The End of Detroit (33 page)

Undoubtedly, Ford would have far preferred more interviews like the ones Edsel Ford did in the months leading up to the centennial celebration. The son of Henry Ford II, Edsel Ford had spent years at the auto company, working in a series of marketing and sales jobs, and had once been thought to be a contender for the job his cousin ultimately landed. But he had wound up as president of Ford Credit, spending most of his time smoothing relations with Ford’s dealers. Ultimately, Trotman told him that he would receive no more promotions. Thus, he left Ford in 1999 (although he kept his board seat) in order to pursue his own business interests, including corporate aviation, and to play a leading role in national and local charitable causes.

Unfailingly jovial, with a down-to-earth manner and infinite patience, he showed off classic Fords on a New York City street to the hosts of
Fox & Friends,
and sat chatting one evening about company history with public television’s Charlie Rose, making no mention of unpleasant issues like the Explorer or the financial crisis that faced his family’s company. It was as if, by dint of the family’s historical significance, Ford could make all the questions about its future fall away and be supplanted by images of its marvelous past. But the approach seemed much like the commercials that Detroit companies love to run, filled with footage meant to trigger memories of the era when they sold Americans their dream cars. All the fond memories of the past do not change Ford’s present. And unless it can address the competitive challenge that it faces from GM, Chrysler and the imports, its next 100 years may be bumpy indeed.

CHAPTER TEN

WHAT DO CUSTOMERS
REALLY WANT?

MARK SANDLIN,
a 28-year-old graphic designer who lives in Everett, Washington, is just the kind of buyer that auto companies long to attract. He grew up loving cars and still treasures his case of Hot Wheels that he collected when he was a kid. His enthusiasm was fueled by his father, who owned more than 30 different models when Sandlin was young—domestics, imports, sedans, pickups, you name it. He’s an avid Web surfer, constantly checking out various automotive sites and dropping into car discussions. On weekends, Sandlin will stop in at car dealerships to see what the latest models look like, fending off salespeople who descend on him like locusts, eager for his business. “I say, ‘Quit it, I know more about cars than you do,’” Sandlin said. Through his knowledge of design, he can analyze every concept car that GM and Ford have put on display at auto shows over the past few years, such as the Ford 49 and the Chevrolet Nomad.

Sandlin is excited that Bob Lutz has taken charge of GM’s product development, and he’s glad that Lincoln is trying to make its interiors more luxurious. But Sandlin has no interest in owning a Detroit automobile. He drives a Volkswagen Jetta, his second import, bought after trading in a Honda Accord coupe. His wife still drives a 1995 Accord, and his friends own Subarus and Toyota Corollas. “There isn’t any American car that evokes any kind of passionate response from me at all. So many of them have been so bean-counterized that they just make you yawn,” Sandlin said. What does it symbolize that he and so many other American consumers are buying cars with import nameplates? Sandlin shrugs. “I think it says we’re tired of Detroit making crap,” he said. “I think the domestic companies are learning that they can’t just support their business by waving a flag anymore. People want something to be proud of while they’re waving their flag.”

Lou Nunez, who lives in the New Jersey suburbs outside New York City, isn’t a car expert like Sandlin, but he has always believed in Detroit, having come from a family of Ford owners. He set out specifically to buy another Ford in 1999, aiming to use up more than $1,000 in credits on a Ford Visa card. Nunez, 42, took home a Ford Contour SE Sport Edition, which joined his brother’s 1998 Contour in the family’s stable of Fords. But a week after Nunez bought his Contour, the compact would not start and had to be towed back to the dealer. Then, when the car was three years old, the speedometer stopped working, requiring a $350 repair. That happened a few months after the air-conditioning died in the middle of a hot New Jersey summer, requiring a new shot of coolant. In addition, his Contour is afflicted with excessive wind noise on the highway, as well as “mysterious creaks, groans and rattles” from the dashboard, he said.

Nunez decided to get rid of his Contour “before it really caused me headaches” and took the car to a used-car lot for an appraisal, only to find out that a car for which he had paid $18,820 four years earlier was worth less than $3,500. A key reason was that Ford had sold countless Contours over the years at deep discount prices to rental car companies. They, in turn, unloaded them onto the used-car market. Some dealers even refused to look his car over. “One guy said to me, ‘Look, I’m not buying this. I’ve had a Contour sitting on my lot for more than six months,’” Nunez recalled. In spring 2003, Nunez broke with family tradition and set out to shop for a Subaru Outback. He figures the car will be reliable, since one of his neighbors has owned one for a dozen years with no major problems. Nunez, who runs the information help desk at a local college, said the experience with his Contour has erased his loyalty to Ford. “Ford, as far as I’m concerned, just has not been loyal to their customers,” he said.

