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Mar
21

The Real Challenge for American Car Manufacturers

It seems that most people have yet to notice, but American car companies are back. Well, not necessarily back financially, but for the most part, they’re back to building world class vehicles. Certainly, there are few cars waiting for their refresh or to be dumped and many cars and even brands have simply been removed from the scene. The new stuff coming out of Detroit, though, is really very good and, for the most part, cheaper than anything shipped to US shores.

As it turns out, though, building new world class cars was the easy part for the American manufacturers. Projecting that reality to the buying public, however, is going to take a very long time. And long-term thinking is just not an American business strength.

A couple of weeks ago, I was meeting with a couple of young entrepreneurs who were both planning new car purchases to accommodate their expanding families. I asked what cars they were looking at. Their answers . . . Honda, Toyota and Nissan SUVs with a BMW or Audi as a long shot. I asked if they had considered an American car. I got blank stares. I said that there were some really nice new small SUVs offered by Chevrolet and Ford. More blank stares. I told them that I had purchased one earlier in the year. Polite, but uninterested body language. I said that the gas mileage was great, it had more interior room than its competition, the safety ratings were the same as the cars they mentioned and after 11,000 hard city miles, the car was tight and solid. Maybe some slight interest, but I may have been imagining it. I then said that the car cost about $5,000 less than its direct Japanese competition and was $10,000 to $15,000 less than its German competition. They responded, “yeah, I’ll have to look into that,” and went to discussing the Japanese and German cars.

I have to assume that if the American companies continue to produce great cars at lower prices, eventually, the buyers will come. Clearly, the companies are going to have to be patient, though. When Lexus entered the US market, no one thought that anyone would buy a high-priced, “luxury” Toyota. At first, few did. Toyota knew this – they knew that it would take a very long time to be considered an equal with the worlds’ best vehicles in that class.  The costs must have been tremendous, but they stuck with their plan and we all know the outcome. The American auto manufacturers will need similar planning, patience and stick-to-itiveness.

Keep pumping out great cars at good prices, Detroit. Eventually, the buyers will come.

Note: there is some indication that the tide is already turning. According to the cars.com blog, KickingTires, Buick is currently outselling all luxury brands in the US except BMW (they are forecasted to beat BMW too by year’s end) with only four cars in their lineup and 73% year-over-year unit sales growth in February.

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 March 21st, 2011  
 Will  
 Stuff with a Motor  
   
 17 Comments

17 Responses to The Real Challenge for American Car Manufacturers

  1. I agree with your post. I think a key factor in convincing consumers like me hinges upon their advertising message. While Lexus, BMW, Mercedes, and Audi highlight their vehicle features, performance, safety, and a certain lifestyle, I still see a lot of Dodge, Ford and GM ads that focus on their super sales and cash back incentives. As long as they keep their prime advertising message on cheap prices, I think the perception of cheap vehicles will linger indefinitely.

    Also, I think in general the American vehicle interiors still lag behind most of the foreign competition. I wish Detroit would put in place a moratorium on hard, cheap plastic interior components… at least on the higher-end vehicles.

    • Tom,

      Excellent point about the messages. I hadn’t thought about that, but I
      agree.

      On the interiors, I also agree, but I think the situation is changing.I was
      driving an Audi Q5 a few weeks ago and it’s interior has much more hard
      plastic than my daughter’s Chevy Equinox. Granted, neither are high-end
      cars. On the other hand, I rented a Camaro while on a trip last week and
      it’s interior surfaces were hard as a rock – and looked it. Of course, that
      was the cheapest Camaro made and a rental at that. I don’t know if the
      higher-end variety have better interiors. Hardly a luxury car though. Aside
      from ultimate high-end (MB S-Class, GL, etc; Audi A*, Q7, etc; BMW 7-series,
      etc; Lexus LS, LX, etc.) I think that European and Asian manufacturers are
      generally moving to cheaper interior materials while the Americans are
      moving up. Have they passed each other yet? I dunno, but it’s very close.

      ______
      978-218-0008
      will@herman.com
      @willherman
      http://www.2-speed.com

    • Tom,

      Excellent point about the messages. I hadn’t thought about that, but I
      agree.

      On the interiors, I also agree, but I think the situation is changing.I was
      driving an Audi Q5 a few weeks ago and it’s interior has much more hard
      plastic than my daughter’s Chevy Equinox. Granted, neither are high-end
      cars. On the other hand, I rented a Camaro while on a trip last week and
      it’s interior surfaces were hard as a rock – and looked it. Of course, that
      was the cheapest Camaro made and a rental at that. I don’t know if the
      higher-end variety have better interiors. Hardly a luxury car though. Aside
      from ultimate high-end (MB S-Class, GL, etc; Audi A*, Q7, etc; BMW 7-series,
      etc; Lexus LS, LX, etc.) I think that European and Asian manufacturers are
      generally moving to cheaper interior materials while the Americans are
      moving up. Have they passed each other yet? I dunno, but it’s very close.

