The End of Detroit (7 page)

Rivals across town, whose cars still looked like boxes of Velveeta, didn’t get it. George Borst, now a Toyota executive, recalled taking part in a session at Chevrolet when his fellow managers took apart a Taurus piece by piece to try to figure out how it had been constructed, a practice in the industry that’s called a “tear-down.” The Chevrolet managers were ripping the Taurus apart verbally, too, saying that there was nothing so special about the Taurus that GM couldn’t do. For political reasons, Borst said, he couldn’t disagree, for fear the others would think him a traitor. But Borst also said he could see the design advantages of the aero look, and the solid construction of the car, which was better than anything Chevy offered at the time. (A few months after that, Borst jumped to Toyota, where his mentor at Chevrolet, Jim C. Perkins, had already defected to help start the Lexus luxury division.)

Japanese companies, however, wasted no time in responding to the Taurus. The first volley came from Toyota, which brought out the latest version of its Camry in 1988, followed by Honda, which surprised the industry in 1989 with a new version of the Accord that had grown in size and power. Sold as a 1990 model, this new Accord, five inches longer and light years ahead of previous Accord models in sophistication, was such an immediate hit that it became the country’s best-selling car. It was the first time that a Japanese model had held the crown, and Accord’s popularity spurred Ford to fight back. It did so with alacrity.

The 1990s marked a new phase for the Taurus. Initially, Ford played it safe as it proceeded with new versions of the car. The 1992 restyling of the Taurus didn’t really change its appearance, but the car grew in size, as did its engine: Tauruses from here on out would be available only with a V-6, an effort to placate consumers who were seeking performance again after so many years of driving underpowered cars. At the same time, facing a stiff battle with the Japanese for individual customers, Ford saw an opportunity for Taurus in the rental car market.

The early 1990s saw the emergence of a new category of automobiles: the nearly new car. In order to keep factories running, auto companies encouraged rental car companies to buy new vehicles every four months instead of every six months or more, which had long been the industry’s practice. In order to encourage the purchases, the companies agreed to buy back the former rental vehicles once the contracts were up, and take responsibility for reselling them at auctions. The continuous sales to rental car companies under these buyback programs helped the Detroit companies solve a problem that arose with their new union contracts. Under an agreement with the UAW in 1990, the auto companies pledged to lay off workers for only 13 weeks at a time. After that, workers would receive most of their take-home pay, even if they were sitting at home and their factories were idle. Since workers were going to be paid anyway, it behooved the auto companies to keep factories running. That meant the cars had to go somewhere, and rental car lots proved the answer.

Once the rental car companies were through with their cars, they would turn them back to the auto companies, which would sell them to dealers at auctions. The dealers couldn’t be happier. Since there were so many of these rental cars, the dealers could get them for a song. And because they had just a few thousand miles on the odometer, they still looked new, meaning they could be displayed right on the showroom floors, next to the actual new cars. If a customer balked at paying full price for a brand-new vehicle, the dealer could show them the nearly new car, which could be had at a discount, but still at a price that ensured the dealer a bigger profit than he earned on a brand-new model. Thanks in part to the flood of business with rental car companies, the 1992 Taurus helped Ford grab the “best-seller” crown back from Accord. It was a devil’s bargain, as the rental car business would come back to haunt the company and ultimately destroy Taurus’s brand image.

Even as the new Taurus hit the streets, Toyota introduced a restyled Camry. Almost in homage to the Taurus, the Camry was redesigned from its previous squared-off look into an elegant, elongated car. Its rounded corners and slightly angled body seemed a fresher look than the jelly-bean-shaped Taurus, whose exterior was virtually unchanged. Moreover, Toyota’s engines were quiet and smooth, its four-cylinder easily a match for the power of the Taurus’s V-6, and with better fuel economy. It was essentially the first Camry to be designed with the tastes of American consumers in mind, rather than a Japanese car that Toyota adapted to American requirements. Also, this Camry reached the market three years after Toyota had launched its Lexus division, whose ES 250 sedan had been built from the Camry chassis but had a slightly more upscale appearance. For many people, the 1992 Camry brought to mind the Lexus, for many thousands of dollars less, and the family similarity became a valuable selling point for Toyota dealers.

