Wednesday, January 10, 2007

Compare and Contrast

AutoWeek: Ford won't use European diesels for cars in the States
DETROIT -- Ford Motor Co. can't make money selling cars with diesel engines in the United States. So it will use diesels only in trucks in North America.

Ford's powertrain plans became clearer at a pre-Detroit auto show event here last month. Mark Fields, Ford's president of the Americas, said the company will not launch a vehicle unless it makes money.

The F-150 pickup will get a new 4.4-liter turbocharged V-8 diesel engine developed by Land Rover. It is expected to debut in the United States by late 2008.

But for cars, Ford plans to boost fuel economy two ways. It will use smaller engines loaded with technology, such as a turbocharger and gasoline direct injection, and offer more models with an optional gasoline-electric hybrid powertrain.

AutoBlog:Accord Diesel in, Accord Hybrid out
Hybrids have now been hyped up beyond their own capabilities, so we find ourselves eagerly anticipating the comeback of the diesel engine. Volkswagen is sure to be one of the big diesel players in the beginning, having just announced its new TDI engine yesterday. But it looks like Honda might be in an even better position to bring oil burners back. Peter Nunn, Winding Road's roving reporter embedded on the isel of Nipon, claims that Honda's first diesel application in the Accord sedan will replace the Accord Hybrid sedan when it goes on sale around 2009.

The diesel in question will be an ultra clean 2.2 - 2.4L four-cylinder able to meet the toughest emissions standards in the world, i.e. California's Tier II / Bin 5 standard. Nunn reports that the Accord Hybrid will be "quietly retired" upon the arrival of the four-cylinder Accord Diesel, which should be able to handily trounce the outgoing hot-rod V6 hybrid in fuel mileage at the same time delivering decent get up and go.

Business Week: Mitsubishi planning diesel car for U.S.
Mitsubishi Motors Corp. said Monday that it will introduce a car with a new diesel engine in the U.S. market by 2010.

Mitsubishi Motors is the latest among Japanese car makers to announce plans to roll out diesel models in the United States, amid increasing demand and regulations for fuel-saving vehicles.

Honda Motor Co. said in May that it will introduce a cleaner diesel engine in the United States by 2009, while Nissan Motor Co. last month said it will launch diesel vehicles by March 2011.

Mitsubishi, Honda and Nissan all said their engines will meet the new U.S. Tier 2 Bin 5 emissions regulations that require nitrogen oxides emissions to be as low as similar emissions from gasoline engines.

Hybrids have a place, urban stop and go driving. They are very good at that. Diesels do better at the kind of driving that most Americans do, a relatively long commute, primarily on high speed roads. Both add weight and cost so combining the two is usually not practicable. Direct Injection will make some gains but not as much as either. I think two big issues pushing Ford to perhaps a less than optimal choice are 1) a low reputation for quality (fair or not) that limits consumer's willingness to try new technologies and 2) limited pricing power forcing them to low initial cost solutions.

The big three are going to have to adopt a conquest business model. The Japanese automakers started with no brand equity. At first they made sales via low cost. As they improved their products they gained a reputation for quality which then translated into pricing power. Hyundai is well down the path and the Chinese are getting ready to start. You cannot win new customers with low content high cost products. I think if you are going to grow your business in such a competitive marketplace you have to make a product that people value at more rather than less than the asking price. Great Styling can draw customers when a car is brand new but loses its power after the first year of the product cycle. To keep margin up the product itself has to have great quality and features. The big Three has been trying to protect margin by cutting costs (including content) as much as possible. But as the cars get "cheaper" (older technology, materials as cheap as they can possibly be) the amount of money they can fetch for the cars goes down even faster (and the amount of money the customer can recover when they sell the car takes a beating too).

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