Detroit gives up on making American cars
12-14-2003, 12:17 PM
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Detroit gives up on making American cars
Bye-Bye, American Car
Forbes - John Turrettini
Detroit is waving the white flag and handing over engineering to foreign partners.
By the time the model T celebrates its centenary in 2008, Ford Motor will have mostly given up on the American car. Oh, it will still design their bodies and assemble and sell them. But it will be foreign engineers who will design the guts of the machines--the suspension, underbody and mechanical gear that determine how a car handles. For instance, Ford's new high-end family car that debuts in two years, called the 500, will be, beneath the metal, in large part a modified Swedish Volvo S80. The same goes for Chrysler . Nearly all its lineup will consist of foreign vehicles with American skins attached. At General Motors about half the cars will be engineered abroad. By comparison, foreign-engineered cars make up less than 20% of the models the Big Three have on sale today.
Why is Detroit throwing in the towel? Because its engineers have gotten killed in the past two decades by their overseas competitors. And because it's one more way to cut costs. Thanks to the many foreign auto alliances they have made over the last decade, the domestics now can tap the very engineering expertise that laid them low. The idea: Reduce enormous U.S. development costs and create a generation of American-badged cars that are engineered abroad--and drive like imports. The shells, what you "see, feel and touch," in the words of Chrysler vice president Richard Schaum, will be American-designed.
The savings should be huge--maybe enough to finally start justifying those costly foreign acquisitions. Christopher Cedergren, head of Los Angeles auto consultancy Nextrend, estimates it costs a U.S. automaker $1.2 billion to develop a new midsize car. But if the automaker builds it off of somebody else's underbody, the development cost is halved, to an estimated $600 million. So Ford's new 500 line by itself could eventually recoup 10% of the $6 billion Ford paid to acquire Volvo's passenger car line in 2000.
Chrysler says the sharing plan is helping cut its five-year capital budget from $42 billion to $30 billion even as it adds five new models of cars and trucks. GM expects to save $500 million in engineering costs by building the Chevy Malibu atop a rejiggered European underbody.
Imports like the Honda Accord and Toyota Camry have been clobbering Detroit in cars for years. This year for the first time Detroit's American brands, like Chevrolet and Ford, are selling fewer cars than the import nameplates. That 49% market share is down from 75% 20 years ago, an annual loss to Detroit of more than 2 million cars, or $50 billion in revenue. The last American hit was the 1986 Ford Taurus, and before that you have to go back to 1978 to find another, the Oldsmobile Cutlass.
Of course we're only talking about half of Detroit's business, the vehicles called "cars." The other half of passenger vehicles is "light trucks," or sport utility vehicles, minivans and pickups. Trucks are still very American. The distinction is somewhat arbitrary; all these are primarily used as passenger vehicles. Last year Detroit rolled out exactly one new car, Ford's niche-market Thunderbird, while unveiling seven new SUVs. Light trucks make up 75% of Chrysler's unit sales, 56% of Ford's and 50% of GM's.
In the car-half of the vehicle market, American offerings have only two strong selling points: price and patriotism. So the Big Three have decided that if you can't beat them, you should join them. The next generation of American cars should boast the tight-and-sharp handling that now characterizes Japanese and European cars.
Chrysler (German-owned since 1998) will give its Crossfire coupe a 40% parts overlap with Mercedes and will even build the car in Germany. It will also borrow heavily from Mercedes for its Concorde and 300M luxury-car replacements, due mid-decade. Among other components, the cars will use a Mercedes transmission.
DaimlerChrysler acquired a 34% stake in Mitsubishi for $2 billion in 2000. Here's the payoff: Chrysler's 2004 and 2005 small and midsize Neon and Stratus successors will roll on the same Mitsubishi underbodies that will be used for Mitsubishi's next generation of Lancers and Galants. The Neon and Stratus replacements will share as much as 65% of their parts with the equivalent Mitsubishis--engines, suspensions, transmissions and underbodies.
Similarly, Ford plans to base its replacement for the bread-and-butter Taurus, due in a few years, on a variation of a Mazda underbody, according to industry gossip. Ford owns 33% of the Japanese firm. Already, Ford's subcompact Focus is completely designed and engineered in Europe. Once the Focus, new Taurus and 500 are all out, only relatively low-volume Ford models like the Mustang, Crown Victoria and Lincoln will stay American-engineered.
