the future of cars

[Eubulides <paraconsistent@xxxxxxxxxxx>]

<http://www.washingtonpost.com/wp-dyn/content/article/2006/01/13/AR2006011301984.html>

Foreign Carmakers in the Passing Lane as GM, Ford Sputter

By Sholnn Freeman
Washington Post Staff Writer
Saturday, January 14, 2006; A01

DETROIT -- While the two largest U.S. automakers are in a painful
fight for their financial well-being, surging foreign rivals are
dealing with more refined issues.

This week at the North American International Auto Show, Japanese auto
giant Toyota Motor Corp. rolled out a Camry with seat fabric coated
with moisturizer gleaned from silkworms and an air-conditioning system
that removes odors and bacteria.

Toyota's luxury Lexus line showcases a new LS sedan that
parallel-parks almost entirely on its own. There are a back massager,
a leg rest and reclining seats in the back. The LS will be the first
car in the industry with a gas-electric-hybrid-powered V-8 engine, a
technological breakthrough designed to merge horsepower with fuel
efficiency. Both Toyota models are due this year.

Toyota and other foreign automakers are using the auto show -- the
biggest annual U.S. display of products, buzz and insight into the
mind of the globe's automakers -- to capitalize on Detroit's
weaknesses. As big U.S. automakers grapple with union contracts, the
bankruptcy of a major parts supplier and shareholder unrest, Toyota is
rolling out new models and new technology in a bid to knock General
Motors Corp. from its 75-year perch as the globe's No. 1 automaker --
perhaps as soon as this year.

The prospects of such a realignment have energized the auto world and
given new momentum to competitors from South Korea, Europe and even
China. It promises to feed another round of sticker wars, with
automakers offerings rebates and price cuts to win over fickle
customers.

All told, the world's automakers will introduce 27 redesigned and 23
new models in the coming year, according to J.D. Power and Associates.
"The world is converging," said Michael Robinet, vice president of
vehicle forecasting at CSM Worldwide, an auto industry research firm.
"Trade is becoming freer, no matter how many trade hawks are on the
horizon. We are down the road to freer trade, and it will not end. The
quicker countries and governments accept this, the better off they
will be."

The fierce competition comes as the top two U.S. automakers -- GM and
Ford Motor Corp. -- struggle to put 2005 in the rearview mirror.

Later this month, Ford will release its restructuring plan, expected
to contain tens of thousands of job cuts and other draconian
cost-slashing measures. GM lost nearly $4 billion in its North
American operations in the first nine months of 2005. The company is
laying off 30,000 workers, shutting down or scaling back at 12 plants
and scrambling to cut billions of dollars in overhead costs. But even
that isn't enough for some. Billionaire Kirk Kerkorian, who owns 7.8
percent of GM's shares, is demanding that the company move into
"crisis mode" and pare back operations even further, suggesting that
GM sell off its Hummer and Saab brands.

Under questioning by analysts in Detroit yesterday, GM chief executive
G. Richard Wagoner Jr. said the automaker could not forecast when its
North American operations will again be profitable.

Wagoner said GM is on track to cut $6 billion in costs by the end of
this year, but he added that the company's outlook remains clouded by
a number of uncertainties. At the top of the list is parts supplier
Delphi Corp., which is under bankruptcy protection and seeking relief
from GM, its former parent, as well as concessions in pay and benefits
from the United Auto Workers. "For 2006, our focus is very clear: The
absolute top priority for me and the entire GM team is to turn around
the North American business," Wagoner said.

GM and Ford are seeking help from Washington. Ford wants tax cuts and
subsidies for the industry so U.S. companies can catch up with
Toyota's lead in technology. GM says the industry needs relief from
health care expenses, pension bills and other "legacy" costs that are
a result of promises made to workers when GM had more than 50 percent
of U.S. market share. By 2005, that share had dropped to 26 percent.

DaimlerChrysler AG's U.S. division has been alone among the Detroit
automakers in holding its ground. Chrysler has already been through a
wrenching overhaul at the hands of its German parents. The automaker's
U.S. share grew slightly last year, and it had a lively show in
Detroit with a number of new vehicle showings, including a Chrysler
Imperial that looks like it borrowed more than a little from a
Rolls-Royce Phantom.

As if Detroit didn't have its hands full with operational problems and
rivals from Japan and Korea, analysts see a second wave of Asian
automakers storming the U.S. market in the future, perhaps including
an entrant from India or China. This year, Geely Automobile Co. became
the first Chinese automaker to exhibit at the Detroit auto show,
displaying a snappy little sedan. The automaker says it plans to enter
the U.S. market in two years, though it faces significant distribution
and regulatory hurdles.

Automakers from around the world are taking a page from Toyota's
playbook, fueling their charge into the U.S. market with vehicles
built at U.S. factories. In recent years, auto plants have been
popping up in Southern states, including a Hyundai Motor Co. plant in
Alabama and a Nissan Motor Co. plant in Mississippi. Toyota is
finishing a new factory in Texas that will pump out thousands of
pickup trucks this year. The world's automakers are increasingly
looking beyond Detroit as competition heats up. For instance, Robert
F. Cosmai, Hyundai's U.S. president, mentioned Lexus and BMW
sport-utility vehicles as chief competitors to the Hyundai Santa Fe,
failing to name a single American rival.

Then there is the latest vehicle from Hyundai.

"The scariest picture in town is the Hyundai Sonata," said Sean P.
McAlinden, chief economist at the Center for Automotive Research, a
nonprofit auto industry watcher. "It's the best value in the
automotive market. It has everything that a Honda Accord and a Toyota
Camry has, and it's built in Alabama."

McAlinden called the Sonata "an embarrassment to Detroit." "Why
haven't we done that in the last 30 years when they've done it in
four?" he asked.

McAlinden says he expects U.S. sales to grow to 20 million by the end
of the decade, up from 17 million last year. He expects market share
for Detroit automakers to slip to 50 percent, from 56 percent today.
"Maybe we ain't that big no more," he said. "It's hard for us to
swallow around here, even for me."

The American automakers play down such gloom and doom and say they are
not cowed by the competition. GM, Ford and Chrysler all rolled out
rosters of new models this year. And in some cases, they hope to find
a bit of their future in their past, when Detroit was king.

GM showed a futuristic version of the Chevrolet Camaro, its classic
pavement burner. Chrysler wheeled out a Dodge Challenger concept, its
design paying homage to the venerated early '7os model. Ford promised
more iterations of the made-over Mustang that went on sale last year
and proved popular. With the throwback designs, U.S. automakers say
they are trying to reignite passion and interest in the car brands
that they hope could translate to other cars in their lineups.

At the auto show, GM's Wagoner vowed that his company will continue to
parry with new vehicles. He said GM officials recognize that they
can't fix the business by solely by cutting costs and closing plants.

"We're going to keep bringing out new cars and trucks. We've got to do
that for success," Wagoner said. "We are in the very early stages of
the soccer game. A lot of time is left and we're going to be ready to
play."