AUTO INDUSTRY

Detroit motor show scales back as carmakers face crisis

With the car industry under enormous pressure, the Detroit auto show promises to be a subdued and tense affair as automakers launch new models that will compete for an ever-dwindling number of customers.

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AFP - With sales tanking and General Motors and Chrysler struggling for their very survival, the Detroit auto show promises to be a subdued and tense affair as automakers launch new models to compete for an ever-dwindling number of customers.

Some 58 new models -- including 44 worldwide debuts -- will be introduced in the coming days as the manufacturers vie for the attention of nearly 7,000 journalists from over 60 countries at press previews.

Daimler was the first to launch its latest high-ticket vehicle, the new Mercedes E-class luxury sedan, at an invitation-only cocktail reception Saturday night.

"Despite the enormous pressures that our entire industry is under these days, we are facing the year 2009 with measured confidence," said Daimler chief executive officer Dieter Zetsche.

"The best way to master a crisis is driving the change instead of being driven by it," Zetsche said, adding that "there will be a bright future for innovative car companies ... and I most certainly include Daimler among them."

Prominent among the new offerings are a host of ready-for-market hybrids and experimental electric vehicles which will be zipping around a tree-lined track set up in the basement of the Detroit convention center beginning Sunday.

The testing track surrounds two ponds with waterfalls and will showcase zero-emission electric prototypes by GM, Ford, Toyota, Honda, Mitsubishi and Tesla.

Ford will also be introducing two new hybrids which it says get better fuel economy than Toyota's popular Prius.

Refusing to be upstaged, Toyota will launch an improved version of its Prius and a new dedicated hybrid for its luxury Lexus brand and said Saturday that it will launch a two-seater electric car by 2012.

China's BYD Auto will be showing the first mass-produced plug-in hybrid which went on sale last month in China and is slated to hit Europe in 2010.

Honda will also enter the fray by unveiling its reintroduced dedicated hybrid, the Insight hatchback.

But in a sign of the troubled times, the Japanese automaker canceled a press conference for the Insight, which will make its worldwide debut without fanfare in the Honda booth when the show opens Sunday.

And a number of automakers decided to skip the show altogether this year, including Nissan, Suzuki, Porsche, Ferrari, and Land Rover.

"Beyond the products and the lights and the glitz, everyone is in a holding pattern," said Karl Brauer, editor-in-chief of the automotive website Edmunds.com.

"Uncertainty is the underlying tension."

A financial crisis, credit crunch and deepening recession pushed 2008 US sales down 18 percent in the steepest decline in 29 years and to the lowest level since 1992.

This year is expected to be even worse, with US auto sales forecast to fall by another one or two million vehicles to around 11 to 12 million vehicles.

Sales have not been below 12 million since the recession of 1982 when the United States had 74 million fewer people than today.

While nearly every automaker posted significant losses and has announced major production cuts last year, Detroit's Big Three were the hardest hit and saw their combined US market share fall below 50 percent for the first time.

Their US market share topped 60 percent as recently as 2004 and was 71.2 percent just 10 years ago, according to Ward's Auto.

Despite years of painful restructuring which had the trio on the road to recovery, the US government was forced to extend billions in loans to cash-strapped GM and Chrysler last month after sales dropped off precipitously in September.

Analysts warn that the loans could simply serve to postpone a collapse if automakers can't lure more buyers into their showrooms.

"What we're looking for is some kind of stabilization," said Rebecca Lindland of IHS Global Insight.

"It's not just about how many cars you can sell. It's about how many cars you can sell at a profit."

The real question, she said, is if GM, Ford and Chrysler are able to learn to operate profitably at a lower market share level and get "some positive results from the opportunity to reorganize."

"If they continue to get support from the federal government as we expect, we would also expect to see an improvement in their balance sheet," she told AFP.

The North American International Auto show opens in Detroit with a press preview Sunday, and some 700,000 people are expected to attend by the time it closes on January 25.
 

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