August 8, 2006
Soaring fuel prices caused by Hurricane Katrina and turmoil in the Middle East have turned U.S. tastes toward passenger cars. Rather than trying to catch up with the competition, the Big Three are using global partners to speed their response to international automakers' passenger car success.
Over the last decade the U.S. market has become a global anomaly.
Vehicle buyers in Europe and Asia have embraced fuel-efficient vehicles and shunned SUVs and pickups popular in the U.S. Even their minivans are smaller and more efficient. The hatchback (popular overseas) combines the fuel economy of a passenger car with the cargo space of an SUV. These vehicles are powered by small engines that sip gasoline.
American buyers have embraced larger vehicles for several reasons. Despite recent cost increases, gasoline is still cheaper here than in most of the world. Our parking spaces, lanes, and backsides are wider, which reinforces the desire for larger cars.
The U.S.'s divergent market dynamics from the rest of the world's have led to a kind of segment specialization. American automakers are very good at making SUVs and pickups. An excellent example is the failure of Nissan and Toyota, despite excellent engineering expertise and U.S. production, to make a significant dent in the Big Three's sales of pickups and large SUVs.
Over the last three decades, Asian automakers have had impressive success in whittling away Detroit's share of passenger cars and minivans (which are car-based). These automakers entered the U.S. market after becoming experts at making passenger cars in their extremely competitive home markets. Their expertise gave them a considerable advantage over the Big Three after the oil crisis of the 1970s, when U.S. consumers demanded smaller, more fuel-efficient cars.
Until late 2005, when soaring fuel prices caused by Hurricane Katrina and turmoil in the Middle East turned U.S. tastes toward passenger cars, the Big Three weren't as hurt by their international competitors' market success as they might have been. Pickup and SUV segments dominated by Detroit are the most profitable vehicles on the market. In some cases, the Big Three make about $15,000 on a high-end truck. In contrast, they are breaking even or sometimes losing money on each passenger car sold. Unfortunately, gas prices continue to rise, consumer preferences continually evolve, and the Big Three's willingness to ignore passenger cars has come back to haunt them.
Rather than trying to catch up with the competition, Detroit is using global partners to speed their response to international automakers' passenger car success. While this cooperation has created many vehicles that are truly world-class, it has also resulted in making the U.S. sedan an endangered species.
The Chrysler 300C®, Dodge Magnum®, and Dodge Charger® all share the same platform, and because of demand, DaimlerChrysler added a third shift at the assembly plant where the 300C is built. The 300C is a great example of the enduring success of the American sedan. Along with its popular HEMI® engine and rear-wheel-drive layout, the 300C is evidence that Detroit can design an original sedan that strikes a chord with buyers.
There's just one problem: This all-star is not quite as American as you may think. First off, it's built at DaimlerChrysler's Bramalea assembly facility in Ontario, Canada. Its famous HEMI engine is shipped from Mexico. The transmission is built in Kokomo, Ind., but is largely based on a Mercedes design from Germany. The same is true of the suspension and handling components, many of which are based on German designs. Approximately 20 percent of the car's design is German in origin. Add to that the Canadian assembly and Mexican engine and you have a real citizen of the world.
Other examples abound. Take, for instance, the Ford Fusion® I recently purchased. The vehicle is based on the CD1 platform, which was designed largely by Ford of Europe and by Mazda in Hiroshima, Japan. The Mazda6®, built in Flat Rock, Mich., shares the platform, as does the European Ford Mondeo®. The car and engine are built in Mexico, but the engine was engineered in the U.S. and is largely based on a Mazda design. The transmission is a Mazda design built in Japan and shipped to Mexico. Put this all together, ship it to a Polish guy living in Michigan, and you have another global jumble.
And the list goes on. The Dodge Caliber® that recently went into production at Chrysler's Belvidere, Ill., assembly plant is based on the Mitsubishi Lancer® platform. It uses an engine made at the Global Engine Manufacturing Alliance facility in Dundee, Mich., which is a joint venture among DaimlerChrysler, Mitsubishi, and Hyundai. The Chrysler Sebring® and Dodge Avenger®, which will go into production this year at the Sterling Heights, Mich., assembly plant, are based on a larger version of the same Mitsubishi platform.
GM plans to import Opel Astra®s, most likely made in Belgium, to sell as Saturns. It will also use its European divisions to assist with the design of front-wheel-drive cars, while its Australian Holden division will assist in the design of the upcoming Zeta rear-wheel-drive platform.
Ford is expected to turn to its Australian arm to design the next generation of the Crown Victoria®. Its Five Hundred® sedan and Freestyle® CUV are based on a Volvo platform. The examples are too numerous to list.
With all this global activity in the passenger car segment, there is precious little in trucks. Rumors are circulating that Ford or GM may import small pickups from Thailand. No pickup truck or SUV, however, has experienced the complex level of international cooperation that is taking place in the car segments. There is little the rest of the world can teach U.S. engineers about trucks. However, there is plenty Detroit can benefit from when it comes to cars.
The landscape is similar for automotive suppliers. Those whose programs are tied to pickups and SUVs can expect continued U.S. influence in design and engineering with fewer sourcing disruptions. Suppliers tied to passenger car programs can expect to deal with increasing complexity as designs from the U.S., Asia, and Europe blend to create one vehicle. They also can expect to deal with the growing number of Asian and European suppliers that are setting up operations in the U.S.S
Bernard Swiecki is a project manager with the Center for Automotive Research, 1000 Victors Way, Suite 200, Ann Arbor, MI 48108, 734-662-1287, fax 734- 662-5736, firstname.lastname@example.org, www.cargroup.org.
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