The End of Detroit (6 page)

GM’s actions made a perverse kind of sense. Given that so much was at stake, it might have seemed timid had it not taken advantage of every sales trick at its disposal. Unfazed by complaints from their competitors that the incentives were ruining vehicles’ resale value, and warnings from analysts that the constant stream of incentives were conditioning buyers to wait for better and better deals, GM’s chief executive, Rick Wagoner, declared, “It’s time to stop whining and play the game. At GM, we’re going to do what works for us.” (Only two months later, at the Geneva Motor Show in Switzerland, Wagoner admitted that the incentives were losing their pull and that GM needed a “new hook” to get customers into showrooms.)

What was good for GM, at least temporarily in 2002, was terrible for Ford. Including its 2002 decline, Ford had lost five points of market share over the past four years. The heady days of the late 1990s, when it seemed a surging Ford might have a chance to surpass a slipping GM in American sales, now seemed but a distant memory. Even as Ford tried to keep attention focused on its revitalization plan, which was meant to propel the company forward into its second century, it continued to lose ground with customers, and its profitability, long the company’s hallmark, had evaporated.

Chrysler, too, had lost market share in 2002. But chief executive Zetsche had vowed not to match the onslaught of incentives that GM was throwing at the market. Long term, Zetsche was trying to fashion an identity for Chrysler that was like those of the best imports. He no longer wanted his company to be lumped in as part of Detroit’s Big Three. Instead, he wanted its vehicles, like those of Toyota and Honda, to sell largely without hefty rebates and low-interest loans, applying them only when a car or truck was getting long in the tooth or in the most critical cases of stiff competition from its rivals. Zetsche was determined to stand his ground and change the way people thought of the auto company.

As Zetsche discovered, however, it was far too soon for Chrysler to be classified with its import competition. Consumers continued to lump its vehicles in with those from GM and Ford. When his dealers could not match GM’s incentives, the company faltered. Without those incentives, Chrysler, which had held 15 percent of the car market in the late 1990s and seemed destined someday to capture 20 percent of American sales, saw its market share plummet to just 11 percent in fall 2002. Dealers were outraged and the company quickly brought the rebates and low-interest loan plans back, stabilizing its market share but frustrating Zetsche’s attempts for the company to gain ground.

In addition to the challenge that the Detroit companies faced from the imports—and the economy—by 2003, the industry was under political assault from critics of all kinds, from Hollywood celebrities to officials of the heretofore business-friendly Bush administration. While executives tried to explain the criticism away, it seemed pretty clear that when it came to goodwill among the public, Detroit’s residual balance had run low.

The initial criticism emerged from a coalition of church groups and ministers who denounced SUVs as wasteful and abusive of the environment. They called their campaign What Would Jesus Drive?—a takeoff on the admonishment to Christian teens, What Would Jesus Do?, that took root in the 1990s. The What Would Jesus Drive? campaign seemed to have little real religious content, but was meant to target gas-guzzling SUVs. Next came a group from Hollywood calling themselves The Detroit Project. Led by the conservative political commentator and gadfly Arianna Huffington, it launched a wave of television ads that equated ownership of SUVs with support for terrorism. The campaign, which ran during Sunday-morning public affairs talk shows, was a takeoff on a series of ads the previous fall that had linked illegal drugs with terrorism.

Huffington herself had owned a Lincoln Navigator, a big, imposing sport utility that had been the rage in Hollywood during the late 1990s. Her conversion had come after the September 2001 attacks, when her friend Laurie David, the wife of television writer and producer Larry David, convinced her that by driving a vehicle with single-digit gas mileage, she was inadvertently aiding and abetting Middle Eastern countries that allowed terrorists to flourish. Abandoning her Navigator, she bought a black Toyota Prius hybrid-electric vehicle (the car of choice for other celebrities who had been converted to the wisdom of better fuel economy) and took off after the Detroit automakers with a vengeance.

