Phil Biggs covers the automotive industry for NewsTalk 1340 WJRW
January 23, 2014 – 8:30 am ET
New General Motors CEO Mary Barra was the talk of the town…
Certainly by now you know that Mary Barra is GM’s new CEO, with background in engineering, an MBA from Stanford and herself a GM-lifer. Her ascension to become the first female chief executive of a major automotive manufacturer has all the makings of a Hollywood movie. Add to that the announcement of GM’s Chevrolet Corvette and Chevy Silverado pickup named as the car and truck of the year at the show, and it was a storybook first week on the job for Barra.
While she was mobbed like a rock star by crowds of journalists everywhere she went at the show, with more cameras chasing her than Joe Biden, Commerce Secretary Penny Pritzker, and other visiting dignitaries put together, Barra has engaging blue collar qualities about her: common sense, humility, and team-centeredness. But make no mistake, Barra can be tough as nails, according to industry titan Bob Lutz. “Why are we surprised?” he said as he walked the floor of the show last week. “Israel had Golda Meir. Margaret Thatcher was probably the best prime minister in the history of England. Angela Merkel is in Germany. This isn’t a question anymore.”
With her “car gal” authenticity and gritty determination, it is difficult not to believe Ms. Barra when she told her engineering teams recently there will be “no more crappy cars built at GM.”
NAIAS puts the spotlight on Detroit and the Cobo Center…
The Detroit Auto Show attracted nearly 800,000 people last year and NAIAS organizers believe that number could reach 1 million for this year’s show. And that translates to $400 million to benefit the greater metropolitan area. With the Motor City stinging from the aftermath of post-bankruptcy, the auto show acts as an economic bandage this time of year.
Detroit Mayor Mike Duggan, who toured Cobo Center last week, said he “couldn’t be prouder of how Cobo looks.” The hefty $300 million investment to make cosmetic and infrastructure improvements is finally paying off with an electrical overhaul, new parking and roofing, and the impressive Grand Riverview Ballroom overlooking the Detroit River that hosted the Ford Motor Blue Oval ceremonies this week.
No, the Detroit Auto Show is not as sexy as Tokyo or Frankfurt or even Los Angeles…but it remains the most important car show destination in the world because of over 700 vehicles on display and more than 50 debuts and unveilings. With eye-popping muscle, concept and niche specialized products on display, there’s no doubt that the industry is feeling strong again.
Among the show’s unveilings, the daring new Ford F-150 had everybody buzzing…
Despite the Chevy Silverado being named NAIAS Truck of the Year, and Dodge Ram flaunting its status as Motor Trend’s Truck of the Year for 2013 and 2014, the buzz at the show was Ford’s new F-150 with its groundbreaking all-aluminum body. As the best-selling vehicle in the U.S. of any kind over the past 32 years, with nearly 770,000 sold in 2013 alone, Ford’s decision to convert to aluminum is more than a bit risky.
But by shedding 700 lbs. and netting an increase in gas mileage of more than 20%, Ford believes its loyal F-series family of owners will be even happier with the extra dollars they’ve saved at the pump. Adding EcoBoost will deliver even better mileage gains, and all of this without sacrificing torque, towing, and overall performance. “The F-150 is well-known for being Built Ford Tough. Now, it is both tough and smart,” said Mark Fields, Ford’s Chief Operating Officer.
Other notable debuts included the new Chrysler 200 in the competitive midsize sedan segment, the stunning Acura TLX and impressive Cadillac ATS in the ever-growing luxury segment, and the Honda Fit in the subcompact segment. As Dr. Dave Cole told me, “This industry has made a profound jump in design, quality, and performance. It’s hard to find something here you don’t like…everything is well built and stylish.”
Targeting the Baby Boomers, Millennials, and women is a daunting task…
It’s a chess game as OEMs continue to sub-divide demographic segments to make an ever-challenging design-to-cost business case. All this is done to lure new car buyers with sexy styles, colors and technologies aimed at desirable demographics: the aging Baby Boomer, women, and the elusive Millennial car buyer.
Although new car prices have fallen slightly from December 2012, Detroit automakers’ transaction prices remain almost several thousand dollars above the industry average. But still there are factors preventing an all-out boom in car sales: Millennial lifestyles keep younger people avoiding car purchases as they use public transportation and other ride alternatives. Coupled with this lack of interest is sluggish job growth and stubborn economic uncertainty which is causing many to stay away from dealer lots as they just don’t have the consumer confidence to make a purchase.
