German Carmakers Unveil SUVs and Beetles in Detroit

For most of the large German carmakers at the Detroit Motor Show, the optimism on display here is more than just show -- it can be expressed in raw sales.

BMW, for example, sold more than 144,000 of its new Mini Coopers worldwide, including 25,000 on the American market last year -- a sales record for the Munich-based company. Organizers of the Detroit show also named the new Mini "Car of the Year." Mercedes also clocked impressive sales gains in 2002 -- with an increase of 3 percent to 210,000 cars. Audi posted similarly rosy results.

And even though the overall market share of German carmakers remained far lower than for their American counterparts, the companies did prove that with the right car models, you can perform well even in a period of economic uncertainty and doldrums. Thus, top executives in the German automobile industry are betting on strong gains in 2003, even as the American market itself shrinks.

"It doesn't help any of us to sit around and just forecast crises," said Jürgen Hubbert, chairman of DaimlerChrysler. "We have to live with the situation as it is. And last year we set the example, showing that you can find success with the right products. If you talk to the people, success will come. For that reason, I'm optimistic about 2003."

Under the Mercedes brand, DaimlerChrysler is unveiling for the first time a four-wheel drive model in the C Class as well as an E-Class station wagon and a new SL 600, which Hubbert hopes will increase Mercedes sales in North America.

Still, the market could prove more daunting for other German manufacturers like Volkswagen and Porsche. Last year, VW sales in the U.S. sank five percent to a total of 340,000 cars. Porsche sales fell a more dramatic 7 percent to 22,500 cars.

Third-best year ever

Despite a difficult overall economic environment in the U.S. in 2002, the automobile industry performed its third-best year ever, with sales of more than 16 million cars. But the price for those sales was high, with companies offering rebates as high as $3,000 and interest-free financing. Most German companies sought to avoid deals that would jeopardize bottom lines without, for the most part, much reason for regret.

"It demonstrates that manufacturers with a clear profile -- and I don't just mean BMW, but rather European premium manufacturers in general -- can become considerably more successful than interchangeable brands," said Helmut Panke, chairman of BMW.

Panke also said he believes German carmakers are relatively immune to hiccups in the U.S. economy. He says the market for high-end cars is less susceptible to fluctuations in the market. It's a sentiment shared by others in the industry.

Over at Volkswagen, board member Jens Neumann said the company is seeking to regain its lost ground this year with its new Touareg luxury SUV (photo). Initially, two versions of Touareg will be sold -- one with a V6 engine starting at $34,900 and a second with a V8 engine and a pricetag starting at $40,700.

The company is setting its sights on a growing market, too -- more than half of the cars now sold in the U.S. are SUVs or vans. In that regard, the introduction of the Touareg is important, since the company doesn't currently sell any models in this crucial American market segment. Most importantly, Neumann says, the Touareg will help Volkswagen reach new target groups.

"The great thing is that we're able to offer individualized cars fulfilling the most customer wishes possible while still keeping down our base costs and the prices at which we can offer them," Neumann said.

Reincarnating an old favorite

The Wolfsburg, Germany-based carmaker is also unveiling the new Beetle convertible in Detroit, the successor to the New Beetle, introduced in 1998. More than 400,000 New Beetles have been sold in the United States and the company is hoping for even greater success with its long-awaited convertible follow-up.

Stuttgart-based Porsche is pursuing a similar strategy with its new Cayenne SUV (photo), which it hopes will attract fans of the Porsche brand who aren't looking to buy a sports car. The powerful Cayenne can motor from 0-62 miles per hour in just seven seconds and will carry a starting price tag of $55,000. Volkswagen subsidiary Audi is also jumping into the fray with the prototype Pikes Peak Quattro SUV, with which it intends to compete against its mother company and Porsche. The car packs in an impressive 500 horsepower engine -- a souped up V8 the company says is capable of accelerating to 60 miles per hour in 4.7 seconds.

In another significant market development, VW, Mercedes and DaimlerChrysler are all planning to unveil models next year that consume diesel fuel rather than normal gasoline. Last year, American carmaker Ford said it was considering sales of diesel models in order to reduce gasoline consumption in the U.S. But it still appears to be a limited development, since a sparse number of diesel-fueled cars have been sold in the U.S. in recent decades and the technology remains relatively under-developed there.

However, if companies are able to succeed in developing diesel motors with modern fuel injection for the U.S. market, companies based in Germany, where diesel-fueled cars are common, could have a clear competitive advantage.