Detroit Takes a European Detour
After three decades of looking to Asia for automotive ideas and integrity, the American market is pirouetting toward Europe for inspiration.
The about-face is driven by Europe's almost fanatical emphasis on smaller vehicles powered by smaller engines that emit little yet make big power. The cars often manage also to combine refinement and driving fun.
Automakers believe such a vehicle formula now will appeal to a profit-generating number of U.S. car buyers. Examples of such coming models will be seen throughout Detroit's Cobo Center today as the North American International Auto Show opens with two days of media previews.
"Europe is five years - I don't want to say ahead of us, but every car you see" at big European auto shows trumpets low greenhouse-gas emissions, often more boldly than horsepower or price, says John Krafcik, CEO of Hyundai Motor America.
Hyundai, headquartered in South Korea, tapped its German studio to design the revamped 2010 Tucson small SUV that went on sale in the U.S. last month. Hyundai plans to move into Euro-size small engines - the Tucson now offers only a four-cylinder - as fast as possible.
But perhaps no company is so committed to a salute to Europe as Ford Motor. For decades at its European headquarters on Henry Ford Street in Cologne, Ford has designed and developed models that have been rated highly by critics, valued by buyers, embraced by driving enthusiasts - and not sold in the U.S.
Ford hopes now to import some of that panache. At December's Los Angeles auto show it displayed the 2011 Fiesta, a subcompact sold in Europe and bound for the U.S. In Detroit today, it will unveil the 2012 Focus, due in a year in the U.S. It replaces the current U.S. model with the true "European Focus" driving enthusiasts have craved for years.
All the focus will be on Focus
That Focus - in the high-volume compact segment - will be the most important car Ford will field in the U.S. for years.
If it flops, it'll wreck Ford's plans to fill a converted truck factory in Wayne, Mich., with hot Euro-derived models it can build inexpensively and sell without discounts. Failure would undercut the maker's "One Ford" plan to integrate product planning and development globally and sell resulting vehicles with only inexpensive, minor changes for different markets. That would cut duplication and spread development costs over a much larger volume of vehicles. A flop also would give the healthiest U.S. automaker a big black eye, suggesting it doesn't know its home market as well as it thinks.
But if Focus succeeds, Ford could reap wild profits from a car expected to start at about $17,000 - vaporizing a long-held, generally true Detroit belief that in the U.S., "Small cars equal small profits."
Foreign companies have mostly skirted that by developing small cars to sell in near identical form globally - what Detroit makers now hope to do.
Focus variations, such as the Grand C-Max seven-passenger van due in 2011, would become part of a family of 10 Focus-based vehicles that Ford believes will generate 2 million sales annually worldwide - "the largest-volume platform in the industry," says Derrick Kuzak, Ford's vice president for global product development.
Says Kuzak, "By using the global system and not having two engineers (in two countries) working on two different exhaust systems for the same engine, for instance, you reduce engineering costs on a typical program 60 percent and total investment 40 percent."
You also cut eight to 14 months off the typical three years to develop a car or truck, allowing faster response to changes in consumer tastes.
Done right, such aggressive product development can drive rivals nuts - or into bankruptcy.
In the 1950s and '60s, the biggest U.S. automakers changed styling and interiors every year, a costly exercise the smaller Packards, Hudsons, Kaisers and Nashes of the world couldn't afford to match, forcing them out of business.
Ford professes no such intent, of course, but it's an industry truism that the freshest models usually sell best and command the highest prices.
Selling small cars to big-car lovers
Despite potential advantages, Euro-centric moves such as Ford's risk overly depending on small vehicles favored there but perhaps not here. Americans bought more new SUVs than any other vehicles last year, according to Autodata.
"Ford might be over-leveraging Europe," says Jim Hall, head of 2953 Analytics and a veteran of the auto industry. "They're expecting the new mileage standards (35.5 miles per gallon in 2016) will force smaller cars" onto U.S. buyers.
"That might be a good bet in the short run, but the mileage standards also will push evolution of midsize cars. You will get (midsize) cars that have real-world mileage within a couple miles per gallon (of smaller cars) and have a lot more space," Hall says.
"What do Americans buy? Space."
In fact, basing a U.S. model too tightly on a European-market vehicle has failed in the past.
General Motors tried developing minivans to sell both in Europe and the U.S., using a German chassis suitable there, but narrow by U.S. standards. The resulting vans were about 4 inches narrower than U.S.-market vans from domestic and Asian rivals.
The GM vans had less room inside, looked slightly ill-proportioned to American eyes and sold poorly. GM no longer sells minivans in the U.S.
Kuzak says Ford's European small cars tend to have relatively large interiors and adds that nothing prevents applying the same global development cost-cutting to larger cars.
Government mileage regulations in the U.S. and taxes in Europe on vehicles that use more fuel are forcing "manufacturers on both sides of the Atlantic to pursue the same technological solutions: improved powertrains, less weight - not necessarily smaller, but lower mass - and better aerodynamics," says Jon Lauckner, GM's vice president in charge of global product planning.
