Shares of Detroit's Big Three automakers edged higher Tuesday as the companies spared little fanfare in showcasing their latest models at the annual North American International Auto Show in Motown. General Motors ( GM), Ford ( F) and DaimlerChrysler ( DCX), along with a slew of other automakers, were exhibiting their vehicles of the future in an effort to convince the crowds on hand that they're ready to compete for precious sales in an increasingly crowded market. The new year promises to be a crucial test for Detroit as the Big Three face slowing sales and unrelenting competition from foreign-based competitors like Toyota ( TM) and Honda ( HMC). In an effort to hold on to customers and pay their burgeoning legacy costs, the Big Three have kept production high in recent years and used aggressive price cuts and cheap financing to move vehicles off dealer lots. Profitability suffered as a result, and GM Vice Chairman Robert Lutz signaled to reporters on Tuesday that that is not sustainable. "We are no longer doing the things that used to get us two to three extra points of market share," Lutz said, according to The Wall Street Journal. "We've got to discipline ourselves." Sacrificing market share in order to boost profits is a strategy that will please Wall Street, but accepting lower revenue and market share levels also means slashing more jobs and shuttering more factories. With U.S. automakers facing important negotiations with the United Auto Workers union on a new labor contract this year, such strains could spell trouble for the industry on its already shaky labor front.
"Within reason, it would be better to sell slightly fewer
vehicles at higher margins," Lutz said. "We tried to sell more at lower margins and it's what got General Motors into trouble." GM enjoyed some success last year after introducing its Chevrolet HHR, a compact wagon, by offering 0% financing deals on the vehicles. Then, when it rolled back the financing deal, sales dropped off. At this year's auto show, GM touted a revived effort to launch an electric car in a demonstration of environmental and geopolitical sensitivity. It displayed a new concept sedan, the Chevrolet Volt, which is an electric car of far superior quality to the EV1, a billion dollar project to produce electric vehicles that GM abandoned years ago. The Volt would travel as far as 640 miles on a single tank of fuel under a combination of engine and battery power, though GM conceded that the project still depends on a breakthrough in battery technology before it can be viable. GM also signaled a renewed focus on its car lineup with its new Chevrolet Malibu, Chevrolet Camaro convertible and Cadillac CTS. For its part, Ford rolled out the 2008 version of the Ford Focus for which the company struck a deal with Microsoft ( MSFT). The PC giant will allow the No. 2 U.S. automaker to install technology called "Sync" in the new Focus that will allow drivers to link their cell phones and digital music players to the car in a hands-free, wireless format.
As for DaimlerChrysler, Chrysler Chief Executive Tom LaSorda unveiled a redesign of its Dodge Caravan and a new Chrysler Town & Country, which both will be available this fall. The new minivans feature second-row seats that swivel to face the third row across a table. This is just a sampling of the many dazzling new products arrayed in Detroit so far this week. But beyond the bright lights and glamour of the auto show, economists are expecting auto sales to decline in 2007 as the economy slows and consumers rein in their spending habits. Shares of GM closed up 19 cents, or 0.6%, to $30.77 Tuesday. Shares of Ford added 6 cents, or 0.8%, to $7.79; and DaimlerChrysler ended up 14 cents, or 0.2%, to $61.15.