Car Wars

Parking lot of a sleek furniture store, early morning. Salesgirl in her 20s.

"May I ask you a question?"

"Sure."

"Did you drive here this morning?"

"Yup. In that Toyota pickup. Twelve years old. Runs great. I love it."

"Ever think about getting a new one?"

"Actually, my husband and I are talking about getting a new car."

"What are you thinking of?"

"A 4Runner."

"Any other possibilities?"

"We've talked about a Tundra pickup, but I think it'll be an SUV."

"When you shop, will you look at any of the American car brands?"

"You mean other than Toyota?"

Summer 2005 was a good season to buy a car because it had been a bad spring in Detroit. The first quarter of the year was a disaster for General Motors, which announced a $1.1 billion loss. In the second quarter it lost $286 million, and Ford started bleeding dollars too. Standard & Poor's reduced the rating of both corporations' bonds to junk. The media was alive with the car business. For a while the GM story was the lead item on the evening news. Critics excoriated the corporation daily for its outdated thinking and irrelevant models. There was even a blog called GM Death Watch.

GM has a blog of its own, but no amount of blogging Anyone with a keyboard was ready to attack the company for betting its future on large SUVs when gas prices reached new highs daily. It was a media feeding frenzy. As the press saw it, the menace that was going to kill off the two weakened American giants was a humpbacked little creature called the Toyota Prius.

Late in the spring Toyota announced the consolidated results of its most recent fiscal year. Its net profit was 1.17 trillion yen. In case you think that's Monopoly money, on the day the company reported its results, the yen was valued at 105 to the dollar. Last year Toyota's profit was more than $11 billion, nearly all of it from the vehicle business. That number towers over the industry.

No conversation about the state of the car business goes on for long without focusing on Toyota and GM. Both companies want to discourage the idea that we are witnessing a clash of titans. In the U.S., 12 major car brands sell their wares, producing about 250 separate models of cars and trucks. If the number one and number two companies were obliterated by martians tomorrow, we could still drive Fords, Hondas, Chryslers, Nissans and a BMW or two. But Toyota and GM overwhelm all discussions. GM is number one by definition; it manufactures and sells more vehicles than anyone else. Its Chevrolet brand, for example, outsold Toyota's cars last year. (That won't happen this year.)

But total vehicle sales are a deceptive measure. By every criterion you'd apply to your own business, Toyota is number one. It is the most profitable. It increased sales by more than 193,000 units in the U.S. last year, while GM lost more than 59,000 units. This year Toyota increased sales every month without rebates, while GM was clawing its way back from disaster in the U.S. with a fire sale called Employee Discounts for Everyone. Last year Toyota sold more than 2 million cars in the U.S. for the first time, and it has raised its projection significantly for 2005. It will sell 2.5 million vehicles here by year's end.

In 2003 Toyota passed Ford in total vehicles sold worldwide. Automotive News anticipates that Toyota will pass GM in worldwide sales in 2007, although that seems premature. More important, all trends favor Toyota and threaten GM.

In 2004 GM sold 4.7 million vehicles in North America (almost 9 million worldwide) and held 27 percent of the market. If you're taking the doomsday tack on GM, you may not want to know that automobile production in the U.S. accounts for four percent of annual gross domestic product, with GM representing 25 percent of that. Yes, GM is responsible for one percent of the GDP of the United States. Between its paid workers and those employed by its suppliers, GM accounts for 1.1 million jobs.

Could the stakes be any higher? Well, yes, they could. The industrial foundation of the world's largest economy is on the line. Before World War II, when Japan's legendary admiral Yamamoto tried to persuade the Japanese high command not to wage war on the U.S., he said, "The Americans cannot be beaten in a modern war. I know. I have seen Detroit."

That was then; this is now. Being the world's leading economy is easy until you find out one morning that the party has ended, someone else has taken your girl, and your credit card has been canceled. Five of Fortune's top 10 corporations are manufacturing companies: General Electric and four carmakers. Of the four, GM is in serious trouble, DaimlerChrysler flirts with trouble on a regular basis, Ford is a disaster waiting to happen, and Toyota is the picture of health. No doubt you've noticed that the troubled companies are the ones in Detroit. Free-trade zones will not cure what ails Motor City. This could get serious. Playboy decided to send an investigator. It looked for an inquisitive journalist with the soul of a car guy and time on his hands.

It found me.

Inside Linens 'n Things. Woman in her early 50s.

"May I interrupt you for a second? I'm writing a magazine article on the car business. What kind of car do you drive?"

"A 1995 Camry."

"Did you buy it new?"

"Yes. It's the best car I've ever owned."

"It's 10 years old now. Will you get a new one?"

"I am never getting another car."

"Not even a new Camry?" (continued on page 160Car Wars(continued from page 92)

"I'm never getting another car. This car is perfect for me. I like to be in it. I change the oil, I put in gas, and that's it."

The Customer is always Right

Before boarding an airplane to talk to people in the car business, I thought I should spend time talking to people who aren't. Whatever is going on in Detroit, the customer is you and me. Cars are like opinions: Everybody has one. The only adults I've known who don't drive are Ray Bradbury and Hugh Hefner.

I did hours of on-the-spot car research in upscale and downscale malls, supermarkets, Starbucks and 7-Elevens in four widely separated states. It took only two minutes to find out if drivers thought their car was satisfactory, sporty or practical; if their next one would be the same make; if their car was quick enough, safe enough or pretty enough. It turns out that people, especially women, love to talk about their cars.

I began to formulate an idea or two about the qualities that create brand loyalty. But my intention was to go to Detroit with questions, not conclusions, so I packed my hunches along with my tape recorder and set off. Before I got on the plane I spent months researching the car business, and the only thing I was sure of was that hell could freeze over and Toyota would still sell 40,000 Camrys a month.

