News

The Ford Fiesta is a superb example of the future for the global car business, and within a year you can look for more of the same in dealer showrooms near you.

The Fiesta was one the hits of the 78th Geneva Motor Show — perhaps the hit among affordable and real production cars — and it will go on sale in Canada next year. The Fiesta, of course, is the production version of the Ford Verve concept we saw in January at Detroit's auto show.

"[Ford chief executive officer Alan] Mulally has talked about the vision for One Ford and the Fiesta is part of that," said Steve Odell, Ford of Europe's vice-president for parts, service and sales, referring to Mulally's desire to refashion Ford as a global brand in the image of Toyota.

Another part of that plan is the Transit Connect that Ford unveiled last month at the Chicago auto show. It is scheduled to go on sale in 2009. Some are suggesting that, with the compact Ford Ranger pickup reaching the end of the line next year, this small European delivery van with the 2.0-litre gas engine, a vehicle built in low-cost Turkey, could pick up some of the Ford customers who might otherwise drift away.

It certainly might appeal to buyers who like the Honda Element. And there is no question it is a bold design statement from a Ford Motor Co. anxious to juice a generally bland lineup dominated by pickups and SUVs.

The Transit Connect, says AutoPacific analyst George Peterson, is like nothing else in Ford's current lineup. It is already a successful commercial truck selling well in Europe.

In North America, it will be a tall minivan outfitted with front seats and cargo room, or a five-seater. With oil prices topping $108 (U.S.) a barrel, a small van makes sense for both family buyers and small businesses — florists, bakeries, stereo and computer installers, and the like.

"We have heard from our dealers and our customers that the market is looking for a rugged, fuel-efficient commercial vehicle that's neither van nor truck, but has attributes of both," Ford Americas president Mark Fields said in Chicago.

Ford, like other auto makers, is now scouring the world for models that will sell in numerous markets, from Switzerland to Saskatchewan. Ford, with a hole in its lineup after the made-in-Canada Freestar minivan was discontinued, says the Transit can be profitable in North America, even with the euro so strong, especially against the American greenback.

Other Ford candidates that could make their way from Europe to North America: The S-Max people hauler, Europe's 2007 Car of the Year, and the Mondeo, a stylish sedan James Bond drove in the recent movie Casino Royale.

Ford, of course, is not the only auto maker looking to tap its global product bank. But Ford may have more potential than many others simply because its European operations are thriving even as its North American unit continues to lose money and market share. In short, Ford's product portfolio in Europe is garnering accolades, while many of its North American vehicles draw yawns.

Mulally's idea, Odell notes, is to create a lineup of cars and trucks that can be sold in multiple regions. Since arriving from Boeing, Mulally has criticized Ford's disjointed product development, which prevents it from selling the same vehicles in Europe and America. That is changing and we're going to see more of the same from other auto makers, as well.

A walk down the streets of Geneva, a highly international city filled with diplomats and bureaucrats and bankers and investors, is a chance to imagine the possibilities for Canadian and U.S. showrooms.

It all starts with the greater fragmentation in Western Europe, where there are 15 brands with more than 2 per cent market share belonging to 11 different companies. In the United States, only 11 brands have more than 2 per cent share, belonging to seven different companies.

Europeans, accustomed to operating in fragmented markets, have developed highly honed marketing, selling and industrial skills. Costs have been cut and uneconomic factories moved to low-cost Eastern Europe — not unlike what we're seeing in North America where new assembly plants are opening in the low-cost American South.

Europeans also pay at least twice as much for fuel, diesel use is encouraged through taxation policies, the roads are tighter, city centres are more densely populated, and new-vehicle sales are taxed more heavily. All these factors make for a very different model mix.

Taxes, indeed, play a huge role. In Germany, the Value Added Tax (VAT) on new vehicles, which is the equivalent to Canada's Goods and Services Tax (GST), is 19 per cent versus Canada's 5-per-cent GST. Even with provincial sales taxes factored in, Europeans are taxed at about twice the rate of Canadians on new-car sales.

These factors and others — Europeans, for instance, like to think of themselves as vastly more stylish than North Americans — mean the vehicle market across the Atlantic is vastly different and arguably more diverse than we have in Canada and the United States.

But that could be about to change dramatically, as the Fiesta and Transit Connect illustrate. In the near future, some of Detroit's newest models may prove to be as at home on the interstate as the autobahn. The idea is to find European models that can prop up ailing Detroit nameplates.

This trend is, in fact, well under way. General Motors is using its Opel unit in Germany as a major source of new cars for the Saturn division in Canada and the U.S. — including the Aura and Astra sedans. Chrysler has successfully marketed the big European-built Sprinter van that's left over from Chrysler's ownership by Germany's Daimler.

George Peterson, the president of AutoPacific, says that while bolstering their lineups with European models is a tactic that has largely eluded Detroit in the past, the future looks different.

"They should have been doing that for decades," Peterson says.

Finally, Detroit's auto makers are looking at their European subsidiaries and partners for answers. Among the reasons: Product development budgets are stretched thin and, with new hardware and software systems available, auto makers are now finding it possible to develop models that meet government regulations around the world — and appeal to consumers in differing markets.

Europe offers particular promise on the regulatory side. Tough fuel economy standards set to take effect both in Canada and the United States by 2020 have Detroit's auto makers looking to Europe. Vehicles there already meet the magic fleet average of 6.7 litres/100 kilometres in Canada (the equivalent of 35 miles per gallon in the U.S.).

So what's the holdup? One problem is that many European cars are more fully featured than their North American counterparts, raising fears that North American buyers will resist the higher price tags. In other words, cars in Europe are more expensive, pound for pound, and would be here, too.

Power is another issue. European cars are typically far less powerful than the vehicles many North American buyers embrace.

True, the Canadian market is dominated by compact and subcompact cars, and so is more like Europe in that respect, but in the United States today, about 70 per cent of car and truck sales sport six- or eight-cylinder engines. In Europe, 89 per cent of vehicles sold have a four-cylinder or smaller engine, according to the Alliance for Automobile Manufacturers.

Europeans also buy smaller, diesel-powered vehicles in response to fuel taxes that are heavier on gasoline than diesel; diesel vehicles enjoy other tax breaks, too. European diesels have, up to now, been unable to meet the strictest clean-air regulations, too — though that is about to change with the latest clean diesels set to come to market.

For the foreseeable future, the most likely new candidates to come from Europe will be built by auto makers who have already established dealer networks in North America and who have experience producing vehicles that meet North American safety and emissions standards.

European brands not here now, such as Fiat, Peugeot and Renault, are more likely to bypass North America to pursue business opportunities in growing markets like China. Canada and the U.S. are mature markets with limited potential for growth and profits.

In certain instances, that's a real shame. It means we are unlikely to see the Lancia Thesis here, for instance. The Thesis features a solar cell sunroof, and ventilated front and rear seats.

The German-produced Audi RS 6 Avant Wagon is another car we're not likely to see. It features a V-10 twin-turbo gasoline engine and races from 0-100 kilometres an hour in about 4.8 seconds.

On the other hand, BMW is bringing the 1-Series coupe and convertible to Canada and the U.S. this year. Daimler's Smart division is already selling the fortwo here and in the U.S., and officials are promising more derivatives in the future.

Audi, too, is promising more models for its lineup and, as we've seen, there is a good deal of promise in the Detroit auto makers' European connection.

As Alexander Edwards, president of research firm Strategic Vision, puts it, if the Detroit Three plan to prosper and be seen as leaders worldwide, "They can do that by leveraging European vehicles."