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Special Report January 10, 2008, 1:55PM EST

Fear and Loathing and Green Tech in Detroit

U.S. carmakers at the Detroit auto show have a green agenda. But is it enough to get them back into the black?

By Jim Henry

Skip the razzle-dazzle, the pretty girls, and the shrimp cocktail. This year's Detroit auto show should by rights be a sober affair. After years of weak sales and shrinking profits, dealers, stockholders, consumers, and critics want to hear what Ford (F), General Motors (GM), and Chrysler are going to do to dig themselves out of their hole. Yes, there will be the normal cheerleading from company executives, but their audience is getting fed up. People don't want a party. They want action. They want results. They want better cars.

As with last year's show (BusinessWeek.com, 1/7/07), there is more cause for tension than exhilaration at this year's North American International Auto Show. Some of the new models that made their debut last year in Detroit—notably the overhauled Chevy Malibu (BusinessWeek.com, 1/27/07), and Ford Focus—haven't been around long enough for carmakers or analysts to determine whether they will become hits.

The 2008 Malibu didn't reach showrooms until November. It has been selling briskly but arrived too late to have a significant impact on 2007 sales figures. The Malibu saw a nice little 6.7% jump over December, 2006, to 12,172 units, but overall, 2007 sales for the Malibu dipped 21.7%, according to Automotive News. The Focus was off just over 2% for the year. At the same time, sales of the redesigned Honda Accord (BusinessWeek.com, 11/16/07), which debuted in mid-September, rose 10%, and the Toyota Camry, still the best-selling car in the U.S., edged up 5%, to a staggering 473,108 units.

Everybody Wants a Hybrid

The problems plaguing Detroit last year are long-standing and well documented. Continuing tough competition from imports, high labor costs, quality concerns, a reliance on large sport-utility vehicles and pickups, and a lack of grand-slam new models added up to plant closings, lost jobs, and the lowest sales in nearly a decade. And, given projections for 2008, things look like they could continue to get worse (BusinessWeek.com, 1/3/08) before they get better.

There are some interesting models coming at this year's Detroit auto show, which is open to the public from Jan. 19-27, but based on advance publicity the offerings from Detroit are long on environmentally friendly concept cars and short on actual models likely to be on sale later in the year. One car that will be, the Saturn Vue two-mode hybrid, could be a winner. "Two-mode" refers to the fact that at highway speeds an electric motor helps the conventional, internal combustion engine when towing or climbing steep grades. At low speeds, the system acts like other hybrids, running on all-electric power, all-gasoline power, or both.

The reason behind the Vue's potential success is that demand for hybrids continued to grow exponentially in 2007. This year, especially now that oil prices have broken through the psychological threshold of $100 a barrel (BusinessWeek.com, 1/2/08), they are likely to be even more popular.

Toyota Is Tops in Green Cars

Just how popular? The funny-looking, underpowered, and overpriced Toyota Prius languished in the showrooms for years after its U.S. introduction in 2000 (BusinessWeek.com, 12/21/07). But then Toyota introduced a bigger, better Prius in the fall of 2003, just before gas prices broke $2 per gallon in 2004. The upshot is that in 2007, Toyota sold 181,221 Priuses, an increase of 68.9% over 2006, according to AutoData in Woodcliff Lake, N.J. Not only that but, shocking as it might sound, the runty Prius was one of the Top 10 best-selling cars in the nation in 2007—it came in ninth—the first time a hybrid made the Top 10.

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