The End of Detroit (35 page)

Tuners use their cars to display their sense of personal style, and their favorite vehicle, hands down, is the Honda Civic. Drive through the streets of West Hollywood at night or down Interstate 405 from Los Angeles and you’ll see Civics and other cars streaking by, with magnesium wheel covers that can cost hundreds of dollars, colored sidelights, booming radios and loud engines. Tuners were featured in the movie
The Fast and the Furious
, which made Vin Diesel into a Gen-Y icon, and the tuning movement, with its “have it however you want it” attitude, surprised Honda and the rest of the industry. They’re all trying to capitalize on it without looking “really uncool,” according to Chen, the Brooklyn graphic designer. “The youth market is a lot more savvy than the car companies give them credit for,” said Todd Turner, president of CarConcepts, Inc., a California firm that studies automotive trends. “If they think it’s specifically made for them, they’re not interested. If they discover it and adopt it, they like it.”

That’s the strategy that other companies are following in various ways. Hyundai has done almost nothing special to attract young customers, but pulls them in anyway with its low-priced lineup and its 10-year, 100,000-mile warranty. The average age of a Hyundai buyer is just 35.8, according to CNW Marketing Research of Bandon, Oregon. Finbarr O’Neill, the Hyundai chief executive, is skeptical about trying to attract any single age group. “You don’t break people down by ages. I just don’t think that it works out,” said O’Neill, banging his hand on a conference table for emphasis. “You can slice and dice the market too thin. You have to look at broader categories, because you otherwise lose the definition of who you are.”

Mitsubishi came up with its own formula: aggressive styling, pulsing music and free cars. At least, free for the first year, under the program it has offered for the past couple of years. Its television ads, with head-bobbing drivers and contortionist passengers, plus some of the industry’s most flexible financing terms, helped make Mitsubishi the fastest-growing automaker in the United States the past four years, with its sales up 81 percent since 1999. What’s more, 40 percent of its customers are under age 35. “We’ve become a very cool and hip company in the eyes of our customers,” said Pierre Gagnon, president of Mitsubishi Motors North America. With vehicles like the entry-level Lancer and the sport Eclipse coupe, Mitsubishi wants its sales to expand to 600,000 by mid-decade, compared with just 190,000 cars sold in 1999. It is trying to shake free of a fuzzy image as a second-tier alternative to Toyota and Honda, and it is counting on young customers to help it get there. Its TV ads, featuring rock bands such as the Barenaked Ladies, and showing cool-looking passengers and drivers heading off to presumably cool clubs, are accompanied by offers of no money down, zero-percent loans and no payments for a year. That generosity has shown signs of becoming a recipe for trouble, given how fickle these young consumers can be. In fact, Mitsubishi’s repossession rates are well above the industry average. But Gagnon insisted there have been more than enough honest customers to offset those who drive away in their free Mitsubishis and never make their payments.

All the maneuvering to attract young customers amuses Helmut Panke at BMW, who has his own youth car, the $20,000 Mini Cooper. There are no special deals on the Mini, still in hot demand after 18 months on the market. Like O’Neill, he’s willing to sell one of his cars to anybody, no matter their age, as long as their state of mind matches that of the retro British automobile. “People who are 96 years old are buying the Mini, as well as 20-year-olds, and I’m happy about it,” Panke said. “It’s good to have a customer. What’s wrong with that?”

After an afternoon spent in Los Angeles rush-hour traffic, the Honda FCV is as serene as a monastery. There is no noise when it starts, and just a quiet whir as its transmission engages and the car moves forward. The front-wheel-drive compact glides up to 35 mph in no time. The car’s speedometer and other gauges are displayed on a screen above the center console. Its ride is as comfortable and safe as that of any other Honda. The FCV has undergone crash tests and been certified by the Environmental Protection Agency. But the FCV isn’t for sale, unless you are the city of Los Angeles, which took delivery this year on the first of a fleet of five FCV cars.

The FCV is powered by hydrogen, which is captured in a fuel cell and used in place of gasoline. Its only emissions are water vapor, and it can be refueled in five minutes. The FCV, which costs $300,000, can travel for 170 miles on a full fuel cell, and there’s another benefit: The same home generation unit that would be used to produce hydrogen for a customer’s car can also make natural gas to heat a home. That won’t happen soon. Hydrogen fuel cell cars are far from ready for the conventional car market and may not be sold to the public before 2010 or well after.