If you ask Toyota what drives the company, it will say the voice of the customer. In truth, everyone in the car business talks about the voice of the customer. Toyota hears that voice clearly. When it thinks it has it right, it doesn't hesitate to defy automotive convention. I had my comeuppance in 1998 when I slid into the driver's seat of a Lexus RX300, one of the first luxury SUVs. "This is a Camry on stilts," I said scornfully. "It's an SUV for girls." What should have been muscular about the interior was soft and girly comfy, with leather upholstery more tufted and squishy than that of, say, a Mercedes ML320, plus wood accents and subtle tonalities. And the RX300 was available only in front-wheel drive--what sort of SUV was that?

It was a brilliant one.

When I tell that story to Mike Michels, Toyota's corporate communications manager, he says, "An SUV for girls? I wouldn't disagree with that. The RX300 was feminized. The predominant buyers and drivers of SUVs were women. SUVs had become the family wagon, and very few of them went off-road. Customers told us they liked SUVs. But here's what they didn't like: SUVs are trucklike, they ride terribly, and they have crummy fuel economy. But customers still like them.

"When we showed the concept car, the off-road-enthusiast press slammed it, and journalists didn't understand it. But for consumers, it was a product they didn't know they wanted until they saw it."

Here's where my on-the-street interviewing led me. Detroit is fighting for its life because, in the 1970s and 1980s, young women got the freedom to be on the road from Toyota, Honda, Nissan--and the automatic transmission. Women fell in love with cars that were easy to drive, that were lively, responsive and small. They could see the fenders over those short, angled hoods. Think of the late 1970s, a time of Ford Gran Torinos and Chevy Impalas with hoods the size of flight decks. Those cars were a nightmare for women; Hondas and Toyotas fulfilled a dream.

It's hard for men to understand that manageable size and mechanical perfection gave women security in the driver's seat, which allowed them to discover performance within their control. Honda's engineering excellence did for the Japanese car business what Nikon had done for the Japanese camera business. Toyota relentlessly pursued mechanical perfection down to each bolt and cam. Women drivers could zip around without fear of being left stranded and helpless, the precise fear they had when driving big American cars. and as Business Week noted, the Japanese devoted more attention to the parts of a car that people touch: the knobs, the steering wheel, the handles. That stuff worked well with women.

Women were the tipping point.

Not the oil crises in the 1970s, not vehicle dynamics or low cost. That's not to say that men didn't take to Accords, Supras and 240Zs or that the Road & Track and Car and Driver audience didn't play a role in Detroit's decline. But the main reason is women. They brought the U.S. auto industry to this apprehensive state.

•

Publix supermarket, Estero, Florida. Senior citizen couple getting into a Buick Century.

"How do you like this car?"

"Oh," the husband says, smiling. "Very good. It's a wonderful car."

"Would you buy another Buick?"

"Yes. We were T-boned in this car and came away unhurt. I'm very happy with this car."

Detroit by Design

When the car-rental bus drops me at my zone, I choose a Chevy Malibu, the car GM builds to compete with the two best-selling sedans in the U.S., the Toyota Camry and the Honda Accord. I've never driven one before. The steering is a little light, but on the road the Malibu surprises. The suspension is solid, the visibility is outstanding, the interior is spacious, and the car is responsive.

As an automotive journalist, I drive about 30 new cars a year for a few days at a time, and I review a select group of them in the pages of this magazine. Many car journalists drive triple that amount, but 30 is a decent sample. Cars have personalities as surely as people do--often more agreeable ones. I've been to high-performance-driving schools and, though I'm no race driver, I have driven at high speeds on difficult racecourses. In cars, I prefer feedback, flat cornering and lively engine response. Like every other driver, I think I am an arbiter of good design both inside and out. In the context of my driving universe, the Malibu holds its own. My only complaint is that the center stack--the space in the middle of the dashboard where the vents, stereo and climate controls are nested--seems to have been an afterthought, as if the pieces were chosen and installed after the car was built. It's not wrong, but it's not terrific. This car needs help; it needs a session on Queer Eye.

I start my Detroit sojourn at Daimler-Chrysler because if there's true life in the domestic car business, it's at Chrysler's world headquarters in Auburn Hills. After Daimler-Benz and Chrysler merged, in 1998, the German leadership originally installed at the Chrysler Group, Dieter Zetsche and Wolfgang Bernhard, fostered an energy that one can sense in Chrysler's new cars. The 300C has a notable design and is a commercial success. With its high belt line, reduced windows and squared elegance, it has been called a Bentley for the ordinary man. It has the sense of privacy--and the blind spots--that go with the look. The 300C hasn't tallied blistering sales, but it has been solid, outselling the Chrysler models it replaced.

The 300C and the Dodge Magnum and Charger are products of a design group headed by Ralph Gilles, a New Yorker by birth who was raised in Montreal and lives in Detroit. He is black, laid-back and unostentatiously hip. In Chicago I saw Gilles cast a beneficent spell on a group of community leaders and design students. Speaking of the Chrysler 300, Gilles said, "We wanted to reinvigorate the American sedan, to make a car that would turn anyone's head. Even my mother, who doesn't notice any cars, notices the 300. We went to research, and they told us, 'The grille's too big. The windows are too small.' We said, 'Yup, the grille's too big. Yup, the windows are too small.' The more rules you break, the more people take note. The car's not just transportation. It's an experience."

A member of the audience asked Gilles, "The 300 has been received well by people of color. Was that intentional?"

"There's a certain flamboyance," he answered. "It says something about you. How do you make a $30,000 car look like $100,000? Details--the chrome rings around the clock. They remind you that your choice was right."

