kansaiwalker1

by Peter M. DeLorenzo



Things To Watch For in 2004.

Detroit. With the new auto show season just weeks away, there are several crucial things in the business to watch for. In the last two weeks, I've written about rising and falling brands, and this week, the subject will be the crucial issues facing the various auto companies in the coming model year. Some of these companies are trying their best to suppress large grins as they wait for hot new products to hit the street. Others are smiling through clenched teeth, knowing that 2004 is likely going to be a long, tedious slog of no new product - and trying to make the best of their fate with the best smoke-and-mirrors marketing strategies that they can come up with. And everyone is going for a bigger slice of the pie in a market literally bursting at the seems with too many nameplates already.

Without further ado then...

Audi. We've covered Audi's ongoing predicament in detail of late, so the outlook for Audi in 2004 remains unchanged. The maker of technically sophisticated, and in some cases gorgeous, cars - Audi still has to convince the American car buying public that they're more than something of an alternative novelty in comparison to the BMW and Mercedes-Benz German luxury brands. In Audi's case, new product isn't going to help them much. They need to market and sell the product they have, while establishing a retail resale track record that exists in the real world - as opposed to the one that exists in the captive leases (and imagination) of Audi Financial services.

BMW. Will the wheels come off the BMW money train? Probably not this year, but there are definite chinks in BMW's heretofore impenetrable armor. This brand image stuff is fragile and can just as easily work against you as work for you - and BMW is about to find out the hard way, apparently. In their quest to put a BMW in every garage, they're dangerously close to making the brand too common and too visible. But there's a built-in lag time in this brand perception game, and BMW's smug demeanor and brimming arrogance have them dismissing clear signs of impending trouble. The bottom line is that BMW has strayed far from their original mission by introducing electronic devices in their cars that continue to remove the driver from the driving equation - and it will catch up with them. BMW continues to see no reason why they can't play in any segment they want to play in - refusing to believe that the cumulative effect of all of this won't somehow hurt them. But it will. Inevitably, BMW managers will be the last to know - that's just the way it seems to work in this business.

DaimlerChrysler. 2004 is a big year for the gang out in Auburn Hills. With a bold move into the heart of the American car market with distinctive, "marching to a different drummer" rear-wheel-drive products (Chrysler 300C, Dodge Magnum), DaimlerChrysler is adhering to its philosophy of going where its competitors aren't. I believe these cars will make a substantial impact on the market - and a positive impact on DaimlerChrysler's bottom line. The German American conglomerate has come up with a couple of cars that are distinctly American in look, feel and power - yet they've done it with a level of sophistication that oozes throughout. These cars will propel DaimlerChrysler off of the gloom and doom pages of the newspapers and back into a position of strength. The big qualifier? If these new cars are presented and launched properly. And that remains a big "if." As for the rest of DaimlerChrysler's prospects in '04, they have to reestablish their minivan dominance in a market that's been cherry-picked by the Japanese, they have to relaunch Jeep into a market that has become transfixed with GM's Hummer, and they have to keep selling Ram trucks by the train loads. A tall order, to be sure, and they have their plates full. But there's no doubt about it - it's put up or shut up time for DaimlerChrysler in 2004.

Ford. The folks in Dearborn are in a bit of a holding pattern in 2004, and that's not good. Yes, they have two important cars coming, the Freestyle crossover vehicle and the new 500 premium high-value sedan, but those cars won't begin to make a dent until later in the year. And that's not soon enough. In the meantime, they have the Ford GT, which will remain the feel-good image story for the foreseeable future (although it will have little impact on their bottom line), and they have to keep selling the new Ford F150 pickup in the face of an even more competitive light truck market. What's even more worrisome for Ford is that the Lincoln brand is deteriorating rapidly, and they don't seem to have any answers even on the radar screen to turn it around - at least none that will have any meaningful impact anytime soon. Cadillac is trouncing Lincoln, and the future has never looked as bleak for Ford's luxury brand. The LS could be a force with its rear-wheel-drive, driver-oriented persona, because the market is definitely headed in that direction, but Ford has to spend money on it, and we're hearing that there is a reluctance to do so, given more pressing priorities. When you read about an auto company such as Ford having financial problems, the reality is this: They have a whole list of things that need to be fixed, updated or changed completely, and because of budget reasons everything can't be addressed at once. Ford spent a bundle on acquiring foreign brands at the peak of the Nasser era, and in some cases that move has started to pay dividends (Volvo, the new XJ Jaguar). Then, they had to devote all of their energies to making the new F150 a worthy successor to the industry-leading pickup. And now they're devoting all of their time on the two new car entries in order to shore up the Ford nameplate. Lincoln's turn is supposedly coming, but I fear the brand will be on the mat and down for the count by the time they get to it - and they may never be able to bring it back. At any rate, Ford not only needs to make money in '04, they need to make a real impact on the market - and whether or not they can do that is the question that will determine the future of the company.

