Detroit shows some restraint in annual auto event

DETROIT -- A headline feature at this year's North American International Auto Show is a test track in the basement of Cobo Center, a ⅛-mile layout landscaped with trees and a waterfall.

The reason there's room for it, though, is that many big players pulled out or cut back on display space for this year's show, which began with press days this week.

Six automakers are absent this year — Nissan, Mitsubishi, Suzuki, Land Rover, Rolls-Royce and Ferrari. That opened premium space on the main floor for the likes of Smart and electric-carmaker Tesla.

"Some manufacturers canceled, yes. Perfect world, you'd like to keep them all," acknowledges Joe Serra, senior co-chairman of the show. "We were saddened" by the dropouts and cutbacks, which have dominoed through lodging, transportation, catering and restaurant businesses here.

Tight credit, shrinking home values and rising unemployment coalesced into the auto industry's worst nightmare. And one of the world's biggest and most important auto exhibitions has been reshaped to match the recession and still-shrinking car sales.

"It's grim," says Mike Jackson, CEO of dealership network AutoNation. "I've been to funerals with more smiles."

Sales of new cars and trucks last year fell 18% to 13.2 million, lowest since 1992, according to Autodata. Sales could fall 22% more this year to an almost unbelievable 10.3 million, according to forecaster IHS Global Insight.

GM GM and Chrysler are operating on $8 billion borrowed from the federal government, and GM is due to get more than $5 billion more this week. Ford Motor F has asked for a line of credit to tap if the year is worse than expected.

Even Japan's normally robust Big Three — Toyota TM, Honda HMC, Nissan NSANY— are slashing earnings forecasts, closing factories, canceling development projects.

"We're not making projections about (sales) volume, for Toyota or the industry. We're not playing games, we just don't know how bad it'll get," says Jim Lentz, president of Toyota Motor Sales, the Japanese automaker's U.S. marketing unit.

Putting the best face on it

It's hard to throw an automotive celebration when the industry is in tatters, but most automakers have soldiered on.

Detroit, more than any show, is the face of the auto industry to millions of would-be car buyers. If this show, open to the public Saturday through Jan. 25, were dreary, that could dampen buyers' interest even more. Interesting vehicles, after all, are the only product automakers have to sell.

Respected auto executive Carlos Ghosn, CEO of both Nissan Motor and Renault, often has insisted that "there's no problem at a car company that good products won't solve," and said at the Los Angeles show he still believes that.

But a too-glitzy bash here would be like dancing a jig at a funeral, reinforcing a wide prejudice that automakers, Detroit's in particular, are out of touch.

"If we had all the dry ice and the dancing girls, it'd be like Nero fiddling while Rome burned," AutoNation's Jackson says.

For this year's show to resonate properly, automakers "have to show they're prudent, practical, not ostentatious, and also have the willingness to communicate how business will improve," says David Cole, chairman of the Center for Automotive Research. So far, he says, they seem to be pulling it off.

Because of the economy, this show and the one in Los Angeles in November focused on "the business of the auto industry," Lentz says. "That's important to some of us in the industry, but I think the consumer is sick and tired of it, and wants to see something that will improve his life."

To keep the balance between hard reality and optimism for the future, many automakers are emphasizing technology and alternative power.

"I don't think people are particularly interested in wacko, super-duper concept cars, but they might be interested in what's coming in the future, such as electric-drive cars," says David Champion, director of auto testing for Consumer Reports magazine.

GM: We will survive

GM consolidated presentations of future models into a single event. "This was not how we originally intended to do this," GM's North American President Troy Clarke said after the press conference. But with auto companies under a microscope and GM's survival being questioned, "It is a once-in-a-lifetime opportunity to present the message that's meaningful to the people we want to hear it."

GM cranked up the positive spin, turning the event into a pep rally. Packing the event were employees waving signs saying GM has changed and will survive. Michigan Gov. Jennifer Granholm, carrying a pro-GM placard, led a parade of GM vehicles onto the show stage. Clarke interrupted his remarks several times to invite the workers to cheer.