Two years later, Honda stepped up with its own freshened Accord, with a comfortable interior, a cleanly designed exterior and, like the Camry, enviable fuel economy. Taurus clung to the lead, but the bar had been raised and Taurus was feeling the heat. Unlike the Taurus, whose sales had to be boosted, the Camry and Accord were selling without incentives and virtually without discounts. Toyota and Honda stayed away from doing all but minimal rental car business, which allowed them to protect the image of their cars along with their profits.

To fight back, Ford executives chose to gamble with an all-new version of the Taurus, due in late 1995, 10 years after the original. A sign reading “Beat Camry” hung on the wall of the conference room where the leaders of Taurus’s development team, which included 700 engineers and designers, met to work on the next-generation Taurus. The team, whose story is told vividly in the book
Car
, by Mary Walton, decided that the new Taurus had to be as as revolutionary as the original Taurus had been when it first reached the market in 1985. “They thought they had to re-create the magic of that first Taurus,” said Brauer at
Edmunds.com
. Seeing how well Toyota had done with the Camry, and how the Accord had also been able to rise in size and price from earlier versions, Ford officials decided that the next-generation Taurus would also be positioned as a more upscale model, moving it away from the reputation it had gained as a bargain car.

The approach was meant to attract the upper-middle-class baby boomers who had been defecting back to the Japanese. And it would help restore the profits on Taurus, which had dwindled to virtually nothing due to the incentives and steep discounts. Ford was certain that the formula of a higher-priced, dramatically different-looking car was just what it needed to beat back the competition and keep Taurus on top.

The result was one of the biggest mistakes in Ford’s history. From an aesthetically pleasing, if now mundane-looking, aerodynamic car, the new Taurus seemed to have gone overboard on ovals. The ovoid shapes were everywhere—oval taillights, oval dials, an oval grille, oval rear windows. It had gone from jelly bean to egg, from simply modern to completely Jetsons. “They tried to use progressive styling as a shortcut, instead of honing an otherwise proven formula,” Kagay said. More than the styling, however, was a marketing miscalculation that stalled the Taurus before it even hit the market. As development of the new Taurus proceeded, company officials were determined that Taurus had to remain the country’s best-selling car. So Ford’s marketing arm laid on every trick they could think of to expand Taurus’s sales. They poured more Tauruses into rental car fleets. They piled on incentives, such as rebates and discounted lease deals, hoping to attract as many customers as they could. In the months right before the new Taurus was introduced, the offers got even more generous, with payments of as little as $199 a month on a Taurus lease, and rebates of $500 or more per car.

The deals worked in one unfortunate sense: Having heard and read all the ads for Taurus bargains, customers came to understand that the Taurus could always be had for a song—exactly the opposite of the upscale image that Ford wanted to achieve. When the new version came out, car shoppers came into dealerships expecting to get the same deals as before. What they found was a double disappointment: First, the looks of the Taurus had changed dramatically from the familiar car that had become such a beloved family sedan. It was as if a teddy bear had put on spandex and a wig. Because its appearance had changed so much, the Taurus also seemed smaller than the vehicle it replaced, and customers complained that the new version wasn’t as roomy inside. And the new Taurus cost hundreds to thousands of dollars more than its predecessor. The cheapest version cost close to $20,000, and once options were loaded on the car, the price approached $23,000. That was a steep price for a family car in the mid-1990s—still more than some Camry and Accord models cost today.

Thus, instead of a comfortable car that could be purchased at a reasonable price, the Taurus had become smaller, more expensive and less eye-pleasing. Dealers, who had ordered thousands of the cars in advance, weren’t happy. But Ford provided them with an alternative that would prove to be another blow to Taurus. By the time the restyled Taurus reached the market, another Ford vehicle was entering its second generation: the Explorer. Introduced in 1990, Explorer had broken new ground in the SUV market. Until then, sport utilities emphasized their practicality and usefulness. The focus was primarily on the ways they could be used to traverse difficult territory and to transport camping gear and other equipment. The few people who bought them for regular driving gravitated to Jeeps, and the best-heeled moved to Range Rovers.

