Research has shown that the number of new model launches in the U.S. has been trending upward over the past 20 years. Between 1988 and 1998, the average was 33 launches per year, according to a study by Merrill Lynch ("Car Wars 2009-2012," May, 14, 2008). From 1998 to 2008, the comparable figure was 41 launches. This is seen as a positive development for the industry since, according to Merrill Lynch's thesis, "an OEM's product replacement rate drives showroom age, which drives market share, which drives capacity utilization, which in turn drives profitability and stock and bond prices."
Certainly, there is a virtuous circle here since vehicle introductions spark consumer interest, create traffic in dealer showrooms, and-if the company has divined the sweet spot of design, features, and price-drive higher sales than existing models. But this simplified view leaves out a lot of other factors that affect the behavior of buyers, the financial picture for the automakers, and overall sales. This year in particular, we are seeing the effects of those other forces-high fuel prices, tighter credit, and the rest of the familiar litany.
In this environment, the upward trend of introductions has been interrupted. A recent report in Automotive News carried the headline, "GM delays most future product, r&d in cash crunch." Although GM authorities characterized the report as being overstated, the basic dynamic is real. Similarly, Chrysler, in announcing plans to cut its salaried workforce by 25%, stated that it would reduce capital expenditures not related to major product programs. In fact, there have been numerous OEM decisions to shift program timing. These are mostly delays, cancellations, or early cessation of programs, although a few have been speeded up to better respond to high fuel prices. Running through some examples of what stays and what is gone provides some insight as to where automakers are placing their bets for the next few years and how close to the bone they have had to cut.
Among the first to go at Chrysler, for example, were unique designs, and, therefore, low volume models including the Dodge Magnum wagon, Chrysler PT Cruiser convertible, Crossfire sports coupe, and Pacifica crossover. Old-style SUVs also have fared poorly: Chrysler declared an early halt to the Chrysler Aspen and Dodge Durango at the end of 2008; there was just not enough demand to keep the plant open until 2009 as planned. Selected new products fit the "must-have" criteria, though. For example, the all-new Jeep Grand Cherokee in 2010 is likely to remain important regardless of who owns the company, since it is a bread-and-butter vehicle that will now benefit from more straight-forward unibody construction.
Ford's decision-making appears to have positioned it well for the next few years. A growing line of small cars such as a North American version of the Fiesta in 2010 and the redesigned Focus for 2011, will meet market demand for fuel-efficient, low-cost transportation in nice packages. The 2009 F-150 pickup is a necessity to preserve its stake in the temporarily dwindling light-truck segment. For the future, Ford is also looking forward to efficiencies from its global EU-CD platform in 2011 that will be the basis for numerous vehicles including the Mazda 6, Ford Edge, etc.
GM has delayed some items, such as a seven-seat multipurpose vehicle deemed too new in form for ready acceptance outside of Europe, and the redesign for the GMT900 truck program. But its Chevrolet Volt plug-in hybrid is an important addition in 2010 for a variety of reasons, and the fuel-efficient Chevrolet Cruze (Cobalt replacement) is another that will be introduced in 2010 if possible (there is speculation that it may be delayed by a year, but as of this writing work continues on the program).
The New Domestics follow similar rationale in their product timelines. There is no mystery as to why Toyota believes its flagship Camry merits development funds for a redesign that will come out in 2011. Toyota's investment in a Lexus compact crossover vehicle early in 2010 and its redesigned RAV4 in 2011 illustrate that SUVs are still opportunities in the right segments. The Yaris B-car being brought over for production in Mexico is a demonstration of the usefulness of a broad product portfolio to mix and match internationally as conditions change.
Hyundai goes against the pattern somewhat in that a key introduction for this relatively new-to-North America car maker will be a larger car, the Azera, in 2010. For Hyundai, the point is to continue to broaden its portfolio, even while it launches the next generation of its bread-and-butter Sonata sedan.
Overall, it is clear that the winners in the race for product development funds for the next several years are most likely to be vehicles that offer a substantial boost in fuel-efficiency, or redesigns of core products that are strongly associated with an automaker. Anything else will have a tough time making it to the showroom floor. The excitement of extensive new product development will just have to wait for better days further in the future of our cyclical industry.