      ______
      978-218-0008
      will@herman.com
      @willherman
      http://www.2-speed.com

    • Tom,

      Excellent point about the messages. I hadn’t thought about that, but I
      agree.

      On the interiors, I also agree, but I think the situation is changing.I was
      driving an Audi Q5 a few weeks ago and it’s interior has much more hard
      plastic than my daughter’s Chevy Equinox. Granted, neither are high-end
      cars. On the other hand, I rented a Camaro while on a trip last week and
      it’s interior surfaces were hard as a rock – and looked it. Of course, that
      was the cheapest Camaro made and a rental at that. I don’t know if the
      higher-end variety have better interiors. Hardly a luxury car though. Aside
      from ultimate high-end (MB S-Class, GL, etc; Audi A*, Q7, etc; BMW 7-series,
      etc; Lexus LS, LX, etc.) I think that European and Asian manufacturers are
      generally moving to cheaper interior materials while the Americans are
      moving up. Have they passed each other yet? I dunno, but it’s very close.

      ______
      978-218-0008
      will@herman.com
      @willherman
      http://www.2-speed.com

    • Tom,

      Excellent point about the messages. I hadn’t thought about that, but I
      agree.

      On the interiors, I also agree, but I think the situation is changing.I was
      driving an Audi Q5 a few weeks ago and it’s interior has much more hard
      plastic than my daughter’s Chevy Equinox. Granted, neither are high-end
      cars. On the other hand, I rented a Camaro while on a trip last week and
      it’s interior surfaces were hard as a rock – and looked it. Of course, that
      was the cheapest Camaro made and a rental at that. I don’t know if the
      higher-end variety have better interiors. Hardly a luxury car though. Aside
      from ultimate high-end (MB S-Class, GL, etc; Audi A*, Q7, etc; BMW 7-series,
      etc; Lexus LS, LX, etc.) I think that European and Asian manufacturers are
      generally moving to cheaper interior materials while the Americans are
      moving up. Have they passed each other yet? I dunno, but it’s very close.

      ______
      978-218-0008
      will@herman.com
      @willherman
      http://www.2-speed.com

  2. Forget 11,000 city miles, I’m used to buying a Japanese car (perhaps built here in the US; the line is increasingly blurred) and doing few significant repairs (mostly just maintenance) for 200K+ miles. This seems like less of a sure bet buying a vehicle out of Detroit. I could be wrong, but that’s the perception. I’d be interested in the average retirement mileage between foreign and domestic brands.

    • A reasonable point, but time will have to pass to be the judge here. IMO,
      perception is bar far the biggest issue ow. Your statement shows that to be
      true. The Japanese were known for horrible quality in the 50s and 60s and
      now they’re know for the best. Perceptions can change, but it’s long after
      the reality changes that the perceptions follow. The Japanese drove the
      conversion with lower prices. I see the American manufacturers doing the
      same.

      On the increasingly blurry part. This is very interesting. Did you hear that
      GM has idled several plants because of lack of available parts . . . from
      Japan. The highest American content of any “American” car is only 85% with
      cars like the Ford F150 – the biggest selling car in the universe – only
      having 75-80% American-sourced parts. As you say, the lines are very blurry.

      ______
      978-218-0008
      will@herman.com
      @willherman
      http://www.2-speed.com

  3. I was on a flight from Atlanta to Stuttgart and was seated next to a mfg. engineer with Mercedes Benz. What few people know is that ALL the GL, R and M series Mercedes are built in a plant in Alabama. “Americans” can and do build quality cars.

    I would agree that perception is a very important thing and can be difficult to change. Most of the damage to american car manufacturers reputations seems to have taken place back during the first two oil crisis’ of 70’s. The thing is, ALL of the cars built then had serious quality problems. They were so busy tackling emmissions and mileage requirements that quality took a back seat. Folks were still mostly buying american brands, the quality during that period was bad and the perception that american cars built lousy cars was set in peoples minds, those that switched to imports a few years later were buying into cars that were being built better by that time irrespective of whether they were built in the US or imported. All the new owner knew though was that their new Japanese car was higher quality than the old POS american car they got rid of.

