As the (Automotive) World Turns

As the (Automotive) World Turns

Growing up in Denver it was common for folks to say, "One thing about living near the Rockies — if you don't like the weather, just wait a minute." The point being that Denver's — along with the entire state's — weather was inconsistent at best, and downright schizophrenic at its worst. The turbulent climate is one of the few aspects of Colorado I don't miss now that I'm a Southern California resident where the weather is about as creative as a "reality" TV plotline. My response to that gleeful statement was always, "OK, so what if I do happen to like the current weather situation?" As an avid motorcycle rider at the time, rapidly changing weather patterns were not my favorite Colorado characteristic.

It's become obvious in the last five years that the climate within the auto industry follows a pattern similar to the weather in my home state. Oh, it may not change every minute, but it does change — both dramatically and relatively quickly. When I take a snapshot of where things stood in 1999, and compare the snapshot with today's industry pattern, it's like five whole minutes have passed on a Colorado spring afternoon.

As an example, let's look at each of the Big Three in 1999 and today.

Ford — If you asked me (and probably most industry folk) which domestic automaker had the strongest product offerings in 1999, the answer would have been Ford. As the company that made the most of America's surging truck and SUV craze, Ford was reaping big profits on every Explorer, Expedition, Ranger and F-Series truck it sold. The car side of the business appeared strong as well (the Focus, Thunderbird and Lincoln LS were on their way), and analysts were beginning to consider the possibility of Ford surpassing GM as the largest seller of vehicles on the planet. But all that changed faster than you can say "Product stagnation and defective tires." The results of both issues have left Ford struggling to update its product line, create profits and retain its number-two status in the industry.

Chrysler — While I considered Ford's future strong in 1999, I felt the potential created by the 1998 DaimlerChrysler merger could turn that organization into an unstoppable sales juggernaut. Here were two automakers — Chrysler and DaimlerBenz — with a history of engineering excellence (a key factor in my personal assessment of any company) and a stated desire to create a "merger of equals." The ensuing (no pun intended) five years have brought culture clashes, lawsuits and management upheavals that often eclipse the impressive product accomplishments of the folks in Auburn Hills (and Stuttgart). Throw in a teetering allegiance with flailing Mitsubishi, and it almost appears to be a case of "united we fall."

GM — And then there's General Motors, the company that's probably had the least amount of publicity over the last five years. No sweeping management changes (though GM did hire product guru Bob Lutz), no monster lawsuits (product or investor related) and the lowest erosion of market share (but erosion nonetheless). During the timeframe in question, GM, the world's largest automaker, has been downright subtle by comparison. Other than the massive rumble created by its incentives spending, the General has avoided major upheaval — a rarity over the last 60 months.

If it appears I'm focusing only on the domestics, I should point out that the true inspiration for this discussion came from the import brands. Anyone who studies the U.S. auto industry's history will quickly notice that upheaval and changing market positions are par for the course. But what few could have predicted five short years ago is the massive turnabout (both good and bad) among European and Asian brands. While an in-depth analysis of these turnabouts could fill a book (and probably does somewhere), here are some quick examples that illustrate my point.

The Good

Hyundai/Kia — Raise your hand if you thought Hyundai/Kia would be one of the fastest-growing and most profitable automakers in America five years ago. The story of Hyundai in the U.S. market — from upstart Korean carmaker with impressive growth numbers to failing brand image and the butt of jokes to viable alternative shopped against the likes of Toyota and Honda — is one nobody could have written in 1999. The quality is up, the styling and design are compelling, yet the price remains ultracompetitive. It doesn't sound like rocket science in theory, but executing on those principals can be difficult, as many other automakers will confirm. Yet Hyundai and Kia are doing it, and doing it right. If you don't think so, check out our Elantra long-term report or our Most Wanted SUV Under $25,000.

Nissan/Infiniti — Now raise your hand if you thought Nissan would be stealing market share from Honda and Toyota five years ago. I personally wondered if Nissan would have a presence in this country in the year 2004. But here the company is, winning awards, stealing market share from everyone (domestics and imports) and producing some of the most compelling product currently available. We named the Titan the Most Significant Vehicle of the Year for 2004, and that was before it stomped every other U.S.-sold full-size truck in our latest comparison test. The Infiniti G35 is consistently among the Most Researched vehicles on (duking it out with the long-time favorite BMW 3 Series), and the Nissan 350Z is one of the best performance values on the market.

