January 10, 2009 - North American International Auto Show, Detroit MI

Auto Show Blues in Motown

Car Makers to Show Off the Shiny Future Amid Howling Economic Storm, Industry Slump

Auto Show Blues in Motown

Car Makers to Show Off the Shiny Future Amid Howling Economic Storm, Industry Slump

The U.S. economy is in a skid. Auto sales are falling. Detroit's car makers are in crisis. Scrambling to prove that they'll still be alive and relevant in ten years, auto makers play up dreamy concepts for futuristic, super high-mileage GreenMobiles.

Yes, 1992. It seems like only yesterday.

The annual North American International Auto Show kicks off this week in Detroit, presenting auto industry executives with the daunting challenge of throwing upbeat messages about the future into the teeth of a howling economic storm. It's been 17 years since things have been even close to this bad in the U.S. car business.

Some companies, notably Nissan Motor Corp., have decided that 2009 will be such a bust that they are skipping the Detroit show altogether. The crop of new production vehicles due to make their debut in Detroit this week looks thin, and skewed toward makeovers of relatively low-volume sellers.

GM has a new edition of its Buick LaCrosse sedan, a redesigned Cadillac SRX wagon, a niche model designed to put some life in the brand's effort to compete with the Lexus RX crossover, and a tiny compact car called the Beat. Ford is expected to show a more stylish design for its Taurus sedan, the latest effort to revive that name after years of abuse. BMW AG promises a redesigned Z4 roadster and a Mini convertible. Daimler AG's Mercedes-Benz will tease journalists at a party in a Detroit hotel with a peek at the sleek look for its forthcoming E-Class sedan.

The press will spend most of its time this week trying to break news about efforts by GM and Chrysler LLC, fresh from their bailouts by the U.S. government, to negotiate pay and benefit cuts with the United Auto Workers and restructure their debts to bondholders.

The last time the contrast was this stark between auto show glitz and the real world was in 1992. Then as now, General Motors Corp. faced a financial crisis. One of the Wall Street Journal's big stories out of the Detroit Auto Show week in 1992 led with the news that Moody's Investors Service Inc. had downgraded GM's debt.

In 1992, Detroit's auto makers were floundering in the face of competition from Japanese auto makers, burdened by uncompetitive labor costs, top-heavy bureaucracies and hurt in the marketplace by their images as purveyors of technologically backward gas guzzlers.

To divert the press from the recession-pinched lineup of real cars on display, auto makers in 1992 put the spotlight on prototypes of ecologically correct cars of the future.

GM, for example, showed off a car called the "Ultralite" with a body made of carbon-fiber composite materials that company executives declared would get 100 miles to the gallon. "Very possibly this could be the compact car of the future," a GM executive told journalists.

The stars of this fractured 2009 Detroit show also will come in shades of Electric Green.

Toyota Motor Corp. is expected to unveil the redesigned Toyota Prius, while rival Honda Motor Co. will show off a Prius fighter called the Insight.

Electric and hybrid-vehicle enthusiast Web sites such as gm-volt.com are buzzing with speculation that GM will pull the wraps from a concept for a plug-in hybrid Cadillac coupe similar under the hood to the forthcoming Chevy Volt. Toyota may counter with a Lexus version of the Prius. This is the kind of rumor that should be true even if it isn't, because the cost premiums that come with adding electric propulsion to a car are easier to cover at Lexus and Cadillac prices than at Chevy and Toyota brand prices.

Boutique car maker Fisker Automotive will drive that point home with a sleek ultra-luxury sports car powered by lithium-ion batteries and a small gasoline engine.

The 2009 Detroit show's sleeper could be Chinese auto maker BYD, which is expected to outline ambitious plans to bring its comparatively bargain priced electric and hybrid cars to the U.S. BYD, which got into the car business as an extension of its battery business, now has as its official goal to be the biggest car company in the world by 2025. Before you laugh that off, consider that one of Warren Buffett's companies recently bought a 10% stake in BYD.

Should the press and public get tired of variations on electric vehicles, there will be some more traditional automotive bon-bons. Ford will talk about its forthcoming "EcoBoost" engines – a family of higher mileage, direct-injection gasoline motors designed to advance Ford's drive to be the fuel efficiency leader in high volume segments. But then, it will show off the 540-horsepower, 2010 Shelby GT500 super muscle car.

The more things change…

Original Story - Wall Street Journal