    I repect Will’s opinion greatly as he has owned both imports and American cars and doesn’t have an axe to grind with either. He has a pretty balanced opinion and is willing to look at the facts than be swayed by some other factor.
    John

    • That’s very nice of you, John. I think we’d all like to think we’re
      objective, but we all carry biases too. I have had my share of American,
      Japanese and German cars. Right now, I have 3 German and 2 American cars
      (and one American motorcycle). I’d put the American cars against anything in
      the world in their class. I’d also put all three of the German cars in the
      same position.

      I’ve said it before and I’ll say it again, I want to buy American and, all
      things equal, I will. Is that a bias. I think it is, but it’s very small and
      on the margin. I find very few Japanese cars compelling any longer –
      although there are definitely some that are. IMO, few can hold their own
      against the German and American cars – different cars in different segments,
      of course. Don’t get me wrong. They are fine cars, most of them. They are,
      for the most part, no longer the best in their classes any longer. And that
      includes being best for their cost – some of the high-end Japanese cars have
      gotten very expensive.

      I don’t know that I agree that all cars were bad for the same period of time
      in the 70s. I think the American manufacturers did a pretty poor job through
      the 80s and into the 90s as well. There were some good cars for sure, but
      they got fat, dumb and happy and didn’t build them across the board. I
      remember you and I talking about the polishing of the inside of
      Honda’s transmissions and the subtle detents in the Lexus’ turn signals.

      That said, the American manufacturers got a severe kick in the ass in the
      last decade and are coming back strong. The fight to win perception will
      take a while though. It’s not like the foreign manufacturers are dropping
      the ball. Most of the cars are made here, and even about half the parts, on
      average, as you say. The cars are of very good quality. The gap has been
      closed, though, and the Americans have figured out how to build small cars –
      bread and butter. We’ll see if they’re patient enough to wait while American
      buyer’s perceptions change.

      ______
      978-218-0008
      will@herman.com
      @willherman
      http://www.2-speed.com

    • I have a Mercedes E350 made in Graz, Austria and a Mercedes GL320 made in Tuscaloosa, Alabama.  Compared side by side the GL is absolute junk.  The materials are lower quality and there have been numerous items literally fall off of the vehicle.

      Never again will I buy an auto that has been touched by American union looters.

  4. Maybe they need to read your last post about listening.

  5. Best car from an American MFG right now: Caddy CTS-V Wagon. OOOOOOh yes…

  6. In my personal opinion, I do not buy American cars for two reasons. One I do not want to support companies that failed, and they failed at my expense, I do not believe the “public” will let that go anytime soon.

    Second, ALL American MFGs have lost the MPG race. Meaning that they have so severely under engineered MPG in ALL models, and ingrained that stereotype for all American cars in the public opinion. It will take far longer time for that ever growing decision factor to depreciate in stigma, than the MFGs have money to ride out the aftermath of their last 30 years of complete disregard for consumers desire.

    Sorry for the rambliness.

    • Frank, thanks for the comment.

      You are certainly right about the fuel economy of the American car makers –
      it is worse on a fleet basis than the Japanese manufacturers, although not
      worse than the Germans. You can find the raw data here:
      http://www.nhtsa.gov/staticfiles/rulemaking/pdf/cafe/Oct2010_Summary_Report.pdf

      In
      summary (for simplicity, I’ll pick domestic passenger vehicles) the fleet
      economy by vendor is:

      Chrysler: 28.0 mpg
      Ford: 32.3
      GM: 30.6
      Honda: 34.7
      Nissan: 32.5
      Toyota: 36.4

      This is for cars made in the US (MANY Toyotas and Nissans are made in
      America), the numbers for the imported cars are a bit higher.

      The Americans are behind, but not by that much. Clearly, they have
      squandered a tremendous amount of time and money. Ford, however, has been
      improving fuel economy at almost twice the rate of any manufacturer over the
      last few years. It’ll be interesting to see what happens to the real numbers
      over the coming years.

      That said, and as you point out, the real problem is the perception that
      people have of the cars and, as you say, the companies. Maybe that can never
      be repaired. I dunno. More Buicks than Lexus’? That’s a pretty big change.

      • I have an american built 1999 honda civc ex and a 1999 Ford F-150 . Both with over 180k miles on the  original engine and transmission. Both cars still run well and both cars have interiors that have held up well.  I think that almost every car company has a model that they “concentrate” on to make as perfect as they can.  Usually it’s a model they know they will sell many of.  The problem with American car companies is that they are “concentrating” on the wrong type of vehicle because gasoline is only going to get more expensive and few people will be able to drive around the perfect full sized pick-up truck (or muscle car for that matter).