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At Detroit Auto Show, Reality Intrudes on the Fantasy

Bill Koenig
By Bill Koenig Senior Editor, SME Media
Toyota-NAIAS-e_768x432.jpg
Akio Toyoda, CEO of Toyota Motor Corp., exits a Supra sports car at the North American International Auto Show, party of the fantasy associated with the event.

COMMENTARY

DETROIT — Historically, auto shows have provided fantasies about speed (as in fast cars) and size (as in huge trucks). That was the case with the first day of the North American International Show. Speed highlights included a 700-horsepower Mustang and the return of Toyota Motor Corp.’s Supra sports car. For size, FCA US unveiled the newest version of its Ram Heavy Duty pickup.

However, reality has a way of intruding on the fantasy.

For one thing, this year’s edition of the show is the last in a winter setting. In 2020, the event is moving to June. The show has seen some of its oomph taken away by CES (formerly the Consumer Electronics Show), held in early January in Las Vegas.

Cars and trucks are getting more technology as the industry moves toward self-driving and “electrified” vehicles. CES has emerged as a natural platform for automakers and suppliers for vehicle tech.

What’s more, some automakers, including Germany luxury brands Mercedes-Benz and BMW are skipping the Detroit show. So the show is trying to reinvent itself.

Then, there’s the general condition of the industry. For one thing, automotive still is a cyclical business. Makers of cars and trucks have enjoyed years of strong sales following the major recession that resulted in the 2009 U.S.-backed bailouts of General Motors Co. and Chrysler, now FCA.

People are wondering when the next recession will be. GM said last year that five plants in the U.S. and Canada will be “unallocated” in terms of new products. As a result, they may close, though that will depend on labor negotiations. Both GM and Ford Motor Co. are looking to cut salaried jobs.

For another, the industry movement toward self-driving vehicles and EVs is following an uncertain path. Nobody exactly knows how it’s going to shake out. The changes will require billions of investment with no guarantees of success.

The day before the auto show began, one analyst said too many are being too gloomy.

‘Calm Down’

“Is this the beginning of the end?” Jeff Schuster, president of Americas operations and global vehicle for LMC Automotive, said at a Society of Automotive Analysts program on Sunday. “It’s not. Calm down. It’s going to be OK.”

However, Schuster said in an interview there are a lot of unknowns.

“The general uncertainty is high,” he said. “There are a lot of things that could go wrong. The uncertainty really blocks planning. Your strategy is on hold.”

Volkswagen AG is an example of the ups and downs facing the industry.

The Wolfsburg, Germany-based automaker used the show to announce plans to construct a second Chattanooga, Tennessee factory. VW plans to invest $800 million and add 1,000 jobs. The company already has invested $2.3 billion and employs 3,800 people there. The new factory will build an electric vehicles.

“Electric cars are becoming more and more of an opportunity,” Herbert Diess, VW’s CEO, said at the show. “The U.S. already is the second largest market for electric cars after China.”

Diess tempered his remarks by noting there’s uncertainty (there’s that word again) because of the  global economy and trade tensions. “2019 will be another year of challenges for us,” he said.

In addition, VW and Ford are scheduled to conduct a briefing on Tuesday about their efforts to form an alliance. The two sides have been in discussions for months about ways they can work together.

The talks began as a way how the automakers could cooperate on commercial vehicles. Reuters reported last week the discussions have expanded. It’s an indicator of how the issues and investments facing the industry show it’s hard to go it alone.

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