But that’s not deterring the automakers. The new Hyundai Genesis was unveiled to compete in the highly-competitive luxury segment and features all-wheel drive…aimed at women drivers who want safety with good looks “priced thousands less than snobbier Euro-competition,” says USA Today. Meanwhile, the VW Beetle Dune is aimed at “progressive” Millennials, the Mercedes-Benz CLA is targeted at “successful” Millennials, and the sleek new Lincoln MLC cross-over utility vehicle is aimed squarely at recent Baby Boomer empty nesters, who desire style and more flexible space than a sedan. Talk about micro niches…the segments just keep getting skinnier!
Marketing to the Echo Boomers…social media is vital but is it a buying motivator?
Globally 2.1 billion young potential car buyers are coming of age and without a doubt there is a crucial desire to convert these Millennials all around the world into actual car buyers. Most of these Echo Boomers are inexorably connected to their iPhones and other devices, as more and more the vehicle itself becomes connected. But the final step, getting Millennials to connect to the vehicle, is proving to be a herculean challenge.
I spoke with Scott Monty, Director of Worldwide Social Media for Ford Motor, who believes the purchasing power of the Millennials is very difficult to measure and predict, but cannot be ignored. “With numbers of 75 million and growing in the U.S. alone, Ford cannot overlook the impact of social media to help position our lineup with the Millennial market segment.”
The cars here at NAIAS are smarter and brimming with new technology in a direct effort to entice the Millennials. The cars are also smaller, and smaller is good: it helps OEMs meet the 54.5 mpg EPA standard facing the industry but, it so happens, smaller is exactly what many of the Baby Boomers and Echo Boomers are demanding now.
But, as Monty says, there is no easy or direct way yet to link social media to volumes. For now, social media’s role is an awareness builder. Following his success in Europe several years ago, Monty is replicating social media coverage here in the U.S. and will keep chipping away at the fickle Millennials in hopes they become car lovers like their fathers and grandfathers were.
Even most of the automakers’ traditional advertising is targeted at the young and hip. The recent ad campaign starring Will Ferrell as the Anchorman character Ron Burgundy was a huge success for Dodge, with 70+ commercials that translated to 33 million You Tube views. Contrast those numbers with the powerfully successful Eminem Chrysler Super Bowl Ad three years ago that drew nearly 17 million You Tube views, and it’s an extraordinary showing. Dodge marketers claim that, besides the enormous buzz generated by the truly funny Ron Burgundy, the campaign produced measurable, in-market demand and sales for the Dodge Durango.
In the meantime, the race to win the Echo Boomers continues and is relentless.
Some final random thoughts…
- Tesla’s Model S won Motor Trend Car of the Year last year, and as more new plug-in electrified cars arrive on the scene, there is no question that they will remain part of the “mix” of powertrain alternatives. However, it is clear that the significant dollars required to continue developing the integrated EV technology plus the inability to bring battery costs down has severely dampened consumer interest. Of course the incidents of car fires aren’t helping. Yet most of the automakers have a considerable stake in seeing the EV succeed. But with vehicle prices ranging 35-40% higher than traditional cars, it’s no wonder that the take-rate hovers below 2% among U.S. consumers. Tesla founder & CEO Elon Musk paints a stark departure from his blustery comments last year with his recent comment, “We have a lot of work to do. We’ll do our best to make it happen. I think we will, but this is not a bold assertion we unequivocally will. There is a possibility we may not…”
- Mark Reuss lost out to Mary Barra for the CEO post at GM, but he won the 2014 Detroit Free Press Automotive Leadership Award, and well deserved. Reuss has been a proven success in his role – he introduced the award-winning Chevy Corvette, delivered a nearly 7% gain in profits for North America in 2013, and had the courage to admit the recent Chevy Malibu didn’t resonate with consumers and authorized its overhaul. A true car guy.
- Engineering and product development productivity gaps are primary worries right now for the OEMs throughout the industry. The barrage of electronic content going into the vehicle and “under the hood” is unrelenting, and so the need to optimize unique processes that create new efficiencies is crucial in order to secure new volumes and sustain profits. Today automakers are faced with complicated systems integration issues and must manage complex supply chains and resource shortages worldwide with a shrinking pool of talent. The key to continued success is how OEM engineering teams support individual field teams to address mounting plant readiness and product launch readiness challenges. All of this in light of the fact that fewer Millennials are seeking engineering professions and more Baby Boomers are retiring.
Not for the fainthearted as 2014 forges forward, but it’s inspiring how the auto business takes on a moving target every day and success is found only in the rear-view mirror in this fast-changing industry.
Phil Biggs is Partner, Automotive Markets, for the Bethesda, MD-based management consulting firm The Highland Group.
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