Automakers should be using this show that way, says Howard Polirer, director of industry relations for AutoTrader.com. "They owe it to the world and the workers to say, 'We're OK, we're going to come out of this. We understand and we're fixing it.' "

He was dismayed to hear the word "crisis" used three times in the show's opening ceremony.

Serra, the show co-chair, figures the several thousand journalists here for the media preview days expect to pick the bones of a dead or dying industry. "I truly believe that's going to be everybody's perception."

But that could work out fine, says Serra — an auto dealer with 21 stores in six states and the upbeat outlook of a sales pro. Expectations are so low, he's sure, that anything positive will be a pleasant surprise — and widely reported. It is, he insists, the industry's best mass-marketing opportunity in years.

Perhaps, but it's impossible for automakers to surprise-and-delight their way out of the grim reality, no matter how many shiny new models they unveil this week and put on display.

GM and Chrysler, operating on government loans, are under particular scrutiny. If either does something extravagant, Congress is sure to cry, "Hey, did we just pay for that?" Champion says.

Even spartan isn't cheap

There's more than symbolism involved. Lavish costs a lot.

Even a bare-bones car introduction — a stage, some spotlights and chairs — runs $650,000. A flashy launch tops $1 million. That's in addition to the millions automakers spend on sets to display the cars to show-goers after the media unveilings.

Nissan, including its Infiniti luxury brand, is the marquee no-show this year. The high-profile pullout caused other automakers and the show itself to worry about the image this year's show will send and to second-guess their own participation.

Alan Buddendeck, Nissan vice president, says the Japanese automaker simply didn't have anything to introduce that warranted a Detroit display.

"In light of current industry conditions, you have to look at the dollars you spend," he says. Should a company pay for a Detroit display if it has nothing special to launch, "or keep your powder dry for another opportunity?"

Says Buddendeck, "We're managing Nissan to make sure we maximize every dollar."

Honda unveiled one of the most important cars here, the hybrid-only 2010 Insight, due out April 22 as a more basic and probably lower-priced rival to Toyota's Prius. Despite Insight's importance, Honda eschewed a flashy presentation "in consideration of a difficult and challenging business environment," says spokesman Kurt Antonius. "We chose to forgo a traditional production unveiling and, instead, made the Insight available to media from the onset of the show's press days."

Mercedes-Benz piggybacked on the show's media draw, but didn't use the show floor directly, to unveil the 2010 E-Class sedan, its No. 2-seller after the C-Class small sedan. M-B hosted an event at a hotel for auto journalists Saturday night, knowing they'd have arrived for media days' Sunday start.

Detroit businesses feel it, too

Detroit automakers could not afford to skip their hometown show but have pared their costs.

GM canceled an annual celeb-studded, high-fashion, high-dollar event called GM Style. Chrysler gave up serving snacks and beer at The Firehouse across the street from Cobo, a popular stop for just-off-deadline journalists.

The centerpiece hotel for the auto show's press days, the approximately 1,300-room Detroit Marriott at the Renaissance Center, did not sell out for the first time since Marriott took over the hotel in 1998, says Judy Dufour, director of sales and marketing.

About two months ago, the regular bookers started to drop out. "We weren't getting calls back," she says. "We knew something was happening."

What is not happening this year, adds Dufour, is "a lot of the pomp."

Bob Sereno, general manager of the upscale Rattlesnake Club, says he lost a $55,000 catering job when an auto-related event was scrubbed.

Showing that belt-tightening is a relative thing, he notes that show-related party givers this year have reserved $100 bottles of wine instead of the $300 bottles typical in past years.

But many social events simply aren't happening, he says. "There usually are a lot of receptions and parties and that type of thing, and companies cannot justify it now."

Contributing: Chris Woodyard in Los Angeles