Detroit auto show report: GM, Ford load up small cars for bigger profits

By Jamie LaReau and Chrissie Thompson, Crain News Service

From Tire Business

Detroit, Michigan - At the Detroit auto show, General Motors Co. and Ford Motor Co. revealed their comeback strategy for small cars: Adorn them with features seldom seen in domestic econoboxes, such as roomy interiors, computer gadgets, turbocharged engines and sporty sheet metal.

For example, the redesigned 2012 Ford Focus-Ford's biggest splash at the show-has touch-screen controls for navigation, phone, climate control and entertainment. The car, due in early 2011, also can download applications used on Apple's iPhone.

The small-car segment, which has been dominated by Asian auto makers, will be a key battleground as gasoline prices rise and federal mileage standards get tougher. But the many Americans who equate small with cheap may balk at high stickers on small cars.

Ford and GM are offering a range of high- and low-end versions of the new cars. At the high end, Ford wants to offer consumers “aspirational” small cars that appeal to affluent buyers, said Jim Farley, Ford's group vice president of global marketing.

“If you look at small cars over $16 000, (the Honda) Civic is the market leader,” Mr. Farley said. “We intend to be deadly serious about competing for the small group of customers at the very high end of the segment by offering them features and series that they have never seen from Ford.”

Ford has no qualms about charging nearly $23 000 for a fully loaded 2011 Fiesta, which is smaller than the Focus. The Fiesta sedan, which goes on sale this summer, starts at $13 995, including shipping.

The Fiesta, with a 1.6-litre four-cylinder engine and a six-speed transmission, gets 40 mpg on the highway.

Ford will be similarly aggressive with high-end Focus prices, Mr. Farley said. “In the past, because of our uncompetitiveness in quality and fuel economy, we've been unfortunately discounted.”

Mike Jackson, ceo of dealership group AutoNation Inc., said: “The Focus is the most important vehicle at the show. This is really a huge test for the Detroit 3. Can they really produce a car that you think is going to sell 2 million units around the world on this platform?”

Meanwhile, GM's Chevrolet division showed a sporty concept that hints at the next-generation Aveo, due in 2011, and the Spark, a minicar due in 2012.

The Aveo RS five-door hatchback concept is longer and wider than the current Aveo. Motorcycle styling inspired designers to give the show car protruding headlights and taillights.

The concept has the same 1.4-litre turbocharged engine with 138 hp that will power some versions of the 2011 Chevrolet Cruze, due in the third quarter. The Cruze replaces the Chevrolet Cobalt.

Bob Lutz, GM's vice chairman, said the redesigned Aveo “will be priced below today's Cobalt and above today's Aveo.” The Cobalt starts at $15,710, and the Aveo starts at $12,685. Both prices include shipping.

One approach: Get bigger

One relatively inexpensive way for GM to raise the perceived value of its small cars is to increase their size, Mr. Lutz said. The Cruze will be nearly 3 inches wider than the Cobalt although 2 inches shorter.

“The fastest way the customer ever reads value is, 'How much car am I getting for the cost?'” he said.

The Spark minicar “may be a size smaller than what most Americans are willing to accept,” Mr. Lutz acknowledged. “But it's an insurance policy. If gas rises to $5 a gallon, everybody in the country is going to be buying nothing but Aveos and Sparks.”

Jim Campbell, general manager of Chevrolet, said GM will win the public over with fuel efficiency and style in the Spark, Aveo and Cruze.

“We're going to really focus on the benefits in fuel economy,” he said, “but combined styling on the inside and out of the vehicles really makes it different from the econoboxes of the past.”

GM will keep the price of its small cars competitive in their segments, Mr. Campbell said. But some will have a sporty RS version or a high-performance SS version, which he said will yield higher profits for dealers and GM.

Reporter Amy Wilson contributed to this report, which appeared in Detroit-based Automotive News, a sister publication of European Rubber Journal.

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Detroit auto show report: GM, Ford load up small cars for bigger profits from Crain News Service/ Tire Business (a Crain publication)