Having recently driven a 300C SRT8 equipped with the bigger, 6.1-liter Hemi engine, I can tell you that it is unreal. It's no surprise that it's fast, but it's also nimble. It sets up flat-level through extreme cornering, and it turns heads, if that's important to you. Because Chrysler engineers have access to quality underpinnings from the Mercedes parts bin, the 300C, at $42,000, is in effect the cheapest big-engine Benz you'll ever be able to buy.

Depending on the size of its engine, the 300C can compete anywhere from the middle of the family-sedan market to the low end of the luxury-sedan market. Selling cars segment by segment is how auto executives think. At Chrysler, analyzing the competition segment by segment is the job of Joseph Eberhardt, executive vice president of global marketing, sales and service. He worked for Daimler-Benz from 1982 until the merger. He has been with the Chrysler Group since 1999.

The Daimler-Chrysler merger was denounced in Detroit as a clandestine takeover of Chrysler. Daimler executives took the strategic executive positions. Dieter Zetsche was CEO of the Chrysler Group until this past August, when the Daimler board requested he return to Germany to run the parent company. As automotive reporter Michelle Krebs tells me, "When the merger began, all you heard in Detroit was 'Those damn krauts.' Now all you hear is 'Thank God for the Germans.' Everyone loved Dieter in Detroit."

I catch Eberhardt between a day of meetings and an overnight flight to Europe, where he is scheduled to drive the next day in the famous Italian road race the Mille Miglia. He joins me in a small conference room.

Playboy: Will your day of meetings lead to a strategy?

Eberhardt: I'd like to know the answer to that one. Our target is to lead in three areas by 2007. The first is product. The second is operational excellence in terms of cost and efficiency. The third is the customer's experience, how well the product is looked after if something happens.

Playboy: You produced two winners since the merger, the 300C and the vans with Stow 'n Go seating. Where do you go from here?

Eberhardt: The priorities were to defend our territory and get our truck, minivan and large-car segments back on track. Now we're working on the compact and midsize sedans. The Japanese have done a lot of things right. One of them is a continuous approach to improvement. Toyota brings out the best Camry it can, no compromises. Then it tries to make it better.

Playboy: Did American companies abandon cars to the Japanese?

Eberhardt: Not consciously. We lost significant share. It wasn't that the public didn't want to buy American cars all of a sudden. But maybe we didn't give them the quality they were looking for. Studies report that more than two thirds of product decisions are made on the basis of quality and cost of ownership. We had shortcomings compared with imports in the car sector. It's going to be a hard road back for us. I don't think you can just make ads that say, "Come back. Trust me, we're different. We used to build very bad cars. Now we build better cars." We need to build cars whose style and performance will bring customers back and make sure we don't disappoint them.

Playboy: Do you work on strategies to sell cars to women?

Eberhardt: Not by having a female team that works on a female car and a male team that works on a male car. We try for the best blend. I think safety is probably more important for women. I would say women influence close to 100 percent of purchases in one way or another. But the industry does not attribute some needs to women. One is performance. It drives me nuts in our internal discussions when we say that guys want performance and women are more interested in other things. I say no. The performance women want is probably not overt, boy-racer-type performance. It's not "Can I smoke the tires?" but "Does my car allow me to change lanes when that 18-wheeler pulls up next to me?" Performance gives a sense of security and safety. The Japanese have perfected off-the-line performance. When you look at their engines, whether four or six cylinder, they are fantastic. Visibility is an absolute key as well. That's why I don't understand why a lot of women drive these huge SUVs, because you can't see anything from front or back. The only thing you can say is "If I hit something or something hits me, I'm in a big thing."

The Toyota Way

Toyota slips into nearly every conversation about productivity, just as it slipped into Eberhardt's. The company is the industry's benchmark manufacturer. Ford made 6.4 million vehicles worldwide last year with 350,000 employees. Toyota made 6.7 million vehicles with 264,000 employees. Harbour Consulting, a Troy, Michigan firm that specializes in automotive-manufacturing management, estimates that Toyota has a $350 to $500 manufacturing cost advantage per vehicle over every one of its competitors. It is estimated that Toyota earns an average profit of $1,700 a vehicle.

Toyota is both the most efficient and the highest-quality manufacturer. No one has ever done that before. At the height of the Big Three's productivity in the U.S., efficiency meant volume. Mass production coexisted with a tolerance for defective products. Shutting down the assembly line to fix a problem cost money. A mistake could go on for hours and produce defect after defect before management would stop the line.

Then came Toyota and the Toyota production system. It has self-correcting assembly lines. It has the widely imitated just-in-time inventory system. It has the best relationship with suppliers and gets the most innovative work from them.

It also gets the most out of every factory man-hour and assembles each car in less time than any other company. It's not enough to make pretty cars or to choose the right car for a segment and price it attractively. Success depends on manufacturing consistency, quality and cost control. My favorite example of Toyota's place in the industry's mindset comes when I visit a renovated Ford assembly plant on Chicago's South Side. In this ancient building, union workers use new automated equipment to put together the Ford Five Hundred sedan. During a conversation about manufacturing ideals with the plant's manager, Anthony Hoskins, he turns my attention to a shelf holding a game ball from his college years. He played football at Iowa State while he studied engineering. "It's all in there," he says, pointing to a book next to the ball. The book is The Toyota Way: 14 Management Principles From the World's Greatest Manufacturer.

Going to the River

One of GM's dazzling answers to Toyota's reputation for quality manufacturing is the Lansing Grand River Assembly Plant in Michigan, which makes Cadillacs. In 2004 Lansing GR was J.D. Power's highest-ranked automobile plant in North America and the third highest in the world. The plant also has the best safety record in North America. In a 2004 speech to Cadillac dealers, John Smith, GM's vice president of global marketing, said government reports show Toyota to be 10 years behind GM in plant safety.