At GM, which remains more reliant on cars and has many more models and brands, the exporting of engineering is only somewhat less extreme. The company's Saturn midsize sedan is engineered by GM's German affiliate Opel, its Pontiac Vibe compact by Toyota, and next year's Pontiac GTO by Australian affiliate Holden. GM has also announced plans to replace its family cars, the Chevy Malibu and Pontiac Grand Am, with cars engineered in large part by European affiliates Opel and Saab.
GM will keep some of its larger cars on American underbodies, such as the Pontiac Grand Prix and Buick Park Avenue. Its foreign partners just don't build things that big.
Detroit is being careful to avoid a mistake it made once before. These new cross-engineered cars won't be "world cars"--a single model with identical styling for all markets. In the early 1990s Ford came to rue its $6 billion gamble on that idea with its Mondeo/Contour lookalike car for all markets. A high-tech compact, it sold well in Europe but flopped in the U.S. because of its small size and high price.
The thinking now is to keep the styling of each model different. The Ford 500 won't look at all like its Volvo counterpart and will have a different engine.
Still, there's a danger to carmakers of blurring brands if their cars share too many components. Would you be so quick to buy a Volvo, for instance, knowing the new Ford 500 contains many of the same features? The risk of cheapening the Mercedes brand by having its components in Chryslers is also real. Ford may have taken a misstep with its lower-priced Jaguar S-Type, the first all-new Jaguar sedan under Ford ownership. Going in reverse, Ford engineered the S-Type off a Lincoln underbody, and the car has received a lukewarm reception.
Will any of this get Americans to buy Big Three cars? It would certainly help if styling got better, too. But until that question is answered, Detroit will at least be saving a bundle
Forbes - John Turrettini
Detroit is waving the white flag and handing over engineering to foreign partners.
By the time the model T celebrates its centenary in 2008, Ford Motor will have mostly given up on the American car. Oh, it will still design their bodies and assemble and sell them. But it will be foreign engineers who will design the guts of the machines--the suspension, underbody and mechanical gear that determine how a car handles. For instance, Ford's new high-end family car that debuts in two years, called the 500, will be, beneath the metal, in large part a modified Swedish Volvo S80. The same goes for Chrysler . Nearly all its lineup will consist of foreign vehicles with American skins attached. At General Motors about half the cars will be engineered abroad. By comparison, foreign-engineered cars make up less than 20% of the models the Big Three have on sale today.
Why is Detroit throwing in the towel? Because its engineers have gotten killed in the past two decades by their overseas competitors. And because it's one more way to cut costs. Thanks to the many foreign auto alliances they have made over the last decade, the domestics now can tap the very engineering expertise that laid them low. The idea: Reduce enormous U.S. development costs and create a generation of American-badged cars that are engineered abroad--and drive like imports. The shells, what you "see, feel and touch," in the words of Chrysler vice president Richard Schaum, will be American-designed.
The savings should be huge--maybe enough to finally start justifying those costly foreign acquisitions. Christopher Cedergren, head of Los Angeles auto consultancy Nextrend, estimates it costs a U.S. automaker $1.2 billion to develop a new midsize car. But if the automaker builds it off of somebody else's underbody, the development cost is halved, to an estimated $600 million. So Ford's new 500 line by itself could eventually recoup 10% of the $6 billion Ford paid to acquire Volvo's passenger car line in 2000.
Chrysler says the sharing plan is helping cut its five-year capital budget from $42 billion to $30 billion even as it adds five new models of cars and trucks. GM expects to save $500 million in engineering costs by building the Chevy Malibu atop a rejiggered European underbody.
Imports like the Honda Accord and Toyota Camry have been clobbering Detroit in cars for years. This year for the first time Detroit's American brands, like Chevrolet and Ford, are selling fewer cars than the import nameplates. That 49% market share is down from 75% 20 years ago, an annual loss to Detroit of more than 2 million cars, or $50 billion in revenue. The last American hit was the 1986 Ford Taurus, and before that you have to go back to 1978 to find another, the Oldsmobile Cutlass.
