Uni-Media Press

Electric, hybrid and small cars will grab center stage at the Detroit auto show this week, as the industry adapts to a world reshaped by the Great Recession and environmental worries.

The event will demonstrate just how automakers are responding to this new reality. Ford wants to build on its success in midsize sedans and re-ignite its small car sales, while Hyundai aims to extend last year’s triumph in budget-conscious models. GM and Chrysler will start fresh with electric vehicles but also try to boost their small-car credibility. Toyota hopes to solidify its dominance in hybrids.

The new crop of models must be successful if automakers are to reverse last year’s 21 percent sales plunge. Mounting job losses, GM and Chrysler’s bankruptcy filings and the death of several iconic brands sent sales skidding to their lowest level since 1982.

Americans feel less wealthy — and more certain that the trend toward higher fuel prices remains a threat. It’s a change U.S. automakers were slow to embrace — and it cost them the last two years as gas prices surged and consumers stopped spending. Most Japanese and European car makers were also caught in the sales downdraft, even though they depended less on pickup trucks.

In 2010, with frugality embedded in drivers’ minds, automakers want to show off new versions of smaller, less expensive cars, many of which get 40 mpg on highways. That also appeals to motorists concerned about climate change.

The show isn’t exclusively about small cars. Detroit automakers also will try to revive 1960s-style car passion with muscle cars, a niche that’s doing well.

Compared with last year’s stripped-down down affair, the show will offer more glitter. GM will have an elevated floor for new cars, a change from 2009′s carpet-over-concrete that was just about everywhere.

One big display is a 37,000-square-foot “Electric Avenue” on the main floor, featuring 20 vehicles that run on kilowatts instead of gasoline. Electrics were shown last year, but shared the spotlight with cars powered by conventional engines.

“Last year we had that ‘sky-is-falling’ mentality, and everybody was running for cover,” says Doug Fox, an Ann Arbor, Mich., car dealer and chairman of this year’s show, officially called the North American International Auto Show. “We are seeing a little more investment made in the actual exhibits than last year.”

Although auto sales improved at the end of 2009, the 41 new vehicles to be unveiled at this year’s show will be down from last year’s 50, Fox says.

That’s because Chrysler LLC, which normally shows five or six new vehicles, has no debuts, and GM has fewer new vehicles because it is shedding the Pontiac, Hummer, Saturn and Saab brands, Fox says.

Here are some key trends to watch at this year’s Detroit auto show:

SMALL IS BIG

Small cars and smaller SUVs — called crossovers — made up only 21 percent of U.S. sales in 2003. But last year, they rose to 32 percent and are expected to grow to 36 percent in 2013. Buyers will see that trend reflected at the show.

General Motors Co. will show off the new Chevrolet Aveo subcompact. The Aveo has been given a more powerful engine, and a lower grille and 19-inch tires for a tougher appearance. The four-door Aveo, along with Ford Motor Co.’s new Focus and Chevrolet Spark minicar, will be part of a small-car blitz. All three will get near 40 mpg on the highway.

“The new paradigm of the American passenger car is no longer great, big rear-wheel-drive luxobarges,” says Aaron Bragman, an auto analyst for the consulting firm IHS Global Insight in Troy, Mich. “It’s small, efficient and upscale.”

ELECTRIC BUZZ GETS LOUDER

Much of the show’s buzz is expected to come from electric vehicles, which have jumped off the drawing board and onto the convention floor. Several big automakers plan to sell them in late 2010, giving the broader public its first chance to buy cars that rely more on electrical outlets than gas pumps.

The big draw is the chance to stop burning gas and drive a more environmentally friendly car, but the cars are expensive.

Nissan Motor Co.’s rechargeable Leaf, due in showrooms late this year, will make its first appearance inside a U.S. auto show. The Leaf is purely electric, using just a rechargeable battery for power. But its expected cost is about $30,000. Chevrolet’s Volt, unveiled three years ago and for sale this fall, will make a reappearance at the show. It costs about $40,000, although there are up to $7,500 in tax credits available.