I visit the plant the morning after my conversation with Eberhardt. The plant building is laid out in the shape of a T, with a T-shaped assembly line inside. Generally cars are assembled single file on a moving line. The plant's narrow shape allows every station on the line to be near an outside delivery dock. Supplies can be unloaded where needed. Operators work in teams with a leader. If there's a problem, any operator can consult the leader, who will stop the line. If there's a big problem, an operator can pull the Andon, a cord that stops assembly the way an emergency cord stops a subway train. Each team leader carries measuring tools to check gaps, fits and welds. The place is airy and bright.

The day after I visit Lansing, I meet with GM vice chairman Robert Lutz in the design and research center in Warren, Michigan. Lutz is the executive in charge of all product development. He is a well-known figure in the car business, having worked earlier stints at GM and BMW before becoming an industry legend at Chrysler, where he rose to president and chief operating officer. Among other things, Lutz is credited with being the guiding force behind the spectacular 12-cylinder Viper sports car, an audacious ploy from Chrysler at the time. Lutz also spent some of his youth as a Marine fighter pilot and is known for his zeal and skill at the controls of any capsule with a motor attached to it. GM CEO Rick Wagoner lured Lutz to GM specifically to put a product guy in charge of the product, a novel idea inside the company's financially driven bureaucracy.

The lobby of the design center is spacious and serene. A wide, dramatic staircase descends from above, its gorgeous wood steps suspended on steel rods. The polished steel verticals make a strong design statement. The tech center was designed in the early 1950s by Eero Saarinen, the legendary Finnish architect. GM would have fewer problems if it could design cars as striking as Saarinen's staircase.

We go upstairs to a comfortable conference room for the interview. (For more of Lutz's comments, see "The World According to Robert Lutz," on page 92.) After we finish the taping session, Lutz, Michael Simcoe, GM's recently appointed design director for cars, and I walk downstairs to the studios.

The space is what you'd expect to see if you were watching a Discovery Channel show--full of people, computers, clay models and detailed, full-size foam models of cars approved for production. It's a terrific room, almost a haven. It has the feeling of a stage set made with a minimalist's sense of color. The space is white and open, and the floor is uncluttered. The foam models are large, silent mounds of color displayed like sculptures in a museum.

Lutz shows me the new Saturn Ion. I like it and say so. But I tell him I think the design of the current Ion is awful. Lutz stares at me tolerantly for a second, but I think I see Simcoe tacitly agreeing with me. The new design director for passenger cars is a lean, handsome Australian who dresses like an art director. He seems a little out of place in the buttoned-down world of GM. He might be just what they need.

He shows me the new Chevy Malibu. Upstairs Lutz said, "When you see the next-generation Malibu, you're going to say, 'Holy shit.'" Here it is. It doesn't cause an exclamation, but the new Malibu has a more emphatic design than the current version. It looks like a car aimed at Camry buyers.

Then we look at the Saturn Aura. It's terrific, a design that doesn't need to be defended. The automotive press may find it similar to the Toyota Avalon. Of course the Avalon looks like an inflated Acura TL. Imitation and adaptation come naturally in this business.

Moving on, we look at the next generation of Cadillacs, which is as striking as the last. Maybe a distortion factor is at work here. Perhaps all car designs look better in foam than they ever will in steel, just as an architect's scale model almost always looks better than the finished building. After all, about eight years ago, someone designed and someone else approved the embarrassingly unsuccessful Pontiac Aztek SUV at GM.

"Do you think," I ask Lutz, "if you had called the Aztek something high-tech, like the P-tek or something, it would have done better?"

"No," he says, "I have a different proposition. If the Aztek had been called the Honda Aztek or the Toyota Aztek, it would have been greeted with 'Oh my God, leave it to the Japanese to make this incredibly intelligent automobile. Who are we to question Honda or Toyota?' Coming from Pontiac's low credibility base, it was hopeless."

A few days later I see a Pontiac G6 sedan on the street. It has a swooping, curvy design that looks terrific from the back, but for the first half of the year it hadn't sold as well as the Grand Am it replaced. In July 2005 Pontiac sold 10,000 G6s with the help of employee discounts. In July 2004 Pontiac sold 10,000 Grand Ams. Did GM spend about a billion dollars to bring out a car that isn't going to move the needle? Can you blame it all on design, or is something missing in the experience of the car? Could it be a Pontiac curse?

I've driven the new Chevy Cobalt as well. The coupe is good-looking and great fun to drive. It has the character that for years had been missing from the dreary Cavalier it replaced. Chevrolet sold 27,500 Cobalts in July 2005, about 7,500 more than the number of Cavaliers sold the previous July. To keep things in perspective, Toyota sold 21,000 Corollas in the same month.

At GM's design studio I meet young designers at their computers. On the walls are strong images, all of them automotive. At one point I tell Lutz and Simcoe that some of what goes on in the studio reminds me of the magazine business: You find an image for a layout, then tamper with it in a search for one version that's better than any other. Ideally, the artistry of the thing and its purpose reach a balance. You hope you've guessed right and it will grab the reader's attention.

"Very much like the magazine business," Lutz replies. "Very much. But I'll tell you what business it's really like. It's like Hollywood. This is another form of the movie business. What we need at GM are blockbusters, home runs."

•

Coffee station at a 7-Eleven. Well-dressed adult male in his early 40s. He asks me if I see the decaf. I ask him what kind of car he drives.

"Nissan Maxima. Six months old. It's my second one."

