Detroit's 'new' idea: Cars Americans want
The question is whether it's too little and too late.
Even though light trucks, including SUV's, pickups and minivans now have a majority of U.S. sales, sales of compact and midsize sedans still have a large segment of the market. Non-luxury midsize sedans, which generally fetch between $20,000 and $25,000, account for more than one-in-five vehicles here last year.
And while sales of those models slipped slightly in 2007, they held up better than those segments where Detroit has put much of its attention for the last decade -- SUV's and large pickup trucks.
Even some Detroit auto executives are now admitting that the Big Three made a big mistake betting so big on light trucks at the expense of car models.
"If your goal is to grow your business, you have to get serious about the small car market," said George Pipas, sales analyst for Ford Motor (F, Fortune 500). "As I look back on it, the steady decline in Big 3 share can be traced directly to the lack of interest and participation by those companies in the small car market. They took the view 'Why should I invest in a money losing or small return business when I can make so much more on trucks?' Why you do it is it's a portal to your franchise."
As recently as 2000, 55 percent of U.S. car model sales went to the traditional Big Three, even as all three were already getting most of their sales and just about all of their profits from light trucks by that time.
In 2001 a majority of Americans looking for car models turned to import brands for the first time, and they haven't gone back.
By last year, the three U.S. automakers had only 38 percent of the U.S. car model market between them, and many of those sales were less profitable fleet sales to rental car companies rather than retail sales to American consumers.
Toyota Motor's (TM) Camry is by far the best selling car model, with
2007 U.S. sales of 473,108, followed by Honda Motor's (HMC) Accord, with 392,231. Next up on the sales list are the Corolla and the Civic, also from Toyota and Honda, respectively.The Chevy Impala, with sales of 311,128, is the best-selling car model from a U.S. automaker, and its sales are heavily dependent on the rental car industry. No other sedan out of Detroit has even two-thirds the Impala's sales volume.
Still, at the North American International Auto Show here in Detroit this week, General Motors (GM, Fortune 500) and Ford Motor are giving renewed attention to car models, rushing to play catch up in small and mid-size car segments, while Chrysler tries to build on car model sales gains it posted last year.
GM just captured the "Car of the Year" award at the show for the second year in a row, this time with Chevrolet Malibu, which is being compared favorably with the Camry and Accord by auto critics.
Malibus, which started selling in November, are flying out of dealers' showrooms as fast as they arrive, and Chevrolet will put considerable marketing push behind the Malibu in the coming months, including Super Bowl ads.
Ed Peper, GM's general manager for Chevrolet, admitted it's been a long time since GM made a car model the focus of its Super Bowl advertising dollars, or even a key priority. But he believes the company now has a product that can win back sedan buyers who are used to looking only at Toyota and Honda. He admitted that it will be a challenge, though.
"There are a lot of import consumers who have not experienced a domestic car in quite some time. So it's very very difficult," he said. "We're the No. 1 selling brand in America, and we have tremendous marketing clout. And when we get behind something at Chevrolet, we can get to a lot of people and make things happen."
But GM's sales last year for the Saturn Aura, which won the car of the year title in same segment, were at best disappointing, coming in at just under 60,000 vehicles sold in 2007. GM won't give any sales targets for the new Malibu, and most experts think it's a long way from challenging the Camry or Accord this year or any time in the near term.
Even those who believe the car is a worthy competitor to those imports say it is too soon to predict success for the Malibu.
"A car like Malibu should shift the thinking," said Michelle Krebs, a senior editor at Edmunds.com, and one of the jurors who voted for the Malibu as North American Car of the Year. "It looks pretty darn good and more expensive than it is. But they don't have the numbers available for manufacturing to rival the Camry numbers yet."
Chrysler LLC actually saw a healthy 6 percent jump in the sales of car models in 2007, at the same time its truck sales fell almost as much. But its car models were able to post that gain off a relatively low base, and sales of car models would have plunged without the new introduction of the Chrysler Sebring and Dodge Avenger sedan, which have not met with anywhere near the same critical acclaim or marketing commitment as the Malibu. Both Sebring and Avenger are seeing large sales into the rental car market.
"The Sebring and the Avenger are subpar in terms of design and interior quality," said Krebs. She said even if Chrysler revamps those vehicles, something the company is reported to be working on, it will be difficult to overcome the poor initial impression.
Ford's offering in midsize sedans is the Fusion, which saw a modest 5 percent sales gain in 2007, its full-year on the market. But it's still seen relatively modest sales, coming in at less than half the level of either Camry or Accord.
Pipas said a big part of the problem for Ford and the other Detroit automakers is that even if their midsize sedans are improving, their compact sedans are generally not competitive. And that's the segment that feeds future midsize car buyers.
"You look at the numbers and you see that 45 percent of the first-time new car buyers under 30 go to the small car market, while 15 percent go to the midsize sedan," said Pipas.
Pipas said he's hopeful that the small concept car that Ford unveiled Sunday, the Verve, will help Ford start to turn things around among car buyers. It is due to start showing up in U.S. showrooms in 2010 after rollouts in Europe and Asia. But he admits that it'll be tough to win back Toyota and Honda customers given the quality of their offerings.
"It is our biggest challenge is to communicate in a way that will give us a chance," said Pipas. "If you as a consumer are a satisfied long-time Toyota and Honda car buyer, you have to ask yourself what's the compelling reason to switch."