US motor giants get into small cars to drive sales

Published on Saturday 4 October 2008 13:42

ACCOMPANIED by break dancers, executives at Chevrolet last week unveiled a car that the company hoped would lure American consumers out of Toyota and Honda showrooms and broaden its international appeals.

General Motors' decision to show the car here, on the eve of the Paris auto show, reflected its increasing dependency on its international markets.

With fuel prices hovering near record levels, GM and its Detroit rivals, Ford and Chrysler, have been struggling to respond to a shift in demand from consumers, who are abandoning gas-guzzlers in favour of smaller, more fuel-efficient cars. To fill the gaps in their US line-ups, the Big Three are turning to their European and Asian operations or foreign partners.

The compact Cruze was engineered and designed in Europe and Asia, with GM tapping resources from the former Daewoo Motor, which it acquired in 2001.

It will be built in South Korea, St Petersburg and Ohio. Chevrolet plans to start selling it in Europe next year, with other regions, including the US, to follow in 2010.

The Cruze will be the "ambassador" for Chevrolet's approach to globalisation, Wayne Brannon, executive director of Chevrolet Europe, said.

Ford has taken a similar approach with a new version of the Fiesta, a subcompact car that was largely developed in Europe, on a platform shared with Mazda of Japan, in which Ford owns a strategic stake. Manufacturing has begun in Cologne; the Fiesta will also be built in Valencia and in China, Thailand and Mexico. It is scheduled to be introduced in the US in 2010.

While Ford sells cars under its flagship brand everywhere, GM cars, including the Opel and the Vauxhall, are sold under different brands in different countries.

But more important, American automakers expect to make a profit on the stylish new models – something that has eluded them with other compacts, at least in North America.

Chrysler is looking to outside suppliers to try to compete in small cars. It has reached agreements with Nissan of Japan and Chery Automotive of China to export to the US and sell them under Chrysler brand names.

The Cruze and the Fiesta are not the first "world cars" from the Big Three. After the oil crises of the 1970s, Ford took a similar approach in the development of the Escort, a small car that was adapted for American consumers from a European model.

But the idea fell out of favour in Detroit as global auto markets diverged, with Americans opting for mini-vans and other light trucks. A European-developed car from Ford, the Mondeo, had only limited success when it was sold in North America as the Ford Contour and Mercury Mystique in the 1990s. Moreover, the car cost $6bn to develop and became a symbol of the fractured state of Ford's global operations.

Another small sedan, the Focus, has done better globally: Ford executives project that it will build two million cars off the platform by 2012, making it the largest volume for any single platform in the industry.

The new Fiesta was originally intended primarily for European and Asian markets. But as oil prices rose and Americans started looking at smaller cars again, the high-mileage Fiesta was added to Ford's North American plans. The Fiesta will give Ford its first entry in the pint-size B-car segment in the US, which Ford sees as an essential part of its worldwide growth.

In France, where the government imposed a tax on gas guzzlers in January, sales of SUVs fell 28% in the first seven months, said Peter Schmidt, managing director of Automotive Industry Data Schmidt. Germany and other European countries are considering similar taxes.

"The likelihood is that the patterns we are seeing in the French market today will be echoed elsewhere – small cars."