"What did you do with the first one?"

"My daughter's driving it."

"Is that the V6?"

"Two hundred sixty-five horsepower."

"Have you always driven Nissans?"

"No. I like American cars. I had a bunch of them. Thunderbirds and others. Then I bought a 1991 Honda Accord. I'll never go back."

"Because?"

"Oh, they're good cars, the American cars. But they're not like Japanese cars. Once I drove that Accord, then my first Maxima--I just really like their cars."

Don't Borrow, Steal

The car business is an exhilarating combination of imagination, engineering and big machines that stamp steel. Talent comes into play at every step, but how good is your management? Once again Lutz's Hollywood comparison comes to mind. Investment in new car models dwarfs the costliest movie budget. Even low-volume Porsche, working on an all-new four-door sedan, will spend $1.2 billion to build it.

It's no surprise that Daimler executives brought fresh thinking to Chrysler. Detroit is a closeted place with a comfortable, insular culture all its own. For years automotive writers criticized Detroit executives because they inhabited a world separated from the real one. They lived in the same upscale suburbs. They drove their company cars and never had to service them. Their sense of permanence and corporate entitlement betrayed them. Cut off from the broad cultural changes of the second half of the 20th century, they were--impossible as it sounds--caught by surprise when they finally digested the fact that imported cars weren't just econo boxes for the poor or Volvos for eggheads. Detroit executives didn't like change and never caught on that for the past 50 years the rate at which things change has been as important as change itself.

Today in Detroit the rate of change has been caffeinated. This year's new car is yesterday's news; next year's car isn't coming soon enough.

The next day, back at Chrysler Group world headquarters in Auburn Hills, the atmosphere is different from the serenity at GM. The Chrysler building is enormous, with two wings: the corporate offices and a tech center. The hallways are wide and brightly lit, mostly by daylight from enormous windows. Staircases and escalators fly off into space; corridors are endless and curve above huge atria. People seem to be in constant motion. There are those who believe work-space design significantly affects workers, and I wonder if this environment produces a different design mentality than GM's. I ask my guide at Chrysler, Sam Locricchio, if he knows anything about how the building came to be. He says, "Years ago Lee Iacocca told the designers they should design something that someone could buy and turn into a mall in case the company went bankrupt."

David McKinnon, the DaimlerChrysler VP who runs the passenger car and family vehicle design group, and Joseph Dehner, the director of interior and exterior design, are in the tech center. Both were involved in every step if the 300C's design, and the Magnum came out of Dehner's design studio as well. Both are long-term Chrysler employees and have firsthand experience of the effects of the Daimler takeover. The 300C was in an advanced stage of its infancy at the time of the merger.

The 300C is bolder than any car GM or Ford would have made. I ask where that energy came from. "Everybody was doing lower belt lines with a lot of glass. That wasn't the look we wanted," McKinnon says. "When Trevor Creed became the head of the design office, he had to say, 'Look, you've got to trust me, but this will sell.' And the guy running the company has to believe that."

"We've always been rewarded at this company for doing different," Dehner says. "We take our show cars to reality," McKinnon adds. "The Viper was probably the initial inspiration for that, and the Crossfire happened because of that. A few years ago design started to have a stronger voice here. The people who run a company don't always know what a product should be. They get together and talk about numbers and segments, but you have to have conviction."

"Look at J.D. Power," Dehner says. "Those quality numbers are very close to each other. Design is becoming the differentiator in the marketplace. Other cars came out at the same time as the 300C--well, I don't want to mention any names."

"You're in a competitive business," I say. "Why don't you want to mention the competition?"

"Well, the Ford Five Hundred. Ford is touting the fact that it built in blandness. That doesn't make sense. That car is almost like an appliance."

"Aren't there many people who are looking for appliances?"

"But you can have appliances that make a statement, like a Viking stove. It has to be aspirational. Cars are emotional purchases."

"The interiors of the new cars are a break from the past. Did the Germans bring that?"

"Creed was brought into this company 20 years ago to upgrade our interiors," McKinnon says. "For his first 15 years, people didn't listen to him. He finally found two guys, Bernhard and Zetsche, who were going to spend money in the right spots."

Dehner adds, "When the Audi A6 came out in the late 1990s, Creed saw it at the Geneva auto show, came back and put together a binder of all the things that were right about its interior. The Pacifica interior was the first product that reflected that--soft touch areas, the instrument panel."

In other words, steal. U.S. car people accuse the Japanese of imitation as if it were a sin. But if you ask me, one of GM's and Ford's problems has been that they haven't been imitative enough. It takes talent to recognize good ideas and adapt them. Or do you think in two years the Honda Ridgeline will still be the only pickup with a lockable trunk hidden under the open truck bed?

We are all Immigrants

When I tell Toyota's Mike Michels about the woman I spoke with who thinks Toyota is an American brand, he says, "Our message must be getting across." Toyota devotes some of its ad budget to telling the story of its presence in the U.S. It creates jobs here. It assembles cars and builds engines here. It supports U.S. suppliers and invests in the community. That message doesn't sit well in Detroit. Automotive journalist Gary Witzenburg thinks the transplants are poorly understood. "Americans should comprehend that nearly every vehicle built by every Toyota or Hyundai plant in North America will eventually be sold, and one fewer vehicle will be sold by someone else--usually a U.S. company that supports American jobs and whose success is highly important to our economy," Witzenburg has written. "Foreign-brand vehicle choices--regardless of where those vehicles are assembled--send dollars and jobs overseas. GM, Ford and Chrysler manufactured more than 75 percent of all vehicles built in the U.S. last year. And their average domestic content is 82 percent. Toyota's is 40 percent. (Lexus's is three percent.)"

