Detroit Auto Show: Electric dreams

After a horrid year, Detroit sees hope in a small, green future

Electric dreams

There was a whiff of optimism, albeit of the cautious variety, mixed with the usual scents of rubber, new car and acres of indoor carpet at the Detroit auto show this year. After a brutal 12 months that saw sales plummet across North America and two of the former “Big Three” Detroit carmakers file for bankruptcy, auto executives were understandably eager to put the past behind them and get back to the business of selling cars, trucks and SUVs amid growing evidence of an economic turnaround.

While the show lacked the glitz and glamour of even just a few years ago—no trucks were dropped from the Cobo Center’s ceiling or cattle-herded through downtown Detroit—the cloud that had hung over last year’s displays lifted to reveal an industry that, if not completely transformed, believes that it’s finally found the right mix of smaller and greener cars to survive in the new and more cutthroat automotive landscape.

“You see all these positive signals on the horizon, plus the fact that our new vehicles are so well accepted, plus the fact that we’re seeing a mild economic recovery,” Bob Lutz, GM’s vice-chairman and product czar, told a group of reporters before the company unveiled its five-door Aveo RS concept, a European-style, sporty hatchback. It all translates into “a chance, a reasonable chance” that GM could return to profitability this year, according to Lutz. Which would be no small feat for a company that has lost some US$80 billion over the last four years, took on US$50 billion in taxpayer loans, slashed four of eight vehicle brands, including Saturn and Pontiac, and is now searching for what could be its third new CEO in less than 12 months.

Similarly, GM’s crosstown rival Ford, which unlike GM and Chrysler didn’t file for bankruptcy or take government bailout money, was also in a buoyant mood after taking home a pair of awards for best car and truck of 2009 (for its Fusion hybrid and its Transit Connect van), a period when it managed to increase market share at the expense of its competitors. “I think the turnaround is here, and it is taking hold,” says Ford of Canada president David Mondragon, who sat in a tiny makeshift office overlooking the company’s displays, including Ford’s new Focus compact car—a so-called “world car” that was unveiled earlier in the day amid thumping music and a dazzling light show. “We are starting to see the fruits of many years of labour.” Even Chrysler, which was narrowly rescued from the abyss by a shotgun marriage with Italy’s Fiat, is predicting that it can break even this year and return to profitability by 2011.

But while the industry may no longer be in the emergency ward, it’s far from being truly healed. Sales for this year are expected to be a shadow of what they were before the economy drove off a cliff at the end of 2008. In the key U.S. market, sales hit a low of 10.4 million in 2009—almost three million less than a year earlier. Some analysts are also talking about the possibility of an extended slump. And, as far as the beleaguered North American automakers are concerned, it’s not yet clear whether all the talk about the cars of tomorrow—many of them small and underpinned by yet-to-be-perfected technologies like plug-in electric hybrid motors—will be sufficient to lure people back into showrooms today.

As a result, the Detroit show, once a shrine to fuel-guzzling trucks, cavernous SUVs and throaty muscle cars, now looks more like a collision between a car dealership and a botanical garden. In the Cobo Center’s basement, there is a test track, first erected last year, where “green” vehicles zip quietly past waterfalls, tulip beds and various types of evergreen and leafy trees. Meanwhile, upstairs, a massive section of the convention hall’s main floor was dubbed “Electric Avenue” and devoted solely to electric vehicle concepts, with the “green” imagery once again in full bloom.

Individual automakers also had fuel efficiency front and centre in their blindingly lit displays. Toyota, in particular, appeared to be betting the future of the franchise on so-called alternative powertrains. Giant pictures of trees, birds and flowers flanked its car displays, and its big announcement was a new subcompact plug-in hybrid concept called the FT-CH. The car is aimed at younger buyers, and would sell for less than the company’s Prius hybrid, according to executives. (Plug-in hybrids refer to vehicles that, after being charged, can run for a certain distance on battery power alone before reverting to a regular gasoline engine. Regular hybrids, by contrast, use a mixture of the two while driving.)

Toyota also revealed that it intends to turn the Prius name into a family of hybrid vehicles, building on the car’s growing popularity as a green alternative. “In the next 10 to 20 years, we will see global demand for fuel exceed supply,” Yoichi Tomihara, the CEO of Toyota Canada, explained to a group of reporters at a dinner event on the eve of the auto show, adding that the Japanese automaker intends to offer a hybrid model in every segment in which it competes.