Sandlin, in Washington State, and Nunez, in New Jersey, each live in a state where customers are buying imports at a faster rate than the national average, a trend that is accelerating with each passing month. The growth is greatest on both the East and West Coasts, and increasingly in western and southern states. It is as if the imports took a map of the country, colored in two sides of it and then began coloring in the adjoining states. The pattern is just like the import companies’ strategy for eating into Detroit’s market share: The imports are nibbling at the edges as the traditional American companies cling to their core strength, the industrial heartland. To be sure, Detroit companies have not lost their grip on the states where they’ve always been strong.

In Michigan, the nation’s automobile capital, where more than 1 million people are directly or indirectly employed by the auto companies, domestic brands have an 87.2 percent share. It is possible to sit at a stoplight at the intersection of Telegraph and 12 Mile Roads, two main thoroughfares 20 minutes from the headquarters of each of the Detroit companies, and not see a single import vehicle among two dozen waiting for the light to turn green. Other midwestern states are overwhelmingly loyal to Detroit, too. Domestic vehicles still have two-thirds to three-quarters of the market in Indiana, Minnesota, Wisconsin and even Ohio, despite Honda’s presence there. But that’s to be expected. What is more alarming is that Detroit is losing ground in some of the wealthiest states of the country, with some of the country’s most sought-after buyers.

Californians have always bought import cars and trucks in droves, attracted by their fuel economy and cleanliness in a state where environmental issues have long been in the forefront. Japanese auto companies made their first inroads there, followed by the Koreans, while European cars with their posh reputations have attracted status-seeking Californians for decades. In almost a reverse picture of what it is like to drive in Detroit, a motorist can sit in a sea of traffic on Interstate 405 in Los Angeles at rush hour and see but one Detroit vehicle—an SUV. But California is no longer the only state where imports have more than 50 percent of the market.

In California, Connecticut, the District of Columbia and Massachusetts, import nameplates took more than half of all automobile sales in 2001, according to statistics from R. L. Polk & Co., which tracks vehicle registrations. In another 13 states—Arizona, Colorado, Florida, Hawaii, Maryland, New Hampshire, New Jersey, New York, Oregon, Rhode Island, Virginia, Vermont and Washington State—import sales constituted more than 40 percent of the market, above the national average of 38.7 percent. On the flip side, there are only three states where imports made up less than 20 percent of all sales. They are Michigan, of course, plus the two Dakotas, hardly a groundswell of support for the Detroit auto companies.

Consumers’ switch to imports coincides with the greatest availability of car-buying information that the industry has ever seen. Thanks to the Internet, buyers can tap into more statistics about vehicles than many engineers at the auto companies used to be able to access. This wealth of data is revolutionizing the way people think about vehicles and the way they approach their car and truck purchases. Anwyl, of
Edmunds.com
, feels the situation has created a whole new dynamic among consumers, car companies and their dealers. “People aren’t as afraid as they used to be” about the car-buying process, Anwyl said. “They feel empowered. Even though car-buying is still a battle, it is a battle that consumers feel they can win.” As recently as five years ago, auto companies did not know what to make of the Web. Some companies saw it only as a marketing tool, a place to stash brochures and dealers’ addresses. Others panicked. For a time in the late 1990s, the industry was awash with predictions that the traditional automobile showroom was headed for the dustbin and customers would be buying cars with a click of their computer mouse. “This Guy Is Outta Here!” a cover story in
Business Week
declared in 1999.

That did not exactly turn out to be the case. Internet purchases are rare, comprising less than 5 percent of all auto sales each year. But Internet research has become the norm. Consumers from all walks of life, from senior citizens to the industry’s youngest buyers, are arriving at showrooms armed with information, already experts on the vehicles they want to buy without being handed a brochure. Some 60 percent of customers research their vehicles on the Internet, whether on the auto companies’ sites or independent sources. Even so, a number of dealers and their parent car companies have been slow to realize the transformation that has occurred, still convinced that their primary job is to sell the sizzle, not the steak.