Those figures don't mean much at the state level. Southern states, with their nonunion workforce, have attracted carmakers from Japan, South Korea and Germany. Governors in those states just about wrestle each other to the finish in attempts to win new transplant factories. Assembly plants help state economies; they create jobs and capital that would never have existed without them. Hyundai built its first plant in Alabama. Toyota has eight plants in the U.S. and is building two more, one in Texas and one in Tennessee. Recently the governor of Michigan was in Japan, trying to entice new import investment in Detroit's home state.

•

On the way to the airport after dropping off my rental car, I talk to the female bus driver.

"What kind of car do you drive?"

"An Impala."

"Are you happy with it?"

"Yes. Very much. I like a full-size car."

"Any problems?"

"Not one."

"Would you buy another one?"

"Oh yes. I don't like that low, down-to-the-ground feeling. The Impala is a good car, and it's a good size for me."

The debate about Legacy Costs

Here's USA Today's version of a primary problem at GM: "GM might be able to handle its problems if it could control its health costs. It spends about $1,500 on health care for each car it makes in the U.S., about twice as much as it spends on steel. This is driven by benefits for 1.1 million workers, retirees and families."

The Detroit News repeated the $1,500 figure in early July. The number sticks in people's minds. GM says it will spend $5.6 billion on legacy costs--health care and retiree benefits--for past and present union members in 2005, an increase of $400 million in a year. It's a huge expense that won't improve a single engine or floor mat.

But no one mentions that GM would be in even better shape if it weren't for the fixed retirement costs of its white-collar retirees. For example, we never hear about the retirement benefits of the legendary Roger Smith (of Roger & Me fame) or any of the past CEOs, not to mention the thousands of retired managers, accountants and engineers, some of whom created the retirement plans that now support them. GM spends $7 billion annually for 450,000 retired white-collar workers--$7 billion. USA Today isn't writing about those expenses. It's simpler to blame the union.

And the union is feeling the heat. The recent bankruptcy filing by giant auto supplier Delphi, formerly a part of GM, set the stage for the recent agreement by the United Auto Workers that will allow GM to introduce some hard medical-insurance realities to retirees and working union members. Individual co-payments and monthly insurance fees, once exceptions in the GM-UAW medical plan, will likely become the rule.

Another element of the financial blame game is GM's executive-compensation program, which uses a step system to kick in a bonus structure at specified levels of profit. The 2004 GM annual report informs us that although the year's results were "below target," they were "above threshold." This triggered $2.5 million in bonus payments to CEO Rick Wagoner, making his total compensation for 2004 more than $4.7 million. (In 2003 he earned more than $8 million.) Other bonuses on a sliding scale were awarded to many managers. The 2004 executive-compensation program kicked in during a year when GM's vehicle-manufacturing division lost almost a billion dollars. GM's 2004 net profit of $2 billion came from earnings at General Motors Acceptance Corporation, which is primarily a home-mortgage lender. No wonder GM is sometimes called the bank that makes automobiles.

I Work For the Union

Since the union is assigned a large share of the blame for GM's problems, I contact the UAW representative at the Lansing plant, Art Baker, chairman of Local 652. He has worked at GM since May 1961 and was elected chairman of the local in 1984. "I've been bargaining my whole life," Baker tells me. " started in the old Oldsmobile plant."

Playboy: Do you drive a GM vehicle?

Baker: Yes, sir, I drive a Chevy Tahoe, and my wife drives a Suburban.

Playboy: Have you ever driven your competitors' vehicles?

Baker: We do drive-outs. The perception is that Toyota has better quality. The truth is that it's hard to beat our quality anywhere. The Pontiac we built at Lansing--we don't build it anymore--was the highest-quality vehicle anywhere. Now we have the Cadillacs, and you can't buy a better-quality vehicle.

Playboy: How do you feel about the claim that the union's legacy costs are the over-whelming burden at GM?

Baker: You'd think GM would prepare for that, factor in the costs. If we were to go to the tech center, we'd see row after row of engineers. We've got all these brands. GM has a responsibility to quit duplicating. GM does a dipstick, but it has a hundred dipsticks, all different shapes and colors. Every engineer wants to put his signature on the car. Why isn't there one GM cigarette lighter, one shape for the bumper trim? Get the basics: springs, driveshaft bearings, taillight bulbs.

We have a lucrative labor agreement, but it's most lucrative at the top. GM is big, with lots of chiefs. On the factory floor, you're getting 58 seconds a minute, 59 minutes an hour from each worker. We have the most advanced technology, the lowest manufacturing costs and the highest-quality products. There's just not much more a worker can do.

Playboy: Do the guys on the floor talk about management's compensation?

Baker: Absolutely. On the floor, members say, "There's some give inside our agreement. There's room to help, but you have to stop paying those bonuses." GM also has to design cars people want. GM took a long time coming around to the idea that employees know their business. Today GM understands that when an operator cross-threads a bolt, you have to stop the line.

Playboy: Why has the UAW failed to unionize foreign car plants in the South?

Baker: It's generational. Workers of my generation went to the factory floor when they were 16 to 18 years old. We weren't supported by our parents for as long as we wanted. The generation that came after us just kept handing the pie to the generation after it. The kids had cars and whatever they wanted before they went to work. They never learned the value of the highest possible living wage. They've got a lot of easy credit, and they're used to debt, so they still have everything they want. It's just different.

•

"I'll bet that's not your first Explorer."

"No, it's my second."

"You must like them."

"They're all right. I'm a Ford man. I'll tell you what I like--that Freestyle."

"Thinking of buying one?"

