PREVIEW: Car industry running on empty at Detroit auto show

By Chris Cermak Jan 7, 2009, 2:44 GMT

Washington - Detroit's annual auto show is usually a glitzy affair and time of celebration for the US car industry, but not after a year that saw car sales plummet to their lowest level in decades.

The North American International Auto Show, which opens for a three-day media preview on Sunday, will see domestic and foreign automakers unveil their latest US models amid an uncertain future for the world's most lucrative car market.

US car sales tumbled dramatically in 2008. The outlook for 2009 isn't much better as the country weathers a sharp recession. Consumers have struggled to get car loans and cut back sharply on spending.

Through 2008, car sales fell 15 per cent to levels not seen since the early 1990s. Over the last three months, sales dropped more than 35 per cent to their lowest rate in a quarter century. Most analysts don't expect the market to pick up significantly before late 2009.

US carmakers have suffered most. High petrol prices over the summer led consumers into the arms of competitors, mainly Asian companies, with more fuel efficient production lines.

The recession means nearly all companies - foreign and domestic - are scaling back their plans for Detroit's auto show this year.

Some top manufacturers, including Nissan Motor Co and Mitsubishi Motors Corp, skipped the event altogether.

Others are cutting back on fancy exhibit costs: concerts and food concessions have been slashed; General Motors Corp has cancelled the fashion show it traditionally uses to unveil new models; Honda Motor Co is foregoing the glitzy, high-tech press conference.

The economic crisis means the new models behind the show face a rough ride in the coming year.

Detroit's iconic 'Big Three' carmakers - GM, Chrysler LLC and Ford Motor Co - have shuttered production plants and delayed projects for the future as they struggle to survive. GM and Chrysler were granted an emergency 17.5-billion-dollar government lifeline last month.

Foreign companies aren't faring much better in the global downturn: Japan's Toyota Motor Corp expects the first operating loss in its history for 2008.

Yet many still see an opening in the US. Asian carmakers have been steadily gaining market share over the last decade - they now make up about 40 per cent of US sales - and continued to pick up steam this year with greener models than their US counterparts.

Chinese carmakers will be on hand at the Detroit show for the first time, while Japanese rivals Toyota and Honda will be unveiling competing hybrid models that run on a combination of petrol and electric engines.

German manufacturers see opportunities. Daimler AG subsidiary Mercedes Benz will be bringing its own new luxury hybrid to the show. Volkswagen AG has begun work on its first US-based production plant in three decades.

Fuel efficiency and hybrid technology are the buzzwords at this year's auto show, after a summer in which the price of oil topped 140 dollars per barrel.

Yet even sales of hybrids took a hit as oil prices plummeted by more than two-thirds over the last few months. Sales of Toyota's flagship hybrid, the Prius, dropped nearly 50 per cent in November.

The Japanese giant will nevertheless be unveiling its updated 2010 Prius model at the show, as well as a petrol-electric version of its luxury Lexus brand.

Honda is hoping to make a splash with its new Insight, a cheaper hybrid than the mid-size Prius, which commands about three-quarters of all hybrid sales.

A smaller number of carmakers will be touting their plans for new plug-in hybrids, which can run up to 80 kilometres on a battery- powered electric motor alone.

China's BYD Auto, part owned by US billionaire investor Warren Buffet, introduced the world's first mass-produced plug-in hybrid on China's streets in December and hopes to one day make inroads into Western car markets.

The BYD F3DM will be on hand at the Detroit show, but the company said last month that it was delaying its US and European launches until 2011.

BYD Auto is well ahead of its larger competitors. Toyota and GM will be showcasing their own plug-in hybrid projects, which are only slated for production starting in late 2010.