A final volley was fired by the federal regulator in charge of automobile safety. Jeffrey Runge, chief of the National Highway Transportation Safety Administration, denounced SUVs to a shocked audience at an industry conference in Dearborn that coincided with the auto show. Drivers who felt safer in sport utilities than in cars were deceiving themselves, Runge declared: SUVs had a far greater tendency to roll over than did cars. “The thing I don’t understand is people, when they choose to buy a vehicle, they might go sit in it and say, ‘Gee, I feel safe,’” said Runge, who had been an emergency room physician for 20 years before taking the federal post. “Well, sorry, but you know gut instinct is great for a lot of stuff, but it’s not very good for buying an automobile.”

He added that he would not let his own daughters ride in an SUV with a poor crash test record, and he vowed that his agency would take more action in coming months to stiffen safety regulations governing sport utilities. Industry officials quickly insisted that their SUVs were among the safest vehicles on the road. They had to—in 2002, sport utility sales accounted for one-quarter of all the vehicles that were sold in the United States, easily making them the top category among the different types of automobiles. The attacks, which were debated on talk radio and on evening cable television all week, dampened the excitement of the auto show.

A few weeks later, Peter DeLorenzo, scion of an automotive family and the prickly industry critic whose Web site,
Autoextremist.com
, was a weekly must-read even by executives who disagreed with him most, declared, “The pendulum has swung back.” Auto companies, he declared, were about to find out that consumers were fickle and that they were likely to turn away from SUVs with the same fervor with which they had once flocked to them. (DeLorenzo has since hired on as a consultant to Chrysler, where he serves up pointed remarks meant to be a wakeup call to any troops who don’t understand the seriousness of the situation in which the auto company finds itself.) The weight of the criticism seemed one more obstacle in the effort by GM, Ford and Chrysler to convince consumers to trust Detroit vehicles, and that they were the equivalent of the imports that were gobbling up more sales each day. The irony was that these big SUVs had directly contributed to the demise of the vehicles that had been Detroit’s best weapon in its battle against the import brands.

Only 10 years before, Detroit had cars that could compete head-on with the challengers from Japan. It had figured out the secret to convincing buyers to try its vehicles. But instead of supporting these cars with their best talent and resources, so that their gains could be perpetuated, Detroit got distracted by the opportunity to make bigger profits on SUVs than those cars could yield. Instead of focusing its efforts on making each generation better than the last, the companies revealed their true interest: easy, quick profits over long-term credibility.

There was no better example of how Detroit had dropped the ball than the Ford Taurus and its twin, the Mercury Sable, two family cars that had proved Detroit could triumph, given the right determination and approach. In the 1980s, the Taurus was the single best example of how Detroit could take on the Japanese and win. In the 1990s, the Taurus hung on to the title of best-selling car in the United States, despite a hard charge from Toyota and Honda. But by 2002, a mere 10 years later, the Taurus was forgotten. Ford, bent on maximizing the profits that its big SUVs and pickups could provide, thought so little of the Taurus that it did not run a single ad for the car for two years. The demise of the Taurus proved that Detroit, in the end, didn’t really care. In a contest between short-term profitability and long-term customer satisfaction, profits won out every time. The irony was that those profits, earned so easily, could slip away just as fast. The much more difficult job of pleasing buyers and maintaining a car’s heritage was seemingly beyond Detroit’s grasp.

When the Ford Taurus reached the car market in late 1985, it was absolutely revolutionary—in looks and in the way that Ford had brought it to life. Ford gambled that it could compete, and it won. Taurus was a tremendous victory for Ford and marked an impressive comeback for the American automobile industry, which had been in dire straits during the early 1980s. Taurus could proudly take its place with the Toyota Camry and the Honda Accord as one of the leading family cars of its day. From 1992 to 1995, it reigned as the country’s best-selling car. Its owners could take pride in the knowledge that they were driving a symbol of American ingenuity and excellence. Along with Chrysler’s minivans, the Taurus is one of the most important vehicles that Detroit developed during the late twentieth century. Had Ford continued to refine and improve the Taurus in the way that the Japanese companies have their cars, it still might be considered in their class. Instead, 17 years after the Taurus made its mark, both the Camry and the Accord are still solidly on top of the nation’s best-selling car list each year, with roughly 400,000 apiece.