"I bought one. I was at the dealer with my daughter. I had just bought a Ford van. While she looked at the Escape, I said, 'What's that?' I went and sat in the Freestyle. The salesman gave me the keys. I took it for a drive, took it back, went home, drove the van to the dealer, traded it in on the spot and got my Freestyle. There's nothing like it. I'm telling you, that's the right vehicle."

To the Edge and Back

Just ahead of us on GM's road course in Milford, Michigan is a wide, skewed checkerboard of concrete. Lutz added this banked curve, a copy of a famous one at the Nürburgring racetrack. At this second it seems as though we're about to leave the flat earth and take a ride on the wall of the Hoover Dam. At the wheel of the C5 Corvette is GM's traffic-safety manager, Frank Taverna. He has decided we ought to try a speed we'll call screaming fast. He has the Vette in fourth gear with the tachometer needle tucked just under the redline. Concrete rises to the sky on my right as far as I can see as we slice diagonally from top to bottom across the bank. At sea level we exit the curve flat out, in fifth gear going for sixth.

While we are on the wall, I lean over to try to read the speedometer, but it is not visible to the passenger, who is not supposed to know what it says anyway. In that instant of trying to focus on something I can't see while the car fast-crabs across the wall, I feel a hint of nausea. It would be bad form to throw up on the director of safety, and I use all my willpower to center myself against the g-forces. While I am in this condition, we lap one of the best multi-elevation test tracks in the world half a dozen times, going faster with each go-round.

After two months of striving to get inside the mind of the average driver, I would generalize that men drive to get somewhere but that women live in their cars. For men, a car is a machine; for women, it's an environment. To Lutz's credit, he wants GM to improve the soul and the sticking power of its machines, but cuter interiors are probably more important to GM's future. The only performance most people feel a need for is the get-up-and-go at the low end of the speedometer because of the endless stop signs and traffic lights of daily driving.

Maybe there ought to be an alternate test track at Milford. It would look like that fake version of Manhattan where Seinfeld was taped. On this track you'd have relatively straight streets with traffic lights. No one would ever go more than 45 miles an hour before a stop sign put a halt to the motoring. At one end you'd have a dry cleaner, at the other a Starbucks, and an elementary school, where real school buses come and block traffic, would be in between. The track would be called the Milford Errand Course. Cars on the MEC would be tested by secretaries, mail-room guys and midlevel executives.

A car that pays off at 115 miles an hour is a jewel. But a car that pays off while you're doing the weekend chores, that tells you that you made the right decision, whose interior feeds your sense of satisfaction--that car is going to sell 250,000 units a year. While it should be unembarrassed on the track, it would be on the money outside the dentist's office.

Nobody's Perfect

In a recent Detroit News story, Chris Denove, a partner in J.D. Power, wrote, "People tend to think import vehicles are a little better than they are, and they tend to think domestic vehicles are a little worse. There's still a gap between perception and reality." Lutz and Chrysler's Eberhardt are preoccupied with the quality-perception gap. Lutz says GM is making not just the best cars it has ever produced but cars as good as anyone's, by any standard. But it can't get its due.

GM's John Smith expressed the company's frustration in a speech a year ago: "Toyota gets a free ride from a lazy and complicit media. How many of you are aware that, according to J.D. Power, GM was the number one multiline manufacturer in sales satisfaction last year? Do you know where Toyota finished? Seventh place. And that included Lexus. We beat the hell out of Toyota in customer-service satisfaction, too. We ranked second of all multiline manufacturers in customer satisfaction last year. Toyota was in fifth place. It wasn't even close."

As it happened, on the last day of June, J.D. Power's annual study of long-term quality reported a general improvement for all GM brands and noted that GM had the most dependable vehicle in eight of 19 categories. Toyota was first in four.

The Chevrolet Malibu and Buick Century took top honors in two midsize-car segments. They beat the Accord, Camry and Avalon. Ironically Buick is ending production of the Century this year, along with the LeSabre, which also did well. So much for continuity.

Lutz also blames some of GM's perception problems on the automotive-enthusiast press. He mentions Car and Driver, which he says has enormous influence on reviewers who speak to the car-buying public.

After leaving GM I read a sampling of Car and Driver reviews online. In its most recent evaluation of the Malibu, the magazine expresses more enthusiasm for it than I did, giving it a near rave review. Perhaps Car and Driver isn't at the heart of the problem. Reviews of the Malibu on Epinions.com and Canadiandriver.com, a terrific place to get practical, occasionally spirited car reviews, are positive. And according to Consumer Reports New Car Ratings and Reviews 2005, "the Malibu is a solid and well-rounded car, but fit and finish are unimpressive. Handling is responsive and secure, and the ride is supple and steady. Good offset crash-test result is a plus. First-year reliability has been sub par." But that last comment conflicts with the reliability history of the 2003 and 2004 Malibu printed in the same publication. The Consumer Reports charts indicate outstanding reliability for the most recent versions of the Malibu. Once again, the perception gap.

Item One

Warren Brown is the Washington Post's car guy. In his reviews he maintains an interesting balance of the practical and the passionate, with a tilt to the practical. Here's part of a weekly chat he hosts online called Real Wheels. The subject is automobile quality:

If GM made a hybrid car that stalled out in traffic, everybody would be saying, "Ah, what do you expect?" Toyota makes one, the Prius, that stalls out, and the media essentially gives Toyota a pass.

If GM recalls 750,000 trucks for faulty suspension work, everybody says, "Ah, what do you expect?" Toyota recalls 750,000 trucks for faulty suspensions, and the media gives Toyota a pass.

Toyota makes lots and lots of big trucks and SUVs, but Toyota is hailed as a green company. GM makes lots of trucks and SUVs. GM is regarded as a dumb and dirty company.

