Vehicle rollouts take backseat to talk about future at Detroit auto show
Detroit — The news at the auto show isn't happening on the floor at Cobo Center — it's happening behind the scenes as automakers prepare for the next iteration of the industry and a possible slowdown.
Ford Motor Co. and Volkswagen AG officials plan to announce Tuesday at least part of a broader global partnership even as VW confirmed plans to build a plant for electric vehicles in Chattanooga, Tenn. Fiat Chrysler Automobiles NV is preparing to increase its plant capacity to make way for new profit-rich SUVs.
And General Motors Co. President Mark Reuss used the first press day of the North American International Auto Show to explain the company's rationale for cutting jobs and idling plants as the company continues to post profits. He says tougher times ahead require difficult decisions now.
Downturns can happen faster than expected — "much, much faster," Reuss said, walking his fingers to the edge of a table in a private room behind the Chevrolet stand. When he reached the edge of the table, he plunged his hand toward the ground.
"There are generally speaking not a lot of people who lived through that," Reuss said, referring to GM's historic bankruptcy in 2009. "We’re paid to make sure that never happens.”
Increasingly, automakers are deploying precious capital to prepare for an electrified and driverless future as they continue to freshen their traditional, profit-driving lineup of trucks and SUVs. For Ford and GM, that will mean cutting costs and reducing headcounts as the companies try to transform quickly enough to compete.
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"We have a lot of opportunity to improve our operating margins compared to the best in our industry," Joe Hinrichs, Ford's president of global operations, told The Detroit News Monday. "You should always be working on your competitiveness or your fitness no matter whether you're in good times economically or in difficult times ... We were able to get through the financial crisis on our own, because we started restructuring earlier."
When Ford, GM and Fiat Chrysler announce full-year earnings in the coming weeks, the automakers are expected to post billions in 2018 profits amid rising commodity costs, trade tensions and signs of a global economic slowdown.
Still, Detroit's two largest automakers are navigating sweeping restructurings that could see plants close and thousands of salaried jobs cut as FCA continues to look for ways to be more efficient.
"In any business, in any industry, in any part of the world, there’s always areas that need for tightening up and improving," FCA CEO Michael Manley said during a Monday round-table with reporters. "That’s a fundamental fact of running any business. You can get to the point where you do a big bang — or you could embed it in your weekly, monthly, yearly, view on your business."
For Ford, profitability isn't enough. Inside Ford's global headquarters in Dearborn, ranking officials have taken to a "return to 10" mantra, which is the automaker's goal for operating margins in North America. CEO Jim Hackett is on a mission to redesign the Blue Oval's business model for the next generation of the auto industry.
"You really are assessing 'do we have the right design of our businesses?'" Hackett said Monday at the auto show. "The design of the business in North America is in the right space. Its biggest challenge is its future in terms of some of these new kinds of services and technology."
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At the same time Detroit's automakers are tightening their figurative belts, they're also publicly investing billions in electrification and autonomy efforts for the future.
As Cadillac revealed its three-row XT6 at the Garden Theater ahead of the auto show Sunday, the GM luxury brand flashed a sneak peek of its first-ever fully electric vehicle. And leaders of GM Cruise LLC said Friday during a 2019 financial forecast that plans to launch a driverless taxi service this year are still on track.
While Ford develops its autonomous vehicle platform it introduced its first hybrid Explorer SUV at the Detroit auto show. Its first full battery-electric vehicle is expected to debut next year.
Even FCA — whose late CEO Sergio Marchionne called electric vehicles a fool's errand at the 2018 Detroit auto show — is recognizing the need for at least electrification.
"The reality is electric vehicles are going to be an integral part of every (automaker's) portfolio, whether you believe electric vehicles make money or don’t make money," Manley said. "I’m with Sergio. Today, electric vehicles don’t make any money."
Still, he sees a future where electric vehicle pricing stabilizes as the cost of the technology goes down.
"We are making investments in electric vehicles," Manley said, "and they will be progressively rolled out in many more numbers than you see today within our fleet."
nnaughton@detroitnews.com, ithibodeau@detroitnews.com
Twitter: @NoraNaughton, @Ian_Thibodeau