GREEN CAR: Hyundai’s Blue-Will

GREEN CAR: Hyundai’s Blue-Will

But not everyone is convinced that hybrids, let alone electric cars, will be a big winner for the industry, at least in the near term. They currently account for a meagre three per cent of U.S. auto sales, a reality made clear looking out the Cobo Center’s floor-to-ceiling windows at the exhaust-spewing cars plying Detroit’s snow-covered downtown. For a company like GM, which is currently owned by the government, it’s as much about politics as market demand, analysts say. “They’re trying to tell Washington that they’re addressing the issue and to stay away from regulating us,” says automotive analyst Dennis DesRosiers.

Indeed, a recent report by the Boston Consulting Group concluded that, barring major advances in battery technology, carmakers will not be able to reach the cost targets necessary to make electric and hybrid vehicles a truly mass-market product. Hybrids on the road today carry a hefty price tag. Toyota’s Camry Hybrid, for instance, sells for $30,900 compared to $24,900 for the regular gasoline version. Even GM’s Lutz, who was closely involved with the development of the Chevrolet Volt plug-in car, says it will be at least a decade before hybrids and other battery-powered cars make up just 10 per cent of sales. “Unless the price of gasoline goes up a lot, it’s going to be very difficult to make a lot of money off strongly hybridized cars, plug-in hybrids or vehicles like the Volt because they contain a lot of cost and technology and sell at a relatively high price.”

In the meantime, carmakers will have to rely on smaller combustion engines and smaller cars to achieve stricter fuel efficiency standards, although many Americans have so far shown little interest in tiny vehicles that lack horsepower. Still, that didn’t stop automakers from forging ahead with all sorts of new models and concepts in Detroit. In addition to its new Focus, Ford also showed off its subcompact Fiesta, while GM had the Chevrolet Cruze, Aveo RS concept and ultra-small, pug-faced Spark. Mazda, meanwhile, displayed its “supermini” Mazda2 car and Honda showed off its two-seat CR-Z hybrid. German carmaker Volkswagen also pulled the curtain back on a yet-to-be-named hybrid coupe concept.

There was also small-car talk from Chrysler (although it did not have any unveilings scheduled at this year’s show). Reid Bigland, the president of Chrysler Canada, said the company would begin selling the tiny Fiat 500 in Canada and the U.S. this year, adding that the marriage of the two automakers was ideal since it mated Fiat’s expertise in small vehicles with Chrysler’s strengths in trucks, minivans and SUVs. Still, it made for a haphazard floor display as sleek and sexy offerings from Fiat’s Ferrari and Maserati brands—complete with scantily clad women draped on their hoods—were dropped into a sea of muscle cars and Jeeps. The idea, says Bigland, was to let people’s imagination fill in the blanks in terms of what sorts of products the Fiat-Chrysler union might eventually yield. “What they are going to put together is that the same company that makes the Maserati also makes the minivan.”

Most industry watchers believe the worst is finally over for the auto industry—U.S. sales are forecasted to climb 11 per cent this year, while Canadian sales are expected to be up four per cent—but others are quick to point out that some automakers, particularly the Detroit Three, still have a lot of road to travel. “They have fundamental issues that they still need to deal with,” says DesRosiers, citing dealership networks that are in disarray following last year’s restructuring, orphaned brands and, most importantly, the ongoing challenge of designing and building vehicles that people want to buy.

After spending years focused on trucks and SUVs, Detroit has so far failed to make much of a dent in the Asian automakers’ stranglehold on the small car segment. While Chrysler won praise five years ago by borrowing styling cues from its past for vehicles like the gangster-looking 300—a favourite of rapper Snoop Dogg—the design renaissance was short-lived and the car never enjoyed anything close to mass appeal. Fast-forward to the end of the decade and only Ford can claim to have a car, the Fusion, on the list of best-selling vehicles in the U.S. last year. “It sounds so simple when you say it, but it’s really just about having the products that people want to buy,” says Jeff Schuster, the executive director of forecasting at JD Power and Associates. “But it’s just very, very difficult to execute on that simple statement.”

It’s equally difficult to predict which new models will catch on once they are removed from their gleaming auto show pedestals and parked in dealerships across the country. The good news for Ford, GM and potentially Chrysler is that, judging from this year’s show, their small-car offerings are starting to closely  resemble those made by their Asian and European rivals. They may not scream “Made in America” anymore, but as Detroit has learned the hard way, that’s no longer the selling point it used to be.

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