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Leaner Detroit rolls out hybrids, smaller cars

Jessie Jones shines up a 2010 Chevrolet Camaro RS in the General Motors exhibit of the North American International Auto Show January 9, 2010 at Cobo Hall in Detroit, Michigan. The show opens to media on Monday and to the general public next Saturday.

Handout/2010 General Motors

There's something missing from the North American International Auto Show this year: good old-fashioned American horsepower.

The watchwords are "small" and "electric" at the first Detroit auto show since two Motown giants collapsed into bankruptcy protection and had to be rescued with a bailout from U.S. and Canadian taxpayers that amounted to more than $75-billion (U.S.).

"It is a new era," says David Cole, chairman of the Center for Automotive Research, an industry think-tank in Ann Arbor, Mich.

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In this new era, everything is smaller - the companies, the market, the vehicles and the show itself. Consider that in 1998, when Volkswagen AG introduced its New Beetle, the main show floor at the downtown Detroit convention hall was so packed that the German auto maker's unveiling was relegated to the basement.

This year, some auto makers are skipping the event entirely and others have shrunk so much that there's room between the Ford Motor Co. and General Motors Co. displays for an exhibition called Electric Avenue, which will showcase such new technologies as battery-powered vehicles and plug-in hybrids that represent the industry's new arms race.

That the stage that traditionally roars with the unveiling of muscle cars and behemoth sport utility vehicles is now the site of Electric Avenue puts an exclamation point on the end of a decade of disaster and downsizing for Detroit.

Beyond the shrunken size of Chrysler Group LLC, Ford, GM and even mighty Toyota Motor Corp., is the downsizing in the vehicles North Americans are buying.

It's easy to point to the spike in gas prices to more than $4 (U.S.) a gallon 18 months ago as the culprit, but much of the transformation in the market is because the baby boomer generation is aging and their children are in a massive group of people who are buying their first vehicles. First vehicle usually equals small vehicle.

"For the next couple of decades to come, boomers are going to desire smaller vehicles -maybe even fewer vehicles - as they go from two-income households to one-income or no-income households, and this will be the dominant force in the downsizing of the vehicle population," says George Pipas, manager of sales analysis for Ford.

Sales of compact cars, for example, exceeded those of mid-sized cars last year for the first time in the U.S. market.

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In Canada, entry-level vehicles represented more than 50 per cent of the market last year, compared with 35 per cent in 2000, statistics compiled by DesRosiers Automotive Consultants Inc. show.

That massive switch in consumers' desires is reflected today at the first of two media days.

Ford, which stayed out of bankruptcy protection and has begun turning a profit again, will show off the latest version of its Focus compact. It's a car for all global markets, but the first time Ford has united its once disparate international operations to create one car for all markets instead of different iterations for North America, Europe and Asia.

From GM, a new version of the subcompact Chevrolet Aveo and its new compact car, the Chevrolet Cruze, will be centre stage.

Not at the show, but waiting in the wings to be introduced to North America on Thursday at the Detroit Science Center is the tiny, ultracheap Nano from Tata Motors Ltd. of India. Tata said last week it is developing a North American Nano that it hopes will be available in three years.

Meeting U.S. and Canadian safety standards and consumer tastes will raise the price of the car well above its $2,500 cost in India, but if Tata goes ahead, it will be another entry in the growing subcompact segment, which Detroit ignored for more than a decade.

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The downsizing of vehicles also shows up under the hood. Even if drivers are replacing their current vehicles with new cars of the same size, they're moving to smaller engines.

"Instead of buying a V-6 engine, they buy a four-cylinder engine," says Xavier Mosquet, who heads the automotive practice at Boston-based consulting firm Boston Consulting Group.

Although fuel prices fell last year from the surge in 2008, the thinking among road warriors is: "If fuel prices rise again, I've just been smarter because I've made the right choice," Mr. Mosquet says.

When Ford's mid-sized Fusion sedan went on the market in 2006, the split between four-cylinder and six-cylinder engines was about 50-50, Mr. Pipas says.

Last year, 60 per cent of buyers chose a four-cylinder, another 10 per cent bought a hybrid version and 30 per cent bought Fusions with V-6 engines.

The absence of horsepower comes in part because there are no news conferences or unveilings by Chrysler, which in past years could be counted on to roll out a super car with a top speed of 248 miles per hour, a reborn Challenger muscle car or a four-wheeled motorcycle with a V10 engine.

Instead, Chrysler's most intriguing new product will be from Fiat SpA, which now owns 20 per cent of the No. 3 Detroit company and has management control.

An electric version of the Fiat 500 subcompact car will troll Electric Avenue. The gas version of the 500 is coming to a Chrysler dealership near you, perhaps as early as the end of this year.

The Leaf, an electric vehicle developed by Nissan Motor Co. Ltd. will also be on display on Electric Avenue.

Toyota will unveil a new hybrid-electric car that's smaller than its Prius, which jolted the market a decade ago.

The pure electric vehicles such as the Leaf and even the cars that will be mainly battery powered with a small gasoline engine, such as the Chevrolet Volt, are not expected to generate profits for the auto makers for years or even to capture significant market share. But the small cars such as the Chevrolet Cruze and Ford's new Fiesta and the new offerings Chrysler will bring to the market with Fiat's help next year and in 2012 need to be profitable.

"The small car issue is a big question mark for everyone," says Mr. Cole of the Center for Automotive Research.

But one way to generate profits from them and attract the millennial generation is to pack them with entertainment and information technology.

So it was no accident that Ford chief executive officer Alan Mulally gave the keynote address at the Consumer Electronics Show in Las Vegas last week.

Ford used that show to announce that its vehicle communication and entertainment system known as Sync - developed with Microsoft Inc. - will soon offer Internet radio and access to Twitter messages.

Mr. Pipas has noticed how that's a striking change from his teenage years, when friends connected by getting the keys to the family car and hanging out at a drive-in or some other place.

"People today hang out on YouTube, they hang out on Twitter, they hang out on God only knows where," he says. "But they don't have to go from A to B to be connected, that's the point."

This story has been corrected from an earlier version.

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