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Auto CEOs Wring Hands While Launching Vehicles At Detroit Show

Notes from the floor of the North American International Auto Show in Detroit during the press preview this week. Former Fiat Chrysler Automobiles CEO Sergio Marchionne, who died in June, is one of the most influential CEOs at the show.
CEOs hopes and frustrations have been on display on the floor of the North American International Auto Show in Detroit during the press preview this week.
Jim Hackett, president and chief executive officer, Ford Motor Company, and Herbert Diess, chief executive officer, Volkswagen Group, tour the Ford display at the 2019 North American International Auto Show. Photo by: Sam VarnHagen

CEOs are in the crosshairs of epochal and rapid developments in the global automotive industry these days, and their hopes and frustrations have been on display in abundance on the floor of the North American International Auto Show in Detroit during the press preview this week.

On the minds of all of them are a few things. The future of the U.S. auto market has turned bearish after four straight years of flat sales that, they fear, have only forestalled a downturn, while the sales cycle has turned even more tenuous elsewhere.

The Trump administration’s trade policies frustrate many, mainly because the uncertainty about how they will work out leaves these CEOs little choice but to pause instead of making new capital investments.

And while the Detroit auto show floor at Cobo Center is awash in new concept electric and autonomous vehicles, many of the industry chiefs assembled here are scratching their heads about how to find a market for EVs when gasoline is just $2 a gallon, and about how their companies are going to afford to lead in an autonomous-vehicle revolution that Silicon Valley is seeking to dominate.

The biggest news has been how two of the industry’s most important CEOs — Jim Hackett of Ford and Herbert Deiss of the Volkswagen brand — agreed to form a limited alliance between the two companies for the production of trucks and small vans mostly outside the United States, with the idea of saving hundreds of millions of dollars for each.

Each is pressed in their circumstances. Hackett hasn’t been able to articulate a vision for the future of Ford that can satisfy investors and industry analysts, and Deiss has been dealing with Volkswagen’s financial and brand penalties from Dieselgate. Not coincidentally, the two CEOs also are going to explore other partnership opportunities for VW and Ford, which may include jointly tackling the huge looming costs of fleet electrification and participation in the driverless-car future.

Meanwhile, Toyota President Akio Toyoda seemed to relish personally unveiling the new Toyota Supra $50,000 sports car to the media, probably in part because he is a race-car driver himself. And Michelin North America Chairman and President Scott Clark got to describe a big new partnership between the tire brand and the International Motor Sports Association.

Two of the largest CEO presences at the show belonged to those who weren’t actually in attendance. Fellow chiefs speculated and commiserated over the fate of Carlos Ghosn, the Nissan-Renault chairman and regular Detroit auto show attender who is now sitting in a Tokyo jail over charges that he illegally boosted his compensation. Is he really guilty of a crime or just using a different cultural lens from his prosecutors at Nissan and in Japan? Opinions differed widely.

And while former Fiat Chrysler Automobiles CEO Sergio Marchionne died rather suddenly in June — meaning his sweater-clad figure no longer circulated on the exhibit floor — he nevertheless has been one of the most influential CEOs at the show.

There are three reasons for that. First, as a result of Marchionne’s leadership and vision and of how his successor, Mike Manley, has picked up the baton, Fiat Chrysler stood out alone in 2018 for a 6-percent sales gain in the United States when nearly all other brands were flat at best. Many had bet that Fiat Chrysler would fade instead of burgeon.

Second, three years ago Marchionne decided to do something that other industry CEOs now are copy-catting: getting out of the business of making sedans, which are in less demand every day compared with SUVs and pickup trucks, and which generate significantly lower profits than those other segments.

And few other CEOs have forgotten how Marchionne sounded a warning to the entire industry several years ago when he insisted that there was way too much manufacturing capacity worldwide and that the costs of automaking needed to be shared by companies in new forms of partnership. He went so far as to prostrate himself figuratively before General Motors CEO Mary Barra to advocate between a tie-up between the two companies.

The Ford-Volkswagen matchup seemed to validate the concerns that Marchionne expressed back then. And by the time industry CEOs once again convene at the North American International Auto Show, in June, 2020, more CEOs may have tacitly admitted that the late industry leader was right all along.

Read more: Ford CEO Jim Hackett Faces His Shareholders


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