Detroit joins the car wars

Can General Motors (NYSE: GM) and Ford (NYSE: F) make a good car? After years of claiming that they can't make money with passenger cars, American automakers are finally taking the car market seriously. The fat years of making glorified pickup trucks tricked out with leather seats and premium sound systems -- better known as SUVs -- are now over, and Detroit finds itself in a bit of a pickle. The Americans may have ignored the basics of making well-designed cars, not gas-guzzling trucks, for so long that they may not be able to catch up with the leaders, Toyota (NYSE: TM) and Honda (NYSE: HMC).

The problem is that foreign automakers now have an enormous lead in design and manufacturing expertise when it comes to passenger cars. The Toyota Camry and the Honda Accord have long been the leading sedans in the U.S., and for good reason. They are roomy, comfortable, very well designed and made, and reasonably efficient. Their surprisingly powerful yet nearly silent engines last for hundreds of thousands of miles, which helps maintain resale values. And they are profitable: Toyota reportedly clears $1,000 per Camry, and with 400,000 Camry sedans sold last year in the U.S., that's a good chunk of change that any car company would be happy with.

Nevertheless, the competition for sedan sales is heating up. As The Wall Street Journalreports, GM is pushing the Chevrolet Malibu as an American alternative to the Camry and the Accord. Ford, too, is entering the fray, changing the name of the Ford 500 to the Taurus in an effort to recapture the glory of that hallowed name. (I think this shows just how desperate Ford is, given that the Taurus' glory days were in the 1980s and that the car sold so poorly in recent years that it was terminated.)

But it may be too late. As John Casesa, a former Wall Street auto analyst, says in the Journal piece, "The ship has sailed in the midsize sedan segment . . . Camry and Accord are now established titans in that part of the market." Even worse, Detroit may not be able to rule the second tier under Toyota and Honda. Other foreign manufactures, including Nissan and Hyundai, are making very good cars these days. Starting at under $18,000, Hyundai's Sonata sedan is a particularly strong alternative to the Camry and the Accord. So there isn't much room for the Malibu and the Taurus. It looks like Detroit may pay the price for ignoring cars so long for many years to come.


Source: http://www.bloggingstocks.com/2007/08/30/detroit-joins-the-car-wars/