Of course we're only talking about half of Detroit's business, the vehicles called "cars." The other half of passenger vehicles is "light trucks," or sport utility vehicles, minivans and pickups. Trucks are still very American. The distinction is somewhat arbitrary; all these are primarily used as passenger vehicles. Last year Detroit rolled out exactly one new car, Ford's niche-market Thunderbird, while unveiling seven new SUVs. Light trucks make up 75% of Chrysler's unit sales, 56% of Ford's and 50% of GM's.
In the car-half of the vehicle market, American offerings have only two strong selling points: price and patriotism. So the Big Three have decided that if you can't beat them, you should join them. The next generation of American cars should boast the tight-and-sharp handling that now characterizes Japanese and European cars.
Chrysler (German-owned since 1998) will give its Crossfire coupe a 40% parts overlap with Mercedes and will even build the car in Germany. It will also borrow heavily from Mercedes for its Concorde and 300M luxury-car replacements, due mid-decade. Among other components, the cars will use a Mercedes transmission.
DaimlerChrysler acquired a 34% stake in Mitsubishi for $2 billion in 2000. Here's the payoff: Chrysler's 2004 and 2005 small and midsize Neon and Stratus successors will roll on the same Mitsubishi underbodies that will be used for Mitsubishi's next generation of Lancers and Galants. The Neon and Stratus replacements will share as much as 65% of their parts with the equivalent Mitsubishis--engines, suspensions, transmissions and underbodies.
Similarly, Ford plans to base its replacement for the bread-and-butter Taurus, due in a few years, on a variation of a Mazda underbody, according to industry gossip. Ford owns 33% of the Japanese firm. Already, Ford's subcompact Focus is completely designed and engineered in Europe. Once the Focus, new Taurus and 500 are all out, only relatively low-volume Ford models like the Mustang, Crown Victoria and Lincoln will stay American-engineered.
At GM, which remains more reliant on cars and has many more models and brands, the exporting of engineering is only somewhat less extreme. The company's Saturn midsize sedan is engineered by GM's German affiliate Opel, its Pontiac Vibe compact by Toyota, and next year's Pontiac GTO by Australian affiliate Holden. GM has also announced plans to replace its family cars, the Chevy Malibu and Pontiac Grand Am, with cars engineered in large part by European affiliates Opel and Saab.
GM will keep some of its larger cars on American underbodies, such as the Pontiac Grand Prix and Buick Park Avenue. Its foreign partners just don't build things that big.
Detroit is being careful to avoid a mistake it made once before. These new cross-engineered cars won't be "world cars"--a single model with identical styling for all markets. In the early 1990s Ford came to rue its $6 billion gamble on that idea with its Mondeo/Contour lookalike car for all markets. A high-tech compact, it sold well in Europe but flopped in the U.S. because of its small size and high price.
The thinking now is to keep the styling of each model different. The Ford 500 won't look at all like its Volvo counterpart and will have a different engine.
Still, there's a danger to carmakers of blurring brands if their cars share too many components. Would you be so quick to buy a Volvo, for instance, knowing the new Ford 500 contains many of the same features? The risk of cheapening the Mercedes brand by having its components in Chryslers is also real. Ford may have taken a misstep with its lower-priced Jaguar S-Type, the first all-new Jaguar sedan under Ford ownership. Going in reverse, Ford engineered the S-Type off a Lincoln underbody, and the car has received a lukewarm reception.
Will any of this get Americans to buy Big Three cars? It would certainly help if styling got better, too. But until that question is answered, Detroit will at least be saving a bundle
01-01-2004, 12:30 PM
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honestly, chrysler was smart as hell to join mercedes. now americans that never looked at chryslers are buying them. and mercedes was smart too....in germany they go crazy over chrysler vehicles...they love them just as much as we love mercedes. and lets be honest....for those who think that U.S. car manufacturers are stupid for letting this happen...they are the ones too stupid to compete with asian and european engineering. its their own damn fault for not competing as hard. with the technology chrysler displayed back in 1984, the lebaron actually talked to you(when doors were open and such), and then with their invention of airbags, etc. they should have had navis and heated seats in the early 90's instead of waiting till now. Same goes for the rest of them....Cadillac, for instance...when did they decide to introduce navis and such?...like two years ago! The big three became a bit cocky and decided not to offer these things because they thought nobody would buy foriegn cars....and now look...they ARE foriegn cars
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