Consumers Benefit From Auto Industry Woes

LOS ANGELES – Uncertain times in the automotive industry mean good times for the consumer, as design and innovation become top priority for the world's automakers.

A range of new ideas and creativity — from a hybrid gas and electric engine in Honda's best-selling Civic sedan, to the blending of technology and retro in BMW's new Mini Cooper — is on display beginning Saturday at the Greater Los Angeles Auto Show.

"Some of the unique styling of vehicles is impressive, and some of the new technology shows manufacturers are starting to focus on what really matters to consumers," said Brian Walters, director of product research for J.D. Powers and Associates.

Although automakers are coming off one of their best years in history, the industry faces a potential downshift in 2002. Companies must confront a range of challenges, from reigning in expensive incentives like zero-percent financing, to controlling labor costs and satisfying government regulations on fuel efficiency and lower emissions.

During a media preview of the show Thursday and Friday, auto executives hedged their normal product boasting with remarks about the growing competitiveness of the industry and the declining margins for error.

"As we enter 2002, the auto industry has never faced so much uncertainty," said Dick Colliver, executive vice president of sales for Honda.

"It has become much, much harder to make money in this business," added Bob Lutz, General Motors' recently appointed North American chairman and vice chairman of product development.

In this environment, automakers are betting that success lies with strong designs that appeal to buyers' hearts and lifestyles.

"Design has become the key differentiator," Lutz said, comparing the look of some of GM's latest offerings to "a well-trained athlete in a tight T-shirt."

During a keynote address Thursday, Lutz singled out two new products from GM meant to captivate the consumer with their quality and non-traditional design: the Pontiac Vibe and the H2 Hummer.

The Vibe is billed as a cross between a compact car, a sports car and an SUV. The muscular-looking multipurpose vehicle is meant to appeal to the younger buyer with an active lifestyle, allowing owners to stuff everything form camping equipment to surf boards in the roomy 57.2 cubic feet of cargo space. The Vibe is set to hit show room floors in February with a starting price of $16,900.

The H2 Hummer is a slimmed-down version of the original heavy duty truck. Weighing 6,400 pounds and with wheels nearly 3 feet in diameter, the H2 out-muscles GM's burly Suburban SUV but manages only about 13 miles to the gallon.

The H2 is designed as a true off-road vehicle, able to climb rock ledges and plow through up to 20 inches of water. But only about 10 percent of buyers forking out more than $50,000 for an H2 will ever venture into the wild with it, predicted Mike DiGiovanni, general manager of GM's Hummer division.

Honda is pushing the bounds of traditional design with its Model X concept vehicle that the company hopes to have in showrooms before the end of the year. The boxy machine, with wide-swinging center open doors, is targeted at active generation Xers, and is described by Honda as both a "dorm on wheels" and a "base camp on wheels."

Honda is also launching a major initiative at the environmentally conscious buyer with its hybrid engine Civic, which will start selling in April for about $20,000.

The regular engine Civic is already the best-selling small car in the United States, and analysts say that Honda's decision to bind a hybrid gas and electric engine to a popular production car will launch the green technology into the mainstream.

The move addresses consumers' concerns about both reliability and image.

"One of the things people don't want is to look too green. They want to look like everyone else," said Thad Malesh, director of alternative power technologies at J.D. Power and Associates.

Honda and Toyota, which sells the Prius, are rapidly developing a competitive advantage in hybrid gasoline and electric engines at the expense of U.S. manufacturers, Malesh said.

GM officials maintain that hybrid technology is not economically viable, in part because the batteries are expensive and wear out. The company is betting that fuel cell vehicles are the best way to cut emissions, but analysts say the technology won't be mainstream for at least the next 10 to 20 years.

Honda says customers should never have to pay for new batteries, which the company covers under an eight-year, 80,000-mile warranty.

DaimlerChrysler is offering another hybrid of sorts. The company touts its Crossfire coupe as a blend of American styling and European engineering, where "Route 66 meets the Autobahn."

The car was designed in the United States by American and German engineers but will be built in Germany.

"This is the first true child of the merger," said Wolfgang Bernhard, chief operating officer of Chrysler Group.

The sleek six-cylinder sports car offers 215 horsepower, a chrome-rimmed dash and two-toned leather. The vehicle is designed to compete against roadsters like the Audi TT and BMW's Z3 and will arrive in showrooms in 2003. Pricing hasn't been set.