China’s BYD Co. LTD, which has the backing of billionaire investor Warren Buffett, plans to show the F3DM plug-in hybrid compact sedan and the new e6 that could come to the U.S. late this year.

Among the Europeans, BMW AG will unveil an electric concept car.

Toyota, whose Prius has dominated gas-electric hybrid sales across the globe, plans to show a new hybrid car.

Unlike the last few years, Chinese automakers largely will skip the show, perhaps because they’re focusing on their own country’s explosive sales growth. Still, any car maker that wants to grow must focus on the U.S., where Asian manufacturers collectively grabbed a bigger chunk of the market than Detroit manufacturers for the first time last year.

One floor below the main level, people can ride with a professional driver in electric cars on a tree-lined course, another sign of the dramatic transition from internal combustion engines to electric.

SWING BACK TO 60s MUSCLE

Muscle cars, while a small part of the market, sold relatively well last year with the Mustang outdueling the Camaro for the top sales spot. Each automaker sold more than 60,000 of the cars.

Ford will put a bigger, more powerful V-8 into the Mustang, while GM plans to show a Chevrolet Camaro convertible muscle car and a sporty GS version of the Buick Regal midsize sedan.

New designs for both small and performance cars generally are following trends toward smaller windows and higher door lines that rise from the hood to rear. Side and hood creases in the sheet metal are designed to make cars appear as they are moving even while still.

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Already the biggest auto market and steel maker, China edged past Germany in 2009 to become the top exporter, yet another sign of its rapid rise and the spread of economic power from West to East.

Total 2009 exports were more than $1.2 trillion, China’s customs agency said Sunday. That was ahead of the 816 billion euros ($1.17 trillion) forecast for Germany by its foreign trade organization, BGA.

China’s new status is mostly symbolic but highlights its growing presence as an industrial power, major buyer of oil, iron ore and other commodities and, increasingly, as an investor and key voice in managing the global economy.

Its ability to unseat longtime export leader Germany reflects the ability of agile, low-cost Chinese manufacturers to keep selling abroad even as other exporters have been hammered by a slump in global demand.

China overtook Germany in 2007 as the third-largest economy and is expected to unseat Japan as No. 2 behind the United States as early as this year. Its trade boom has helped Beijing pile up the world’s biggest foreign currency reserves at more than $2 trillion.

The global crisis speeded China’s rise up the ranks as a 4 trillion yuan ($586 billion) government stimulus kept its economy and consumption growing while the U.S. and other markets struggled with recession. Chinese economic growth rose to 8.9 percent in the third quarter of 2009 and the government is forecasting a full-year expansion of 8.3 percent.

On Friday, data released by an industry group showed China topped the slumping United States in auto sales in 2009 — a status industry analysts a few years ago did not expect it to achieve until as late as 2020.

Economists and Germany’s national chamber of commerce said earlier the country was likely to lose its longtime crown as top exporter.

China’s exports per person are still much lower than those of Germany, which has a much smaller population of 80 million people. China sells low-tech goods such as shoes, toys and furniture, while Germany exports machinery and other higher-value products. German commentators note their country supplies the factory equipment used by top Chinese manufacturers.

“If China grows, this pushes the world’s economy — and that’s good for export-oriented Germany as well,” an economist for the German Chamber of Industry and Commerce, Volker Treier, said last month.

Of course, with 1.3 billion people, China is still one of the world’s poorest countries. It ranked 130th among economies in per capita income in 2008, according to the World Bank.

China’s trade ended 2009 with exports rebounding in December, jumping 17.7 percent after 13 months of declines, the customs agency said.

The upturn was an “important turning point” for exporters, a customs agency economist, Huang Guohua, said on state television, CCTV.

“We can say that China’s export enterprises have completely emerged from their all-time low in exports,” Huang said.

Plunging demand in 2008 forced thousands of factories to close and threw millions of laborers out of work.

China’s trade surplus shrank by 34.2 percent in 2009 to $196.07 billion, the customs agency said. That reflected China’s stronger demand for imported raw materials and consumer goods.