General Motors. After years of missteps, false starts and flat-out floundering, GM is finally poised to make a real run at the market in 2004. They don't have all of the new products they need, but they have enough for it to qualify as more than a good start. We talked about Cadillac last week, and it is certainly the star in GM's lineup. I have some concerns about the hefty pricing of the SRX, but there's no doubt that the division is not only on a roll - it is actually starting to lure buyers away from some of the exalted import brands. Cadillac isn't resting on its laurels, either - the new STS that's coming should be the best example of the rejuvenated brand yet. GM is going to school on what they've learned in the course of getting Cadillac back on the right track, and they need to apply that same focused consistency to the rest of their divisions. Chevrolet looks poised for better times with the new Malibu, Malibu MaXX and the Equinox. Chevrolet needs to get back in the game with bread-and-butter vehicles that sell on their own merits - without resorting to populating rental fleets. Add to the mix the finest Corvette ever built, and Chevrolet will definitely be making some noise in the market in '04. Chevy needs more, much more (the upcoming Cobalt further down the road will be pivotal), but at least they're getting there. Pontiac is the next division that will get GM's attention. Yes, the GTO is here, and it qualifies as the obvious symbol of Pontiac's renewed mission, but the crucial entry for Pontiac will be the upcoming G6, which replaces the Grand Am mid year. If Pontiac is to succeed and get back in the swing of things, the G6 absolutely must be a grand slam home run. Anything less, and the division will be in danger of backsliding again - and they can't afford that. Saturn has the notable Red Line series for '04, but other than those entries, Saturn, like Buick, will have to wait their turn in the GM rejuvenation factory. And Saab is in a bit of a holding pattern, too, awaiting a competitive SUV entry. But just the fact that Saab is breathing enough to be in a holding pattern is a huge accomplishment for GM. Hummer will add the H2 SUT in '04, but the real significant news for Hummer will be the H3, which is not due for another 18 months down the road. Hummer will remain Jeep's worse nightmare, however, because even though its price point is considerably higher than Jeep's, the Hummer image has become dominant virtually overnight. Jeep finds itself on the outside looking in - in a market they created and owned for decades.

Honda. Honda keeps chugging along, and 2004 will be no different. Even though they're basically in a holding pattern waiting for new product, it's a holding pattern that some other manufacturers would kill for. Honda will show their new SUT based on the Pilot in Detroit, a development that Detroit and the other manufacturers will be eyeing warily, but there's no reason in the world why Honda won't continue as the little engine company that could. As for Acura, the new TSX and TL are getting great reviews and should sustain Acura quite nicely for '04, but the real question mark is Acura's upcoming RL replacement. The Japanese, for once, are missing a market - the return of rear wheel-drive - and there are question marks about which way Acura will go with the new RL. The RL hasn't even been in the luxury sedan game because it has been underpowered, underwhelming and obsolete for years. If the new RL falls short, it will be a blow to the brand, and Acura will have wasted the accrued equity derived from its other excellent cars in one fell swoop.

Hyundai/Kia. The Koreans will continue in their quest to convince the American driving public that they offer something beyond high-value alternatives to the Japanese makes - but that will be asking for a lot. Hyundai and Kia will need to maintain their "more-bang-for-the-buck" positioning, because as of right now there a few other reasons to consider them. The big push from the Koreans in '04 will be the new Kia Amanti, which is a version of the Hyundai XG350. The Koreans are hoping that the Amanti will elevate the Kia brand, preparing this market for higher-echelon products in the future. We'll see about that, but in the meantime, the Koreans have a long, long way to go.

Mazda. I see this brand making a stronger run in the U.S., not because of the RX-8, but because of the Mazda6 and Mazda3. They're excellent products with good word-of-mouth "buzz." Mazda will be playing a crucial role in Ford's future car platform plans, but we decided to break it out separately anyway. Mazda has a good vibe right now, whether they can sustain it remains to be seen - although we're betting they can.

Mercedes-Benz. The former gold standard German luxury brand will continue to watch its reputation erode, its residual values plummet, its street "cred" dwindle and its quality satisfaction scores sink - and its management will continue to not understand why. No brand has fallen lower in as short a time as Mercedes-Benz. This trend will continue in 2004.

Mitsubishi. This company will spend 2004 getting their house in order, their products in line and their dealers reenergized. They have a new Galant to sell, along with the image-enhancing rally rocket EVO - but their internal problems must take priority if they hope to make meaningful progress in the future.