But hybrid-electric vehicles are already being sold across the country, and they are demonstrating that there is a group of consumers, though limited at the moment, that is interested in exploring automobiles powered by something other than an internal combustion engine. These cars, powered by battery-driven electric motors and gasoline engines, came into vogue in 2002, when spiking gas prices and the backlash against SUVs made them seem not only sensible to many ordinary consumers, but hip to Hollywood stars like Cameron Diaz and Leonardo DiCaprio. Detroit has resisted offering alternative-fuel vehicles for years, saying that there was no sign that customers would be interested in them, and no possibility of making a profit on such expensive research. But Ford and GM are finally being dragged into the alternative-fuel-vehicle market because Honda and Toyota are already there, selling more than 30,000 hybrid-electric vehicles a year. “They’re about building hype. We’re about building products that people want,” said Jim Press of Toyota, which has sold the hybrid-electric Prius (pronounced “PREE-us”) in Japan since 1997, and in the United States since 2000. As for Detroit’s conversion to the wisdom of hybrids, Press says, “I’m glad they see this giant walking down the hallway, but they saw it too late.”

For, as Detroit companies introduce their first hybrid-electric vehicles over the next few years, with Ford bringing out the hybrid Escape SUV and GM promising a hybrid Saturn VUE sport utility, Honda and Toyota are on their second-generation hybrids and Toyota also plans to introduce a hybrid Lexus RX 330 in 2005. While Bob Lutz talks about giving American customers more cylinders and Chrysler brings back rear-wheel-drive cars, executives at the Japanese companies firmly believe that hybrid vehicles are set to move beyond experiments. In 2002, Honda added the hybrid Civic to a lineup that was launched with the Insight in 1999. Now the hybrid Civic accounts for 10 percent of all Civic sales. “Honda likes technology, but engineers feel they’re successful only if they can put it into the market,” said Ben Knight, vice president of Honda’s Research & Development Center in Torrance, California.

The automobile industry has examined ways to power cars with something other than gasoline since its earliest days. The Stanley Steamer, powered by steam power, was the first car bought by the American government while Theodore Roosevelt was president. Electric cars were curiosities through the 1920s, when gasoline engines firmly took charge, and Chrysler had a brief fling with jet-engine-powered cars in the 1950s, ordering up a fleet of them. There have been diesel-powered automobiles for generations, enjoying a spike in popularity in the 1970s, due to the rise in gasoline prices in the wake of a pair of oil embargoes. But the idea of a vehicle powered by anything but gasoline died out until the 1990s, when California passed a regulation requiring that 5 percent of all vehicles sold in the state be nonpolluting by 2000. The auto companies vigorously fought the idea. But in the meantime, GM decided to give electric vehicles a try.

It spent $1 billion to develop a small electric car, the EV1, which was available through Saturn dealers in California and Arizona. GM leased rather than sold the EV1, and its owners had to install charging stations in their garages and be interviewed by the company in order to be sure they understood all the requirements of an electric vehicle. The biggest problem with the EV1 was its short range, especially in California’s stop-and-go traffic. The air-conditioning system could sap the car of power, and more than one owner had to cancel meetings that were more than 100 miles round-trip, fearing that they couldn’t get back home. Put on the market in 1995, GM discontinued EV1 in 1999 after developing just two versions of the car, concluding that there wasn’t sufficient demand. “We couldn’t give them away,” said Gary Cowger, president of GM’s North American operations.

In retrospect, EV1 was a good starting point for GM and earned it a lot of loyalty among its small group of owners, some of whom filed suit in 2002 to keep their cars instead of turning them back in to GM when their leases expired. But instead of using EV1 as a launching pad into hybrid vehicles, the auto company saw it as wasted time and money and simply decided that customers weren’t interested. “EV1 was frankly what held us back on hybrids,” Cowger said. “When the hybrid thing started, people said, ‘Show me the business case.’” Added Lutz, “A product that loses money is not a legitimate product.” But Lutz is quick to congratulate Japanese companies for sensing the inklings of public interest in hybrid vehicles. “Was it smart PR? Of course it was. Do we wish we had them? Of course we do.”

