Auto show lessons

According to an old industry adage, you can judge the financial health of automakers by the food they serve at their parties—the bigger the shrimp, the fatter the wallet.

By that measure, Toyota should have served lobster tails and champagne at its Camry® introduction, and GM should have served fish sticks and water. While the food was not quite that interesting, the North American International Auto Show, held in January, did serve up a feast of noteworthy automotive introductions.

China on the Move

Of all the introductions, the Chevrolet Camaro® received the most attention from media and attendees. Although it's eye-catching, the Camaro isn't likely to have as great an impact as some of the more nondescript vehicles introduced in Detroit.

Consider the Geely 7151 CK®. Apart from having the most awkward name in the industry, this car has a poor fit and finish, inadequate horsepower, and an outdated design. The 7151 CK never even made it onto the auto show floor. Instead, Geely had a little booth in the hallway outside the main doors—where the real action was taking place.

While Geely's premiere may not seem auspicious, a majority of the media made sure to stop by. Why? Geely is the first Chinese automaker with serious sales potential to show a car at the Detroit show. Geely plans to start selling vehicles in Puerto Rico in 2007 and in the U.S. in 2008. The vehicle that it will ultimately sell here will be at least one to two generations improved over the lowly 7151 CK introduced at the show. It also will have a more pronounceable name.

While U.S. consumers have gotten used to buying vehicles from Europe, Japan, and Korea, American automotive suppliers also have had to adjust to supplying these firms when they begin production on our shores. If Geely's ambitions are realized, U.S. suppliers will be working with Chinese automakers in the coming years.

2005 Sales Results Are In

The positive media buzz that surrounds introductions of new vehicles allows automakers to hide bad news. During the show final sales numbers were reported for the 2005 calendar year (the numbers provided here represent pure sales for each automaker, with join-venture and imported vehicles stripped out). GM fared the worst, as its sales fell 5.6 percent from 2004 levels. Ford's performance wasn't much better, with sales decreasing 4.9 percent from 2004. Chrysler's 300C® and Charger® have been selling very well, and the company posted a sales gain of 5.1 percent for the year.

As expected, the news was more optimistic for Asian automakers. Japanese automakers as a group reported a sales increase of 7.4 percent over 2004 levels. Hyundai and Kia, the sole entrants from Korea, reported a 7.2 percent sales increase. Hyundai's sales for the first time included an American-built vehicle. The Hyundai Sonata® began production in Alabama in June 2005. This year a redesigned Santa Fe® sport utility will begin production. Kia is expected to announce its own U.S. production facility later this year.

New-Model Introductions

Chrysler introduced a concept version of the Dodge Challenger® that is expected to reach the production stage in 2007. When the Challenger begins production, it will share its LX® platform with the 300C and Charger.

The success of the LX-platform vehicles has resulted in an interesting twist. Chrysler's Pacifica® CUV, which currently shares its platform with Dodge and Chrysler minivans, eventually will be made on the rear-wheel-drive LX platform. At that time Pacifica production will move to Chrysler's St. Louis assembly facility, which also makes minivans. Both redesigned platforms will be made in the same facility—a return on its flexibility-enhancing investments Chrysler recently announced for St. Louis and its other assembly plants.

Chrysler also introduced the Imperial®, a high-end luxury sedan concept. The automaker has an excellent reputation for making production vehicles out of its concepts. Should the Imperial see production, it would likely join the Pacifica in St. Louis on the LX platform, adding complexity to Chrysler's manufacturing mix.

Chrysler has been able to hang on to its sales success in this segment, while new entries from Japanese and Korean automakers have eaten away market share from Ford and GM. Ford ultimately may give up on this segment and service its customers with crossover vehicles such as the Edge®. It appears to have plans to put into production a vehicle based on the Fairlane® concept that would be produced on the Volvo-derived platform that currently is the foundation of the Five Hundred®, Mercury Montego®, and Freestyle®.

GM is taking a similar tack. Its current minivans are not competitive and require substantial incentives to sell. GM introduced the Buick Enclave®, a crossover vehicle based on its Lambda platform. The Enclave is just one of a series of crossovers on this platform that will be sold as GMC, Saturn, Pontiac, Chevrolet, and even Saab vehicles. Following a round of crossover introductions starting in late 2006 and through 2007, GM is expected to make minivans on the same platform.

While auto shows are stages for automakers to display their latest and greatest, they also serve as interesting harbingers of what's coming at suppliers over the next few years. Trends such as a greater number of variants of each product, as well as decreasing product life cycles and development times, promise to make things challenging for suppliers.

These lessons were all there in Detroit, beneath the surface of the glitzy introductions and special effects—if you could tear yourself away from the shrimp.