Iron ore imports rose 41.6 percent to 630 million tons, while oil imports rose 13.9 percent to 1.4 billion barrels, the agency said. Economists say the buying binge has been driven in part by a Chinese effort to build up stockpiles while global prices are low.

The United States and other governments complain that part of China’s export success is based on currency controls and improper subsidies that give its exporters an unfair advantage against foreign rivals.

Washington has imposed anti-dumping duties on imports of Chinese-made steel pipes and some other goods, while the European Union has imposed curbs on Chinese shoes.

The U.S. and other governments also complain that Beijing keeps its currency, the yuan, undervalued. Beijing broke the yuan’s link to the dollar in 2005 and it rose gradually until late 2008, but has been frozen since then against the U.S. currency in what economists say is an effort by Beijing to keep its exporters competitive.

The dollar’s weakness against the euro and some other currencies pulls down the yuan in markets that use them and makes Chinese goods even more attractive there, adding to China’s trade surplus.

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China’s government will likely spend the full amount of its planned stimulus in 2010, the finance minister said Sunday, despite improvements in its economy and efforts to control bank lending.

Separately, China’s Cabinet announced measures to curb speculation in the property market.

Finance Minister Xie Xuren’s comments could help to reassure companies and investors that Beijing will keep spending to shore up growth.

Xie said Beijing plans to spend 992.7 billion yuan ($145.3 billion) on public investment in 2010, Xinhua News Agency reported, including 572.2 billion yuan of stimulus funds.

The state-run news agency gave no indication whether Xie’s comments included whether the rest of the stimulus due to come from other levels of government also would be fully spent.

China’s stimulus calls for pumping 4 trillion yuan ($586 billion) into the economy in 2009 and 2010 through higher spending on public works and aid to industry. Some 1.18 trillion yuan of that is coming from Beijing and the rest from local governments, state companies and lending by government-owned banks.

Xie’s comments add to a string of assurances that official aid will continue, especially to private companies, which missed out on the first year of the stimulus. Most funds last year went to state-owned construction companies and suppliers of steel and cement to build airports and other public works facilities.

China’s economic growth accelerated to 8.9 percent in the third quarter of 2009, which prompted some economists to say Beijing should start thinking about how to wind down its stimulus. But Premier Wen Jiabao and other officials say the recovery is still not firmly established and have warned against complacency.

The government has ordered banks to control lending following a stimulus-driven credit surge in mid-2009 and is trying to prevent over-investment in steel, cement and some other industries. That has stirred unease among some investors that Chinese leaders might be winding down the stimulus and cutting access to credit.

Meanwhile, the minister also said Beijing’s central government revenues rose 11.7 percent in 2009 despite the global financial crisis.

That could help to reinforce confidence that Beijing can continue stimulus spending without straining its finances. Economists say China can afford more stimulus because its debt is low compared with other major economies and tax revenues are still strong.

Xie did not give a deficit figure but said it was within the budget approved by the national legislature last March. The government projected then that it would run a deficit of 951 billion yuan ($138 billion) in 2009, equal to about 3 percent of China’s $3.5 trillion economy.

The State Council, China’s Cabinet, stepped up measures Sunday to curb unauthorized investment in real estate, a move aimed at countering speculation.

Communist leaders have been trying for three years to cool a boom in housing costs that they worry could ignite a backlash if the poor are priced out of the market. But credit limits and curbs meant to discourage speculation and increase the supply of low-cost housing have failed to slow price rises.

Housing prices rose 5.7 percent year-on-year in November to a 16-month high and new construction rocketed almost 200 percent, while sales nearly doubled.

“With the recovery of the real estate market, such problems as excessively rising house prices have recently emerged in some cities, which call for great attention,” the State Council said in a notice.

The notice called for strengthening the monitoring of capital flow and foreign investment to prevent credit from entering the real estate sector illegally and “stop overseas speculative funds from jeopardizing China’s property market.”

It said families applying to buy second homes backed by loans should foot a minimum down-payment of at least 40 percent.

Governments at all levels should increase the supply of affordable homes to help resolve the housing difficulties of 15.4 million low-income households by the end of 2012, it said.

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