The Top Dogs Of The Automotive Pack

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The U.S. auto industry is the ultimate dog-eat-dog world.



This Darwinism only gets tougher when the industry enters a downturn. Forecasts for 2008 predict the worst sales in a decade, at just below 16 million light vehicles -- that is, passenger cars and light trucks such as pickups, minivans, SUVs, and crossovers, not counting medium and heavy trucks including 18-wheelers.



Even the top brands -- BMW (BMWG), Mercedes-Benz (DAI), Honda (HMC), and Toyota (TM) -- are constantly jockeying for position, coveting each other's turf.



BMW had record sales in 2007, but still wishes its flagship 7 Series commanded as much prestige as the Mercedes-Benz flagship S-Class. Mercedes-Benz had record sales, too, but wishes its entry-level C-Class had the fun-to-drive factor -- not to mention the sales volume -- of BMW's dominant 3 Series.



And you wouldn't think mighty Toyota has much to worry about, now that it's the world's largest automaker. But as they say in Japan: "The nail that sticks up gets hit."



Moving on Up

In the U.S. market, a number of underdog brands are moving up in the pecking order, including Nissan (NSANY). The redesigned Altima sedan had a banner year in 2007, and Nissan has crossovers such as the all-new Rogue and the redesigned Murano coming onstream at what appears to be just the right time in the marketplace.



Ford's (F) Mazda brand is another up-and-comer. Mazda has "terrific products," says Alexander Edwards, president, automotive, for San Diego-based market research firm Strategic Vision.



Strategic Vision has a research model based on the "hierarchy of needs" consumers must satisfy before they are comfortable enough with a brand to buy it. It's analogous to psychologist Abraham Maslow's famous hierarchy of needs, which starts with basics like food and shelter, and works its way up to self-actualization.



Research shows Mazda has established strong links between the "fun and exciting" aspect of its brand image and product quality, according to Edwards. Successful brands need both. Edwards says, for instance, Dodge has several "great" products, but its major focus is on "being interesting, and less focus in foundational security needs; most people will consider and purchase 'security' before 'interesting,'" he says.



Audi's Big Splash

The Audi (NSUG) brand is also honking its horn and pulling out into the passing lane. Audi's goal is to become the No. 1-selling luxury brand in the U.S. by 2015.



That's a tall order, considering Audi had U.S. sales of 93,508 in 2007. That's less than half of U.S. sales for BMW and Mercedes-Benz last year, and less than one-third of the No. 1 luxury brand, Lexus. [Woodcliff Lake [N.J.] AutoData provided all sales numbers for this story.]



"We see the potential to be the market leader. We are the market leader in several European markets, so why not in the United States?" said Ralph Weyler, then the Audi board member for marketing and sales, in an interview at last month's North American International Auto Show in Detroit. [Audi announced on Feb. 22 Weyler was leaving the company to start his own consultancy business, with customers including Audi and Volkswagen (VLKAY). His successor is Peter Schwarzenbauer, who was CEO of Porsche Cars North America.]



Audi has been putting its money where its mouth is, including the ultimate status symbol: a 60-second ad costing upwards of $5 million that aired during the 2008 Super Bowl. By the clubby standards of the German auto industry, the ad takes an uncollegial, almost literally violent approach. The Audi ad was modeled on the famous horsehead scene in The Godfather; in the Audi ad, the main character is covered with motor oil instead of blood and the "severed head" looks a lot like the front end of a Mercedes-Benz, hood ornament and all.



"You can't advertise with a full-page ad every day in USA Today, so why not the Super Bowl? Sometimes you need a big blowup, like fireworks, where the whole sky is illuminated," Weyler said.



Hyundai (HYMTF) aired a Super Bowl ad, too, to introduce its upcoming Genesis model, the brand's first luxury car. The market will decide whether Hyundai and Audi can keep the sky lit up, or whether the effort is a flash in the pan.



Luxury vs. Light

Luxury brands have outperformed the rest of the market, but U.S. light-vehicle sales have already slipped two years in a row. Sales in 2007 fell 2.8% to 16,148,811. That's also about 7.5% below the all-time peak of 17.4 million, in 2000.



The downturn is undoing mergers and acquisitions that were sealed as the industry approached that last peak of prosperity. As Jim Press, co-president of Chrysler, is fond of saying: "Good habits are formed in bad times, and bad habits are formed in good times."



Daimler and Chrysler, which never did merge all that thoroughly after getting hitched in 1998, got divorced last year over irreconcilable differences. Ford Motor has pawned its assets, up to and including its blue oval logo, to fund new products. It is selling Land Rover and Jaguar, which it acquired to form the now-defunct Premier Automotive Group. However, Ford is keeping Volvo -- for now.



Ford's Lincoln brand is making an unlikely comeback, with new products including the MKX crossover. But the bread-and-butter Ford brand is still a big pickup truck brand, first and foremost.



To Kill or Be Killed

General Motors (GM), like Ford and Chrysler, is deep into an effort to switch from gas-guzzling trucks to smaller cars and crossovers, in response to high gas prices and changing consumer tastes. GM's Chevrolet, Cadillac, and Saturn brands seem to have momentum in the right direction.



"Saturn has increased the perceived quality of its products, backed by secure belief in its dealerships," says Strategic Vision's Edwards. The redesigned 2008 Cadillac CTS also has Cadillac on the move, he says.



The price for standing still is high. In the last decade, GM killed Oldsmobile and Chrysler killed Plymouth. Just last month, slow-selling Isuzu announced it will pull the plug on U.S. new-vehicle sales in January, 2009. Isuzu, once famous for Joe Isuzu, the fictional lying car salesman, had U.S. sales averaging more than 100,000 units per year, from 1985 to 1999.



From the top dogs to the back of the pack, somebody is always nipping at your heels. And that's no lie.



See the BusinessWeek.com slide show for a look at which automakers are today's top dogs, underdogs, and at the back of the pack.