Tracking Car Firms’ Strategies for 2006
Automakers will report their year-end sales figures on Wednesday, but the industry already knows that General Motors Corp. and Ford Motor Co. had a rough year.
As gas prices jumped, the automakers -- which rely on sport utility vehicles and pickup trucks for a big chunk of their sales -- continued losing ground to import brands.
Against that backdrop, the auto industry is preparing to launch its winter offensive.
Some of the newest models and hot concept cars will be shown at the Los Angeles International Auto Show, which opens Friday at the Los Angeles Convention Center.
Mark McCready, 39, is director of pricing strategy and market analysis for CarsDirect, the Los Angeles-based auto shopping and information service. He was previously a product design engineer and planner at Ford and a marketing strategist at Nissan Motor Co., whose resurgence has been one of the decade’s major success stories.
McCready is responsible for identifying industry trends, and he recently talked about what Japanese and U.S. automakers will face in the year ahead.
Question: This is going to be a key year as GM and Ford struggle to regain momentum. What’s their strategy?
Answer: GM will be attempting to come back with new SUVs and pickups, while the Asians will continue a proliferation of car products.
Q: Trucks didn’t do well last year, largely because of soaring gas prices. Can GM’s truck strategy work?
A: Well, they didn’t have the luxury of deciding to do something else. The decision to redesign their large trucks and launch them this year was made long ago, before gas prices were an issue. The key for GM’s success with these vehicles will be to deliver a quality product they can sell with fewer incentives so they make more profit. And we’ve seen consumer interest start to grow as the ... first of GM’s new SUVs [Chevy Tahoe and GMC Yukon models] gets closer.
Q: Ford, GM and DaimlerChrysler’s Dodge traditionally have been the big truck sellers, but the Asians are now turning out pickups. How big is this threat?
A: Toyota [Motor Corp.] can be a volume threat when it starts building the new, full-size Tundra pickup at its new Texas plant in San Antonio next year. The present Tundra is a little smaller than full-size, but if Toyota comes out with something as capable as Nissan’s Titan, that could really hurt.
Q: Isn’t the real threat from Asian automakers in their new passenger cars, not trucks?
A: Yes. With the new [Toyota] Camry and [Honda Motor Co.] Civic just out and a bunch of new small passenger cars coming, the Toyota Yaris, Honda Fit and Nissan Versa, the Asians are going all out in a segment where the Big Three is pretty much absent.
Q: Most of these cars will sell for less than $20,000 and attract younger buyers. Why isn’t Detroit interested in that segment?
A: I think the domestics have decided they can’t build small cars profitably, so they’ve decided to push into higher-priced, higher-performance [models] and let the imports take over the low end. And it works. The [Ford] Mustang is very successful, and the Chrysler 300. We hear talk this year of new versions of the [Chevrolet] Camaro and the [Dodge] Challenger.
Q: So Detroit is still betting on trucks and cars with big engines. What about gas prices?
A: The imports are betting that gas prices will remain high and will move buyers into sub-compacts with low prices and high mileage. The Big Three are betting that their performance cars, with names that evoke memories, will draw consumers with more money -- baby boomers -- and are hoping this will bring back profits.
Q: Who’s right?
A: I don’t think it’s a case of the domestics being shortsighted. I think the new Asian products are not really youth-oriented. I think the Asians are hoping to attract a lot of older consumers who are looking for economic cars. And I don’t have the kind of crystal ball that lets me predict who’s guess is best.
Q: While we’re on the subject of fuel economy, what’s happening with gas-electric hybrids?
A: The [Toyota] Prius is still the hot hybrid, with waiting lists and selling prices that are higher than the sticker price. But for [hybrid] models like the Honda Accord, Ford Escape and even Toyota’s Highlander hybrid, we’ve seen supplies starting to build up.
Q: Are people losing interest?
A: It’s the hybrid premium. When shoppers see that a hybrid costs $3,000 to $5,000 more than the gas version, a lot of them give in to the temptation to buy the gas version because [of] the savings.... It’s greater than their need to be green.
Q: The foreign brands in the U.S. today seem invincible. Are they?
A: I think that the very possible entry of the Chinese into this market would be a large threat to the Japanese and Korean automakers.
Q: Not to the domestics?
A: No, the Big Three are pretty much out of the lower-priced segments, and that’s where the Chinese will go.