They have remained the symbols of their respective companies, whose engineers focus intently on making the next generation of each better than the one before it. At Toyota, the Camry has served as the basis for half a dozen other vehicles, resulting in sales of nearly 1 million vehicles a year in the United States that use the Camry platform. Meanwhile, the Accord, now in its twentieth year of production in the United States, continues to break new ground with each revision. “The Accord is the franchise,” said a Honda executive. In comparison, however, the Taurus has fallen sadly behind in both sales and prestige.

The year 2002 marked the lowest Taurus sales in 10 years. From being a vehicle that consumers could own with pride, it has become essentially a rental car, or a company car, sold in bulk and at a discount to fleet purchases, far less often purchased by individual consumers. “Not many car companies in history have literally abandoned a best-seller,” DeLorenzo, the Autoextremist, said. And in 2003, Ford announced its plans to discontinue the Taurus in two years’ time, replacing it in its lineup with three different models—the Ford 500 family car, the Ford Freestyle crossover vehicle, and the Ford Futura, a hybrid-electric model—none of which was likely to reach the height of popularity that Taurus once achieved.

Yet, when Taurus reached the market in 1985, Ford was already awash in advance orders from buyers eager for the next great American car. Taurus had been born of adversity. Auto companies in the 1970s had been forced by two oil crises and a wave of federal regulations to severely overhaul their lineups, downsizing their cars to improve fuel economy and sending buyers fleeing to import companies that offered small, economical cars. By the early 1980s, Chrysler had nearly gone bankrupt, and Ford was hemorrhaging as well, pleading with the United Auto Workers for contract concessions, and relying on profits from its successful European division to see it through miserable years at home. Fuel-efficient imports were continuing to steal sales away from Detroit companies, and now the Japanese companies were starting to expand their lineups. When Honda opened its first U.S. factory in Ohio in 1982, it signaled that it was serious about transforming itself from primarily a maker of motorcycles into a real competitor beyond small cars. Toyota had started a joint venture with GM in Fremont, California, and it, too, was looking for a site on which to build its first American plant. With Honda selling more than 350,000 Accords a year, and Toyota selling 150,000 Camrys, it seemed of utmost importance to Phillip Caldwell, Ford’s chief executive at the time, that Ford prove it could compete with the Japanese.

In the early 1980s, Ford had a development team working on a new family car under the code name Project Sigma. Caldwell had handed the team its new challenge: develop a family sedan that would be world class. And so Team Taurus was born. The project became notable for two reasons: It broke with industry tradition, in which designers handed off to engineers, who handed off to manufacturing experts, and then on to the marketing department—each group fighting for its own priorities and slowing down vehicle development, causing introduction dates to repeatedly be pushed back. Instead, the Taurus development team worked close to one another within Ford’s Dearborn operations, giving birth to the phrase “co-location.”

They vowed that the Taurus would be introduced on time in late 1985—remarkable for an industry where delays in product development were routine. The team also embraced a new practice called benchmarking, in which they studied the features of competing vehicles to discern which manufacturer had the best features and components in a given area, and chose the ones they wanted to emulate. They decided that the Taurus needed to look distinctive, and borrowed from Audi what ultimately became known as the “aero look,” with rounded body styling instead of square-cut corners. The look had several advantages. With rounded instead of angular sheet metal, air would flow more smoothly over the surface of the car, reducing drag and increasing fuel economy. The appearance also made the car look as if it could go faster, a plus at a time when Americans were chafing at a 55-miles-per-hour national speed limit. Calling to mind the favorite snack of President Reagan, Taurus was dubbed the “jelly-bean car.”

The Taurus was priced at just above $10,000 when it went on sale, the average price for a car at the time. For their money, buyers got a roomy vehicle that could seat six passengers, or up to eight in a station wagon version, and which could be purchased with either bucket or bench seats, in contrast to the Japanese cars, which came with only front bucket seats. “It was packaged perfectly for the American market,” said Gregory L. Kagay, an automotive industry analyst with Auto Market Scope. Buyers responded with enthusiasm, snapping up so many Taurus and sister Mercury Sable cars that Ford expanded production to two plants, in Chicago and Atlanta. Soon, suburban driveways were dotted with Tauruses. “You didn’t have to be ashamed that you owned an American car,” said Karl Brauer, editor in chief of
Edmunds.com
. Ford reveled in profits of up to $2,500 per car, an almost unknown figure at a time when most companies lost money on every car they sold.