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Industry woes cast shadow on U.S. auto show

Industry woes cast shadow on U.S. auto show

Even after the high-stepping drum band, the deafening roar of '60s-era Camaros, the strobing spotlights and blaring mood music, Bob Lutz, General Motors' chiseled vice chairman, couldn't escape the gloom and doom.

On Monday, the auto giant's Chevrolet division wowed the North American International Auto Show here by introducing its hottest new "concept" car in years - a muscular, low-slung echo of the vintage Camaro.

But as a scrum of international journalists crushed in around Lutz to discuss the new car and the possibility of it coming to showroom, it took only minutes for someone to ask whether it was true General Motors is teetering on the edge of bankruptcy.

"I know it makes great headlines, but it's not going to happen," Lutz said.

Referring to his years at once-troubled Chrysler Corp., he added, "I've seen near-bankruptcies and this ain't one of them."

Detroit's auto show is supposed to be the industry's chance to pat itself on the back and crow about its new products. But after a year in which GM and Ford Motor Co. axed thousands of workers, lost large chunks of market share to foreign rivals and watched their credit ratings drop to junk status, the biggest marketing challenge in Detroit isn't just how to push cars, it's how to save corporate reputations.

"The good thing about 2005 is that it's over," said Mark LaNeve, GM's top marketing executive. "Obviously the negative reporting isn't good."

It's not that the Big Three have failed to come out with some strong new products and concepts this year. The Camaro, the Lincoln Mark S and the Chrysler Imperial all promise to be robust competitors if the companies eventually take them from the concept stage to production.

But amid the financial storm sweeping through parts of the industry, GM and Ford executives admit that the challenge in 2006 will be to refocus consumers on products, not balance sheets.

Executives at the show said the sharp drop in production at Ford and GM in 2005 has caused all manner of problems for the industry that aren't likely to go away soon. The slump has helped precipitate a raft of bankruptcies among auto parts companies like Delphi and Collins and Aikman. And that has created disruption even for healthy companies like Daimler Chrysler. Chrysler Group Chief Executive Tom LaSorda said the Collins and Aikman bankruptcy caused Chrysler's costs to rise US$100 million partly because of increased prices at the supplier.

"It hurts the industry big time," he said.

Meanwhile GM Chairman Rick Waggoner said price increases at Delphi caused by its bankruptcy cost GM US$2 billion in higher parts prices last year.

Honda Executive Vice President Dick Colliver complained that last year's discounting by GM and Ford made his own marketing costs go up substantially.

"It's important that they stabilize," he said. "They're a big presence in the industry."

LaNeve and others acknowledged that the wall of woe helps cut off GM and Ford from potential buyers. But they also contend that the industry may finally be facing up to ghosts that have been haunting it for a couple of decades.

"We can talk about things we couldn't talk about five years ago," said Volker Barth, president of Delphi's European operations. "This is the end game for what began 15 years ago that we were too shy to confront then."

Sitting in Cobo Arena watching Ford unveil several new models to a smoke and light show worthy of Britney Spears, LaNeve pointed out that for all the financial troubles in 2005 the year wasn't as bad as people think.

It is true that GM's "employee price" promotion over the summer sucked up sales that would otherwise have been made in October and November, making the numbers look bad in those months.

"But do you know how much we were down for the year?" he asked. "Four percent. Most people think 20, 30 or 40 percent."

He also noted that the Chevrolet division regained its title as the world's top-selling brand. And despite all the talk about GM's perilous reliance on sport-utility vehicles and trucks in an era of soaring fuel prices, the company racked up the best year in truck sales it has had since the late 1970s.

Besides working through the financial problems, the key to 2006, LaNeve said, will be to refocus consumers on GM's plan to cut retail prices to sustainably low levels instead of trying to drive sales through heavily advertised promotions. That will require focused marketing and strong consumer acceptance of the company's raft of new products.

Updated : 2021-06-18 10:23 GMT+08:00