For decades, consumers got the bulk of their quality data from magazines like
Consumer Reports
, which served as a bible for customers who demanded high quality. Dealers got used to shoppers walking in the door with dog-eared copies of the magazine under their arms. Although the magazine barred companies from citing its reviews, and still does, a favorable rating in the publication could lead to the “
Consumer Reports
effect,” triggering a sales increase of as much as 25 percent in the year after the review appeared. The magazine’s repeated endorsement of Toyota and Honda vehicles throughout the 1970s and 1980s helped launch those brands in the United States. Likewise, its declaration of the Suzuki Samurai as unsafe led to the small SUV’s demise and triggered an angry lawsuit from the Japanese company. But
Consumer Reports
was far from the only source of information: For generations, car enthusiasts have turned to magazines like
Motor Trend
,
Car & Driver
,
Road & Track, Popular Mechanics
and, more recently,
Automobile
for their opinions and for their wildly entertaining articles.

In the 1980s, another place to look for advice popped up: the marketing firm J. D. Power & Associates, which issues a series of ratings every year on vehicle quality, reliability and the service provided by dealers. Unlike
Consumer Reports
, J. D. Power allowed the auto companies to use its ratings in their ads. And by the 1990s, its endorsement had become a very visible imprimatur on the automotive scene. But these automobile raters proved to be only a run-up for the explosion of information about automobiles that is now available on the World Wide Web.

One of the most widely accessed sources is
Edmunds.com
, which is based in Santa Monica, California, and which draws 2.7 million visitors a month to its omnibus site. The Edmunds company has been around since 1966, and it became known for its annual series of buyers’ guides for both new and used cars, domestics and imports, that were then the size of
Reader’s Digest
. Along with other publications, Edmunds helped buyers figure out the mysterious process of car shopping, cautioning them about the ways dealers calculated prices, alerting them when vehicles were likely to be poor values. In 1994, the company took the leap to the Internet with a site that now rivals
Consumer Reports
in its reach and impact on the car market.

Unlike the magazine, however,
Edmunds.com
is a freewheeling site, focused as much on data as it is on opinions and reviews. Its phenomenally popular “Town Hall Forum” invites car owners, shoppers and enthusiasts to post their views on everything from financing to future vehicles and to volunteer to be interviewed by the media.

What
Edmunds.com
and some of its rival sites have done is bring the concept of data transparency right into the faces of the auto companies. Just about any statistic about any vehicle sold in the United States can be found on the Web, whether it is new or used. The data on Edmunds alone seems endless.

Manufacturers’ list prices are just a beginning. There are list prices and invoice prices for vehicles and features like CD players and antilock brakes. There are pages that compare everything about a vehicle across a grid that stacks it up next to its competition. Buyers can find out what vehicles are selling for within their zip code and elsewhere, allowing them to get an idea of the price they can expect to pay, a feature that Edmunds calls the True Market Value. It’s a way to figure out how deep discounts are running, and also to tell how hot a vehicle is, by determining how close to sticker price deals are ranging in their area. “In any car purchase, the biggest fear that people have is the fear of making a mistake,” said Robert Kirilko, vice president of marketing at Edmunds. “One of the things they want to do is buy a good car at a good price,” he said. To that end, customers can check out the kinds of incentives that the auto companies are offering and how they compare to what’s available on other cars. They can look up financing information, print out pictures of future vehicles, and arrange for insurance. They can also find out the kind of damage that discount lease deals, incentives, zero percent financing and other special offers are doing to the resale value of their vehicles, and figure out whether vehicles are reliable. In March 2003, Edmunds introduced a feature called the True Cost of Incentives, which showed an alarming discrepancy between import and Detroit vehicles. At that time, the site found that for every $1 that was being spent on incentives by Japanese companies, Korean companies were spending $1.15, European automakers were paying $1.67 and Detroit companies were paying $3.39.

Executives view Edmunds and other sites as a sea change. “The better informed a customer is, the worse it is for Detroit,” said Denny Clements, the Lexus general manager. “No matter what they try to say, the quality gap hasn’t narrowed. Just look at the data that you can find out there on the Web.” While disagreeing with Clements, GM’s Bob Lutz said he likes the sites for another reason: The more information a consumer has, the more GM can combat mystiques about other companies, he said. But the flood of information is taking a key element out of the car-buying process: raw emotion. Detroit has long operated on one basic premise, which was that in the end, people bought cars that stirred them inside. That perception still lingers today, and it helps to explain why Detroit companies still place so much emphasis on niche vehicles, like sports cars, as proof of their expertise. In the world of Detroit, which is so relentlessly male in focus, people buy cars because they are sexy and exciting. It is a
Maxim
magazine approach whose validity is fast being eroded by imports.