features of past models, most noticeably front end references to the second-generation Shelby Mustangs from 1967-70. The Mustang is now the sole survivor of the pony car segment that it started in 1965. Through its styling and a possible 400-horsepower supercharged engine, the Mustang GT could invigorate the performance side of Ford's lineup.
On the sports-luxury side of the equation, the Porsche Cayenne will be appearing in showrooms near you any day. Frankly, all the brouhaha about this SUV is tiresome and meaningless. Porsche is a fiercely independent company, and over the years has shown the will to do what is necessary to survive. The 914, 924 and 944 all made substantial, positive contributions to Porsche's bottom line, without doing any lasting damage to the brand.
The Cayenne will never be an aspirational car the way the 911 is, but then, what SUV or crossover car is? Let's hope it does well and its profits allow Porsche to continue building definitive sports cars.
The real issue for the Cayenne will be the crowded market segment it is entering. By all accounts, the VW Touareg, built on a shared platform with the Cayenne, is an extremely competent vehicle, and priced thousands of dollars less than the Porsche. And the Audi "Pikes Peak" show car, on display at NAIAS, is better looking than either the VW or the Porsche, and built on the same platform.
Should Audi decide it wants a piece of the luxury SUV market and build the Pikes Peak, VW and Porsche would seem to be veering dangerously close to the badge-engineering that GM is now struggling to overcome.
Cadillac was the long-ball hitter at the NAIAS, unveiling their 1,000-horsepower Sixteen show car. Imposing in a flamboyant Art Deco style, the car makes a "rule the world, take no prisoners" statement badly needed by the brand.
Recall that the 1957 Cadillac Eldorado Brougham was never built for profit, and yet remains an icon symbolic of Cadillac's dominance of the luxury car segment in that era. GM should build 300 Sixteens and sell them for $200,000 apiece, even if that means a loss per unit of $100,000.
That $30 million loss would translate into a positive halo effect for the entire Cadillac brand, allowing an XLR or CTS owner a bit of marque swagger when he saw a Sixteen parked in front of the Four Seasons. Further, with Maybach and Rolls prepared to duke it out at the $350,000 luxury car level, the Sixteen, if priced aggressively, would mark a return to the long-lost American luxury car tradition: bigger, bolder and more bang for the buck.
Four years ago, Cadillac had three wheels in the grave. In perhaps the most stunning turnaround in the industry, the brand has produced a remarkable array of edgy, performance-oriented cars that have changed the marketplace's perception and acceptance.
To GM, I say, put the Sixteen into production. Build it to an uncompromising, world-class standard. Plant your stake in the ground and challenge not only your own division, but all of GM to stand up to this level of achievement. Avoid distractions. Spend your money where it matters, on definitive product.
FAT AND FAST
Speaking of halo cars, Steve Bridge, who lives in the Black Hills of South Dakota, was inspired to paint the Dodge Viper GTS-R after watching it in the 1996 24 Hours of Daytona.
"It embodies everything that makes racing great for me," Bridge said, "a big fat car going faster than anybody." Bridge completes pencil drawings before starting to paint in what he calls a "wet on wet" watercolor style. "I paint loose and fast," he said. "I just took a 1-inch brush and went for it."
Bridge had just started painting when he created this Viper; "Rolex 24 Hour" was only the fourth painting he had done. Painted on illustration board, it measures 30 x 40 inches and is still in the collection of the artist. No prints are available, but he has 13 x 19-inch Giclée prints of some of his other works for $60.
When we called, the artist was making notches in the frame of his Triumph Spitfire GT6+ so it could accommodate a fuel-injected Rover V8 in preparation for competitive autocrossing.
Bridge may be contacted at 605/342-8507 (SD).