Ford, however, had seen how popular those vehicles were and experimented in the 1980s with a smaller version of its big Bronco SUV, called the Bronco II. Built on a truck chassis, the Bronco II’s quality was subpar and its ride was uncomfortable, yet it offered a window into a potential market—namely, an SUV that could substitute for a car. Ford tapped into that market with Explorer, which by the mid-1990s was outselling many of the cars in Ford’s lineup.

This was made abundantly clear when the new Taurus reached showrooms. Should consumers shake their heads in dismay at its radical new design and higher price, dealers could walk them over to an Explorer and suggest they give it a try. Some versions of the Explorer were even more expensive than the Taurus, but that seemed okay, given just how much bigger a vehicle the buyers were getting. Dealers were delighted to convince customers to make the switch, since profits on the Explorer were in the thousands of dollars, versus a few hundred on the Taurus. And customers were happy, both because SUVs were becoming chic and because they could avoid the hassle of shopping elsewhere. “They didn’t even have to leave the showroom,” said Brauer.

The defections from Taurus were immediate. By 1997, Taurus had slipped from first place to third in the best-selling-car list, behind the Camry and the Accord. Ford seemed to take forever to respond to dealers’ complaints that the car cost too much, most likely because it simply didn’t want to admit that its gamble to go upscale had been wrong. It eventually did make a cheaper version available, but despite the uproar over the car’s dramatic styling, it left the Taurus’s appearance alone. Changing it right away would have meant millions of dollars in unbudgeted engineering expense. And by then, Ford had other priorities on its hands—namely, trucks. Jacques Nasser, who had become head of the Ford Automotive Group and was angling to become CEO, was convinced that the auto company needed to push full-bore into the SUV market. He saw all kinds of opportunities: Full-sized SUVs, bigger than Explorer—a vision that eventually led to the Expedition and the gargantuan Excursion. Small SUVs, such as the vehicle that Ford would call the Escape. Luxury SUVs, like the Lincoln Navigator. He also came up with an Explorer clone for Mercury called the Mountaineer. The company was SUV crazy, and its engineering resources were deployed to focus primarily on trucks.

As a result the Taurus, badly in need of attention, got left behind. “They thought totally corporate. They said, ‘We’ve got all these truck products coming out, and they’re going to be high margin,’” said a former Ford executive who is familiar with the decisions that were made on the Taurus. “They said, ‘We can just let the Taurus sit there.’” Because of the company’s obsession with trucks and its unwillingness to save its best-selling car, it took Ford five years, until the year 2000, to do anything about the styling that had been such an immediate disaster. On its next go-round, Ford calmed down the Taurus’s appearance, removing the ovals and simplifying the interior, so that the car had a cleaner, understated look. It had cut back somewhat its flood of sales to fleets and rental car agencies, which had sliced into the car’s profitability and destroyed its carefully crafted image.

But the changes hardly mattered by this time, because Taurus had long since been eclipsed again by the imports. In 2002, the Camry once again reigned as the nation’s best-selling car, a title it has held since capturing it from Taurus in 1997. Accord was slightly behind, while Taurus trailed the pair by thousands of sales. Its sales in 2002 were nearly 100,000 fewer than at its peak. Ford executives belatedly admitted that they had made a major mistake. Speaking to journalists at the Chicago Auto Show in 2003, Ford executive vice president Jim Padilla said Taurus didn’t deserve what Ford had done to it, saluting the car as if it were a fallen comrade.

Already gone from many buyers’ shopping lists, the Taurus is destined to never again hold the crown as the nation’s best-selling car. Ford is converting one of the factories that built the Taurus to produce the Freestyle, its first entry into the market for crossover vehicles, a kind of SUV that is a combination car and truck that it plans to introduce in 2004 as one of three models it has slated to compete for family buyers. But once again, Ford will trail its competition. The Japanese are already setting the pace with crossover vehicles like the Toyota Highlander and the Lexus RX 330, which are in their second generation, the Honda Pilot and the Nissan Murano, while Chrysler brought out the Pacifica in 2003. Later this decade, Ford also will introduce a family sedan, the Ford 500, and plans a hybrid-electric vehicle, the Futura, counting on those two vehicles and the Freestyle to fill the place in the market that Taurus alone once occupied.