Nissan. The latest darling of the automotive media, Nissan has done wonders in an unbelievably short period of time. Maintaining momentum will be the task in '04, both for Nissan and the Infiniti luxury brand. The revival of Infiniti is perhaps an even more significant story-within-a-story than the rebirth of Nissan itself. The G35 coupe and sedan and the FX35/45 have literally brought Infiniti back from the dead, because before these products were introduced, Infiniti wasn't even on the luxury car radar screen. So that is a significant achievement for the Nissan/Infiniti folk. But the real story for Nissan in '04? All eyes will be on the new Titan pickup this year. Those 100,000 additional Titan units slated for the U.S. pickup market will be coming out of someone's hide - who will it be and how will it break down?

Porsche. The big news for Porsche, the car company formerly known for its exclusive sports cars, is that it will be bringing out a V-6-powered version of its overweight, overpriced Cayenne SUV. The engine for the "entry-level" Cayenne will be supplied by VW. In other news, the ultra-expensive Carrera GT will make its way to the select few who can afford one. Meanwhile, Boxster sales are down more than 35 percent, 911 sales are down more than 12 percent, a four-door luxury sedan is in the works, and Porsche continues on its merry way on the road to oblivion.

Subaru. Another Japanese car company that will continue to do what it does best in 2004, Subaru will sell its vehicles to its loyal owners who place greater emphasis on inner beauty and mechanical function, as opposed to exterior design presence. Subaru is supposedly working on improving its design presence for its future models, but we'll believe it when we see it.

Suzuki. We actually like what Suzuki is doing in the market, particularly the Verona and the Aerio, but they need a defining car that captures some of the spirit of their radical concept cars of recent years. If anyone could do a bare-bones affordable sports car with motorcycle overtones, it's Suzuki. They could use a vehicle like that to generate more visibility. This brand has a huge upside if it's handled right.

Toyota. What's left to be said about Toyota? The Japanese Juggernaut is on a forced march to take 15 percent of the world's automotive market by 2010. That's equal to the share owned by the world's current largest automaker, GM - and no one doubts Toyota can get it done. Toyota outsold DaimlerChrysler in the U.S. market earlier this year for the month of August, and they're on the verge of passing Ford for second place in the world market. They have the financial war chest to take some chances like Scion, win the "green" PR battle with the Prius, race in three major racing series at once (NASCAR, F1 and the IRL), and keep up a relentless campaign to win the hearts and minds of the American car-buying public. Storm clouds? Hardly. Anytime Toyota gets a less-than-stellar quality report they go back and not only fix things, but make them better than they were to begin with. They are relentless, and they have the will to succeed. In short, Toyota is the most formidable car company in the world, and for 2004, Toyota and its Lexus luxury division will keep pouring it on. Not exactly comforting news to the rest of the industry.

As we've been saying for months now, 2004 will be a pivotal year - not just for the Detroit-based car companies, but for the entire industry in the North American market. The overall market is getting smaller by the minute, simply because more car companies are fighting for the same slice of the pie - and something has to give. Virtually every car company either has an entry in the $35,000 - $45,000 "sweet spot" in the market or has one coming, and to a company, every single one of them believes that they have the magic formula that will make them winners. But it doesn't work that way.

There will be big winners in 2004, but there will be big losers too.

I have a definitive idea of how 2004 will shake out, and I will look forward to sharing that with you in a future col.

And if you want to see our Autoextremist "Best of" Awards for 2004, check out this week's "Road Kill."

Thanks for listening, see you next Wednesday.

kansaiwalker1

From this week's Autoextremist "On the Table:"


Cadillac. Placing two finalists among the six for the 2004 North American car and truck of the year, Cadillac demonstrated yet again why it is the industry brand to watch for the foreseeable future. The Cadillac XLR was one of three car finalists, along with the Mazda RX-8 and the Toyota Prius. And the Cadillac SRX was one of the three truck finalists, along with the Ford F-150 and the new Nissan Titan. The awards, which began in 1994, will be given out the first week in January at the 2004 North American International Auto Show media preview days. Fifty automotive journalists participate in the evaluation and final voting.


VW. trying to capture some of the whimsy and magic from VW advertising campaigns of the '60s - work that remains as some of the best ever done - VW's latest ad for the Phaeton, their new luxury sedan, features the headline: "Think Big" which conjures up thoughts of the Beetle headline in the '60s that said, "Think Small." The copy goes on to say, "This is indeed a big car. But it's not some kind of super-luxurious land barge that you can't park. Instead, it's big in the place where it needs to be and small in the places where new thinking (on our part) can save you space. And we did this because we wanted to build a luxury car that's nimble and compact..." Nimble and compact? Really? At 5,100 pounds there is nothing nimble and compact about the VW Phaeton - try bloated and overwrought. VW is trying anything to get people into the showrooms, but harking back to a time in VW's past when the cars were simple and the advertising was brilliant just isn't going to cut it. VW is flailing away, throwing anything up on the wall that looks like it will stick - in hopes that something, anything will trigger sales for the Phaeton - which has become the latest industry answer to the question that absolutely no one was asking.

