Detroit Auto Show Brings Out Fierce Competition

DETROIT, Jan 2 Reuters filed this report that spotlites the NAIAS: The North American International Auto Show that starts on Sunday will throw a spotlight on the increasingly competitive U.S. market, as automakers facing economic slowdowns around the world place their hopes on American buyers.

For the first time in decades, all the major markets for new cars and trucks -- the United States, Western Europe and Japan -- are facing slowing economic growth or recessions at the same time, and sales in all three are expected to fall this year.

While vehicle sales may still be growing in developing countries, the most profitable market remains the United States. And the crowded floor of the Detroit auto show will hold the hopes for much of the world.

``If you produce the right product for the right price, you can make money in this market,'' said Michael Robinet of auto industry analyst CSM Forecasting. ``The Koreans and the Japanese still look at this as a growth market.''

Automakers have themselves to blame for much of their predicament. Between 1990 and 2000, worldwide capacity for building new cars and trucks increased to 78 million vehicles from 58 million, according to PriceWaterhouseCoopers.

Yet in 2001, automakers built only about 53 million vehicles according to CSM Forecasting -- leaving more than 30 percent of their worldwide capacity unused. Such wasted capacity kills profits at an auto company, as expensive equipment sits idle and workers are laid off or fired.

For automakers, there are three ways to address the problem. They can close plants or cut workers and production, as General Motors Corp. , Ford Motor Co. and DaimlerChrysler AG all did in 2001.

They can keep production up through boosted sales even as prices stagnate or fall and profits shrink to nil, as automakers did with rebates, interest-free loans and other consumer incentives to American buyers last year -- an estimated $40 billion worth, according to J.D. Power and Associates.

Or they can out-design and out-engineer the competition, building the kinds of cars and trucks that consumers rush to buy. The Detroit auto show will give a good picture of those efforts and the competition they will foster in the United States for the next couple of years.

BIG THREE DROUGHT?

GM, Ford and the Chrysler arm of DaimlerChrysler will all unveil new models headed to production in the near future. As in years past, trucks and sport utility vehicles will get most of the focus.

GM will show production versions of its Chevrolet SSR truck-roadster, the Hummer H2 SUV and the Cadillac XLR roadster. Ford will take the wraps off a revamped version of its full-size Expedition SUV. And Chrysler will show a ``crossover'' vehicle that blends features of cars and SUVs and will go into production in 2003.

Foreign automakers will continue with a flood of new products. Toyota Motor Corp. will unveil a new Lexus full-size luxury SUV, while Honda Motor Co. Ltd. will unwrap its Pilot mid-sized SUV. Both models will target market segments where the Big Three have reigned supreme.

Other automakers introducing new models for the U.S. market include Subaru, BMW, Nissan, Volvo and Land Rover.

The tougher competition will drive not just more models but newer ones. Analyst John Casesa with Merrill Lynch said in a recent report that between 2002 and 2005, an average of 50 new models will be introduced in the United States every year, with the average age of a vehicle model falling to 2.5 years.

Casesa noted that over the same time period, Detroit's Big Three will hit a relatively quiet spell for new vehicles. That's evident from the lineup at this year's show. Detroit's new models represent a smaller volume of sales than the models introduced in the past few years. Last year, for example, Chrysler had the Jeep Liberty, Ford had a new Explorer and GM had its new trio of mid-sized SUVs.

With U.S. sales in 2002 expected to fall by as much as 1.7 million vehicles from last year's sales of about 17 million, few automakers are expected to increase their volume. But analysts will be closely watching which automakers are able to hold on to their pieces of the market.

``This year more than ever, market share may be what you focus on,'' said Rebecca Lindland, a senior global auto analyst for DRI-WEFA. She sees the major Japanese automakers holding an edge in that measure: ``They're great at maintaining share. They don't lose customers readily.''