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News > Companies
Car makers look to future
January 8, 2000: 1:18 p.m. ET

After record 1999, auto industry gathers in Detroit to try to extend winning streak
By Staff Writer Chris Isidore
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NEW YORK (CNNfn) - The 20th century began with the introduction of the Model T in 1908, the first mass-produced, widely affordable automobile. It ended with the industry's best year in history.
    This century begins with the industry gathered in Detroit next week, trying to figure out how to top last year and the last century, and where to go in this one.
    As the North American International Auto Show opens to the press on Sunday, manufacturers are displaying new and futuristic concept vehicles and vehicle options they hope will create the strong consumer interest to drive another banner year.
    Last year's record U.S. sales of almost 17 million vehicles, about a million more than hoped for in the most optimistic projections a year ago, came not just because of a strong economy and soaring consumer confidence. It came because manufacturers have offered a range of popular new light trucks and sports utility vehicles that drove buyers to the showrooms.
    
The future on display

    The Detroit show is the place where many of these vehicles first see the light of day. There were 62 vehicle introductions last year. Next week is the press preview week, which drew more than 6,000 members of the media last year. The public can start visiting next weekend. More than 700,000 came last year. The show started in 1907, the year before the Model T.
    

    
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DaimlerChrysler Co-Chairman Robert Eaton unveiled the PT Cruiser, a hybrid between a car and a sports utility vehicle, at the North American International Auto Show last year.

    Photo source: Chrysler, via Weick Photo
    

    The show is also the last place some of the products are ever seen, as futuristic concept cars come and go without ever getting near a showroom or a customer's garage. But elements and features of the concept cars that never see the road can be found on many vehicles today. That is why industry members and observers spending as much time studying the features and options as the cars and trucks.
    
Surprises still possible

    While there are few secrets within the high-profile, fiercely competitive industry, the show still produces surprises. Sometimes it's plans or products kept carefully under wraps. More often it is the buzz sparked by a product or vehicle that shakes up the industry.
    "It's not so much they don't know what is going on, but it's the reaction, said Alan Baum, vice president of IRN Inc., an auto consultant and publisher of Auto Futures. "Last year's PT Cruiser was no surprise for those who follow the industry. But the attention caught people by surprise."
    Chrysler's hybrid between a car and a sports utility vehicle was unveiled at last year's auto show, and it makes its last stop there this year before hitting dealer showrooms in the coming months. Not surprisingly, given the interest it generated, this year's show is full of concept cars that are hybrids between SUVs and other platforms, such as cars, pick-ups and minivans.
    "Of course the automakers would never admit they did something because they saw it at the show," said Baum. "But it might change the parameters, change the timing on the product."
    
Troubles on horizon

    Still, despite the strength of the industry, there is great uncertainty mixed with the optimism. Worldwide production capacity is probably 25 to 30 percent above demand. While Asia's demand for cars is expected to show decent growth this year, no one is expecting the U.S. market to top last year's record. Because of this, more global mergers are probably on the horizon.
    The DaimlerChrysler (DCX) merger of 1998 was just the most visible global merger. Other, less high-profile deals have transformed the industry, and continue to do so. Ford Motor Co. (F) and General Motors Corp. (GM) are vying as the show starts to see who ends up with a stake in Korea's Daewoo Motor Co.
    David Cole, director of the office for the study of automotive transportation at the University of Michigan, said that as strong as the Big Three and the overall industry are right now, concern about what happens in the next economic downturn has manufacturers scrambling to find the best deals while they can. He and other experts expect consolidation to continue.
    "You've had such a redistribution of wealth in the industry over the last few years, if we get an economic slowdown, the weak and even some of the middle-weight players could be taken out," he said. "You want to do something while you've got your best strength."
    
New technologies bring changes

    Cole said the other major change facing the industry is the coming demand, either from government regulators or consumers, for much more fuel-efficient cars. What appears to be the winning concept right now is a hybrid electric and gas-powered car that uses an internal combustion engine to accelerate, and an electric motor to maintain highway speeds. Fuel efficiency in the 70-miles-per-gallon range for midsize sedans is seen in some of the concept cars.
    "There is a increased realization that a green revolution is about to begin," Cole said. "This is a real shift in technology."
    Manufacturers also are looking to continue to make impressive improvements in productivity. If manufacturers can meet goals of five to 10 days from order to delivery, it could radically improve the profitability of the industry. Consumers would be more likely to order the car they want, with the features they want, rather than buy what's on the dealers' lots.
    The 60-day inventory now considered ideal for the industry could be slashed, reducing costs and eliminating the need for many incentives to help sell slower-moving models. New efforts by Ford and General Motors to set up e-commerce relationships with suppliers to facilitate the better flow of goods and information is key to the goal, said Doug Gross, managing partner for the automotive practice at KPMG.
    "That's what is going to give them the ability to make quantum leaps in productivity, cost and time to market," he said. Back to top

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.