But he doesn't foresee a U.S. market awash in Euro-minicars, because that's not what American buyers want, he says. European cars will move toward "1-liter, three-cylinder engines with turbochargers and relatively high (power) output, substituting for, say, 1.6-liter engines. In the U.S. you'll see four-cylinder engines substituting for six-cylinder engines," mainly in midsize cars, says Lauckner, who worked for GM in Germany from 2000 to 2005.
"Everybody's going toward more output per liter (of engine displacement) through technology and boosting (such as turbocharging). It's a trend in Europe and in North America, but it might apply to different engines" in the different markets, he says.
Reinforcing the trend, adds Lauckner, is that China, now the world's biggest new car market, has set vehicle rules similar to Europe's.
The word of the day: 'Europe'
Ford's Fiesta and Focus may be the buzz of the moment, but they are hardly Euro-unique.
Unveiling GM's coming 2011 Buick Regal at the L.A. show, Buick marketing director Craig Bierley referred to "Europe" four times in four sentences. He also mentioned Germany's no-speed-limit autobahns, GM's European Opel brand and the Opel Insignia sedan, on which Regal is based. "That's an impressive bloodline - one we can't wait for Americans to discover for themselves," he summarized.
Slightly more subtle, Chevrolet managers touted the 2011 Cruze small car, due in the third quarter, as a product of GME (General Motors Europe). It took little encouragement, however, for them to launch into how similar it is to the Opel Astra.
Chevy's Spark, being exhibited for reporters in Detroit, is a European minicar coming to the U.S. in 2012. The Orlando, due in the U.S. in 2011, is a European compact van based on Cruze/Astra.
As in Europe, Cruze is to offer only four-cylinder powerplants, and they'll be the smallest-displacement engines in GM's U.S. lineup: a 1.8-liter four standard, a 1.4-liter turbocharged four optional. The Euro-derived Regal also will offer only a four, even though it's a midsize car.
No surprise, perhaps: When GM recently shuffled executives, it tapped European veteran Karl-Friedrich Stracke as chief of global engineering.
Chrysler embraces small engines
Chrysler Group's future is obvious. The smallest Detroit automaker now is controlled by Italy's Fiat Group, the conglomerate that includes Fiat Auto. Fiat CEO Sergio Marchionne also is CEO of Chrysler.
For starters, Fiat plans to send to the U.S. a version of its Fiat 500 minicar later this year.
Chrysler's future engine mix will skew radically European, according to the Chrysler/Fiat five-year business plan rolled out Nov. 4. By 2014, 38 percent of Chrysler vehicles will have four-cylinder engines, vs. 19 percent today. Sixes will drop to 37 percent from 54 percent today. And expect more diesels, a staple in Europe, where gasoline is taxed to $7 or more a gallon. Diesel fuel is cheaper there, and diesel engines deliver higher mileage. Diesels are to grow to 14 percent of Chrysler's U.S. mix, up from 9 percent, all trucks, now.
Tiny engines hot, but some buck the trend
Krafcik, Hyundai's U.S. CEO, says he loves "the move to small-displacement engines" and is pointing his company that way. The German-designed Tucson with no more optional V-6 soon will be joined by the redesigned 2011 Sonata midsize sedan that also will offer only four-cylinder power.
Volkswagen says it is studying whether U.S. buyers would accept a tiny engine of about 1.4 liters instead of the 2.5-liter base engine it now sells in the U.S. - if it delivered nearly as much power.
Despite the presumed advantages, Euro minimalism still seems an odd intrusion into brawny American reality. Even amid the recession hangover and fuel-price uncertainty, Ford also is showing off in Detroit a new 5-liter V-8 for its Mustang. Chrysler still is trumpeting its 5.7-liter Hemi V-8, not just in Ram trucks but also in Dodge sedans.
GM's GMC truck brand has flooded televised football games with ads flogging the 6.2-liter, 403-hp V-8 offered in the Sierra pickup. And GM Vice Chairman Bob Lutz recently hosted a racetrack challenge pitting 556-hp Cadillac CTS-V sedans against BMWs, a Jaguar, an Audi and other performance cars.
Also, midsize cars, not small ones, remain the biggest slice of the U.S. car market. According to Autodata, midsizers claimed 48.1 percent of new car sales in 2009 vs. small cars' 34.9 percent.
"There's some risk. It's a gamble" to follow the Euro-market tastes too strictly in the U.S., says Jeff Schuster, head of forecasting at consultant J.D. Power and Associates. "If gas prices were to remain where they are, or decline, the push to small cars doesn't seem necessary from the consumer-pocketbook standpoint."
It will be especially risky, Schuster says, if automakers, as expected, try to emulate the European model of option-loaded, premium-priced small cars: "Will buyers buy more of a small car - a more-heavily contented small car with a bigger price tag? That's yet to be seen."