Porsche. We've commented on Porsche's travails longer than any publication in the business, and now that other media sources are climbing on the Autoextremist bandwagon and seeing through the Porsche-manufactured PR fog, we thought we'd help them begin to understand why and how Porsche could throw away 50 years of historical significance as one of the automotive world's greatest marques, turn their backs on their founder's principles, and walk away from their core raison d'etre as a maker of exclusive sports cars - all in the interest of assembling an SUV. Along with Porsche building some neat little street cars and some fantastic racing machines over the years, they also developed another remarkable capability - and that is a capacity for greed unlike any other auto maker in the world. Not that we have anything against profit - far from it, actually. As a matter of fact, profit is an exceedingly good thing. But in Porsche's case, it makes Wall Street's Gordon Gekko appear to be a fiscal conservative with a penchant for charity work. One of the strongest pieces of evidence of Porsche's affliction for greed is their option list, an unbelievable document that should be on any enthusiast's reading list - even if it's just to sit there and shake your head in wonder. We haven't actually done it for a couple of years, but it was nice to see evidence in the new Road & Track that not much has changed with those merry pranksters in Zuffenhausen. In the "box score" for the road test of the new 2004 Porsche 911 GT3, R&T listed the car's list price ($99,900), followed by its "Price as tested" ($118,250). The options? How about $8,150 for Ceramic Composite Brakes, $2,920 for a full leather interior, $1,280 for a leather steering wheel, $1090 for xenon headlights, $855 for aluminum gauge faces, $705 for lowered seats, $570 for cruise control, $425 for aluminum doorsill trim, $175 for center caps with colored crests on the wheels and $115 for floor mats. The gas-guzzler tax ($1300) and destination charge ($765) fill in the rest of the "as tested" total. Now, if we were going to spend our time doing a lot of track days, we could maybe justify the ceramic brakes, but the only relative bargain on the option list is the floor mats - and why they're not standard for $99,000 is a joke. The option list on R & T's 911 GT3 test vehicle is but the tip of the iceberg. For a closer look at the creativity demonstrated by Porsche, go down to your local Porsche dealer and ask them to run you off a copy of their option list. Unfortunately, the creativity, time and effort Porsche used to spend on their street and racing cars is now being focused on making money - image, heritage and conscience be damned. SUVs with VW engines in them and grossly inflated option prices are Porsche's new raison d'etre. How the mighty have fallen..

Business Week. We don't know how it went down, or what kind of deal was made, but the PR "puff" piece about Porsche in the new Business Week, entitled "This SUV Can Tow An Entire Carmaker" is embarrassing. Gail Edmondson, reporting in Zuffenhausen, was apparently given an IV of the Porsche Kool-Aid and then given a "patch" to wear when she gathered her notes to write the story. Picking up the Porsche view of the world hook, line and sinker, Edmondson goes on to canonize Porsche CEO Wendelin Wiedeking and his decision to bet the future of the company on an SUV, and how everything is wonderful and beautiful for the former exclusive manufacturer of sports cars. She manages to gloss over several major problems along the way - like the fact that Porsche is now responsible for only 15% to 20% of its production (the rest is farmed out), and that the new Cayenne is being discounted all over the U.S. market, just in time for the VW V-6-powered entry-level version. But c'est la vie, Wiedeking is a genius, and she got to bask in his aura for an hour - and apparently, that's all that matters.

USA Today. We never would have expected it, but in USA Today's year-end auto industry review they landed some direct hits on Porsche. Naming the Cayenne to their "cold" list of 2004 models that are in trouble, they had this to say about it: "Sure, it has boosted Porsche's perennially small sales, but it isn't setting the SUV market on fire as predicted by the automaker's German managers. Dealers are bringing down the price by thousands. And even though the automaker said before the launch that a real Porsche has to have a Porsche engine, it will serve up a cheaper V-6 Cayenne with the Volkswagen engine from VW's Touareg SUV. VW and Porsche jointly developed the basics of the two SUVs but diverged on engines, bodies, interiors and other major features. Touareg has been the hit that Porsche hoped Cayenne would be. Now Porsche thinks a cheaper Cayenne will help meet sales targets." Amen, and you guys are now honorary Autoextremists - at least for this week.

charliemike

Honda has a real problem with the Accord Coupe. If they don't fix it soon it's going to bite them in the ass.

SiGGy

what is the problem?

gavriil

Yeah, what is exactly the prob with the accord coupe?