Nobody is more unhappy that GM doesn’t have hybrids yet than former GM chief executive Robert Stempel. Since resigning form GM in 1992 in the midst of the company’s financial turmoil, he has become a tireless advocate for alternative-fuel technologies, devoting the bulk of his time to the development of hydrogen fuel cells and lean-engine concepts. “I’m furious,” Stempel said in March 2003. “GM had the technology. The lead [over Japanese companies] was there. I know it.” But the Japanese companies got a leg up on their Detroit competition for a couple of reasons. First was the deeply held belief by executives at both Toyota and Honda that the environment mattered.

Throughout his life, Soichiro Honda had constantly dogged his engineers to keep the environment at the forefront as they developed engines. He actually approached GM decades ago with some of his environmentally friendly technology, Stempel said, but the auto company turned him away. Likewise, in 1996 Toyota said that internal combustion engines most likely would someday have to disappear, in order to protect the world’s shrinking energy resources. Overall environmental consciousness seems much higher, on a daily basis, in Japan than it is in the United States, some green communities aside. For one thing, Japan is an island. The sea is never far away from any point in the country, and Japan has taken enormous efforts to preserve its parks and shrines, despite the intense crowding that occurs in its cities and on its subways and on its highways. Gasoline, as in Europe, costs $5 a gallon and up. Long before fears over severe acute respiratory syndrome, or SARS, circulated in Asia during spring 2003, Japanese pedestrians could be seen walking through major cities wearing face masks to protect themselves against the air pollution that permeates urban areas.

Both Toyota and Honda developed electric cars and then segued into hybrid vehicles as a way to maximize fuel economy of gasoline engines. A hybrid vehicle’s battery is recharged by the gasoline engine and by collecting energy when the car brakes. The battery powers an electric motor that boosts and occasionally replaces the power of the gasoline engine. Honda and Toyota use the power a little differently. On Hondas, the electric motor helps out the gasoline engine when the car is climbing hills or accelerating sharply. On Toyota models, the electric motor takes over completely at slow speeds. In both, the gasoline engine shuts off when the car comes to a stop at a traffic light or stop sign. (Jay Leno quipped that he’d once had a car that did the same thing. It was called a Yugo, he said.)

The first hybrid car that was introduced in the United States was the Honda Insight, an aluminum car shaped like an upside-down bathtub that definitely was a stretch to get used to. The two-seater was originally available only with a stick shift, and it was uncomfortable, appealing only to the most serious devotees. Honda has solved that quirkiness question with the hybrid Civic, virtually the same as the conventional compact save for a $2,000 premium. But Knight says that Insight, since updated and made available with an automatic transmission, has been important for Honda. “I don’t consider it an experiment. The Insight really helped prepare the market [for hybrids],” Knight said. He brushes aside criticism of the Insight’s space-age looks, saying, “The public recognized they were real cars.”

Appearance wasn’t an issue with the Prius, which is about the same size as a Toyota Corolla and has significantly more headroom. It required no compromises space-wise, and its conventional appearance was a strong selling point for dealers. “When you look at what’s happening with the world and the availability of oil reserves going forward, they really hit the nail on the head with the Prius,” said Greg Penske, owner of Longo Toyota, the country’s largest Toyota dealer. In 2002, Toyota passed a milestone, selling its one hundred thousandth Prius worldwide since the car went on sale in 1997. Toyota is aiming to sell 400,000 hybrids a year by 2005, and by 2010, the company would like to sell 1 million hybrid vehicles a year, according to its chief executive, Fujio Cho.

Toyota’s approach differs from Honda’s in that it sees two ways to apply hybrid technology. One is the conventional hybrid system; the other is called a mild hybrid, in which fuel economy is boosted about 10 percent on the company’s biggest vehicles, like its minivans and larger cars, by use of the electric motor when the car is idling in traffic. That might not seem like much, but on a vehicle that gets 25 mpg, even an extra 2.5 mpg can reduce gasoline prices in places like Tokyo. Stempel, for one, says this fuel-economy-boosting hybrid is an important development. “The biggest payback on a hybrid is not on a smaller car. It’s on the bigger stuff,” said Stempel, chairman of a company that is developing hydrogen fuel cells. “The bigger it is, the better it is.” Honda, by contrast, has just one kind of hybrid and doesn’t think a mild hybrid has much use, since it can get a 10 percent increase in fuel economy out of its conventional engines. “Words are meaningless,” said Knight of Honda R&D. “Ours is a high-efficiency hybrid. There are many ways to package it. What counts is performance.”