The Bad

BMW/Mini — Regular visitors to this site already know how much we like BMW (and Mini) products. When it comes to creating passionate, driver-oriented automobiles that transcend mere transportation, BMW has it nailed down. At least, that's been our impression for as long as I can remember. But since 1999, the company has introduced several all-new models. A redesigned 5 and 7 Series, an all-new 6 Series, the X5 and X3 sport-utility vehicles, the redesigned Z3 (now called Z4) and, of course, the Mini Cooper. With the exception of the Mini Cooper and the X5, all of these vehicles have been met with less than 100-percent adoration from both the automotive press and the marketplace. While the controversial styling of newer BMW models is the easy item to focus on, I believe the problem goes deeper. First, there is the iDrive interface, which I have officially decided is a failure (but that's a topic for another column). Then there are the driving dynamics of the new models, the franchise around which BMW has built its reputation since the 2002 model was introduced three decades ago. While modern BMWs still offer exceptional driving pleasure, there seems to be a philosophical shift away from the undiluted design of the past, while moving closer to the technology-based systems of the future. Certainly an automaker can't put its head in the sand while technology passes it by, but integrating new technology into a brand while maintaining that brand's integrity can be tricky. Neither iDrive nor active steering holds true to BMW's "ultimate driving machine" mantra, and I feel the sales numbers of the 5 and 7 Series already reflect this. BMW would likely point out that the numbers are better than the previous models', but they shouldn't just be better they should be drastically improved, with a steady growth pattern for several years. I don't believe they are, and I think BMW knows this (though the company would never admit it publicly). Regardless of styling preferences, user interfaces and specific sales numbers, the bottom line is that I felt BMW had an unblemished record of consistently producing benchmark products in 1999. Today I don't (and I don't think I'm alone).

Honda/Acura — I never thought I'd be putting Honda under "the bad" for anything, and in reality there are many companies that would gladly switch places with Honda. However, U.S. sales have been flat for 2004 and the company is actually wrestling with an over-capacity problem at its U.S. plants. Two factors are to blame here: a lack of truck products and a lack of youth-oriented products. The Element was designed to address this issue (it is both a truck and youth oriented), but sales haven't hit the level Honda was hoping for. The Accord and Civic, two stalwarts of the company's success in America over the past 30 years, are both down in sales for the year. Even more troubling, so are the Odyssey and Pilot. Honda is looking to offer more truck models and lower-priced, youth-oriented cars in the near future. It's worth noting that Honda sales in its home market of Japan have improved in recent months, motorcycle sales are way up and overall profits for the company are also at an all-time high. The Accord even won our recent family sedan comparison test, beating out nine other models in what is probably the most competitive market segment we have. I don't see any insurmountable problems here, but the company does need to address its product offerings in the U.S.

Volkswagen/Audi — Speaking of product, Volkswagen's current problems can be directly attributed to product neglect. VW was another darling of the industry in 1999, when the New Beetle was still an "it" car and the redesigned Passat had people wondering why they should pay more for an Audi…or a BMW. Volkswagens had a reputation for offering premium interior materials at non-premium prices, along with German driving dynamics and attractive styling. The Passat and Golf have made recurring appearances on our Most Wanted list over the last five years, and we still consider them excellent buys in their respective categories. But with companies like Hyundai, Mazda and Nissan offering newer models at lower prices (and with increasing levels of interior quality), Volkswagens no longer present a unique value proposition in the marketplace. Add in the recent quality issues that have surfaced (including a widespread ignition coil problem), as well as the introduction of such models as the $70,000 Phaeton, and you have the making of a sales slide, which Volkswagen is experiencing. In fact, Peugeot-Citroën sales in Europe are threatening to pass Volkswagen this year, an unprecedented event (like Toyota beating Ford). Don't get me wrong, I still love the Audi A8 and Bentley Continental GT, but these aren't the cars that will keep Volkswagen-Audi profitable over the long-term.

What's Next?

If the already turbulent auto industry is still too boring for your tastes, consider the following: China's automotive growth has reached stampede levels and the nation will probably start selling cars in the U.S. in the next few years. This could make the industry's turbulent weather of the last five years seem like a gust of wind by 2009.

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