GM sweeps the quality-plant rankings in the latest J.D. Power surveys, taking first, second and third place. The media yawns. Toyota gets top marks for plant efficiency in the latest Harbour Report. The media applauds. But the same report shows that GM has the biggest overall gain over five years, and the media yawns.

Item Two

From the first long-term road test by Edmunds.com of a 2003 Honda Pilot:

Most editors still liked the Honda Pilot and ranked it among their favorite midsize SUVs, but it tested our love. The biggest of these tests happened to come on a remote stretch of Interstate 70 in Utah when the timing belt snapped, stranding our editor in chief, his wife and their two young children. Granted, the breakdown was the result of a missed recall notice, but you never expect a modern-day vehicle to leave you on the side of the road--especially not when it's wearing the H badge.

Although the Pilot made a full recovery from this incident, our confidence in Hondas was shaken a bit. Fortunately, as you'll read in the consumer commentary section, none of the readers who wrote in to tell us about their Pilots had anything close to a breakdown. For now, it appears that our experience was one of a handful of anomalies rather than a widespread blow to Honda's legendary reputation for dependability.

People who buy Toyotas and Hondas accept a misstep because they are confident that it is an anomaly, not a tradition. In a food court in the Denver airport, I ask a young woman from Missouri what she drives. "A Corolla," she says. I ask what she likes most about it. "It's so reliable. Even if there's a problem, they fix it once, and that's it," she says. When I ask John Mendel, Honda's senior vice president, auto operations, what happened to the supplier that made the Pilot's defective water pump, he says, "A SWAT team of Honda engineers showed up at the supplier. They went over everything from the original design to the manufacturing to the package it was shipped in. It turned out to be a casting problem. It's not a problem any longer."

I call Tony Swan, executive editor of Car and Driver, a likable, sophisticated man as well as a way above average driver who races in Sports Car Club of America events on weekends. I tell Swan that Lutz thinks the editor and his brethren impose unrealistic, expert standards in their car reviews. "Lots of people think it's wrong to talk about vehicle dynamics in consumer cars," Swan says, "but there's no question in my mind that good dynamics contribute to safety."

"To be fair, Lutz would agree with that," I say. "But he says GM's improvement isn't recognized."

"We've recognized it," Swan says. "The cars have been getting better, but they're not capturing anyone's imagination. They have to turn a tough corner. They have to turn people's heads."

"Is GM on the right track?" I ask.

"It does too many focus groups and gets too much input from dealers. The LaCrosse was a good car that was lost in production. It's not new; it has an old engine. The feel is tighter, but it's the same stuff, refined somewhat. The corporation doesn't understand. Right now Daimler-Chrysler is re-creating the American automobile in the 21st century. The Cross-fire--what a fashion statement. The 300?

Wow. The Magnum? Wow. It's a new feel. GM isn't living it. Chrysler is living it."

•

Golf course parking lot. A father and son get out of a Lexus ES300 sedan in the space next to me.

"Do you like your ES?"

"Not really. At 65 in a crosswind, you can feel it. The body's too high. The performance is okay. It rides soft, and I like that. I like the steering."

"Are you looking for another car?"

"Yeah. I've had Lexuses before, and I'm thinking the LS or the GS. I'm telling you what else I've been thinking of--the Cadillac STS. But what I'd really like to do is get what you've got." He points to the Honda Element I'm driving. "That looks like it would be great. And that Toyota hybrid."

"The Prius?"

"Yeah. Those would be two cool cars to own."

Marketing 101

According to The Washington Post's Brown, 46-year-old marketing vice president Mark LaNeve is going to save GM. He has been credited with re-creating Cadillac, giving an edge to a brand that had stood for sclerotic design. Now he's simplifying GM's brands and clarifying its messages. LaNeve is personable, unhurried and steps lightly through an interview.

Playboy: We have research that says women are responsible for 50 percent to 60 percent of car-buying decisions.

Laneve: That matches our data. They either make them or strongly influence them. As we know, women influence a lot of decisions.

Playboy: Have you ever considered developing a brand to direct toward one gender?

Laneve: If you look at automotive brands, the Japanese ones tend to be feminine. They've had success positioning with women. We have masculine brands--say, Chevy trucks--but they appeal to women the same way Marlboro cigarettes did. I think you can get at it either way.

Playboy: Robert Lutz says if the Aztek had been a Toyota, the press would have reacted differently.

Laneve: I don't know about that. No comment. Look at it this way. We were so big for so long, the tendency is to pile on GM. We believe the first chapter of the Japanese entrance into the market has been written. Toyota, Honda and Nissan's combined share last year was greater than GM's. I'm the first to say to my team, "Look, they've won that quarter, and we have three quarters left to play." The focus is on GM, but when you get outside Detroit, what people really care about are the products. We have the products. Far and away GM is still the country's leading company.

Playboy: How do you shift from sending a message about quality to securing customer loyalty?

Laneve: The LaCrosse is a great story. The LaCrosse thumped Toyota in J.D. Power's initial quality studies. But if you ask 100 people which has better quality, Toyota or Buick, not too many will say Buick. If you took the current LaCrosse and put a Camry badge on the back and a Toyota sombrero on the front, it would sell as much as the Camry.

The Number Of Possibilities

But the LaCrosse doesn't outsell the Camry, and it's not supposed to. They aim for different segments of the market. But a look at the Camry segment, the compact sedan, is instructive. Toyota sold 43,000 Camrys in July 2005. Honda sold 36,000 Accords. No one else comes close in the segment. The next closest, Chevrolet's Malibu, sold 14,600 units. The Taurus will be discontinued next year and replaced with the new Ford Fusion. Ford sold 12,300 Tauruses in July, plus 2,000 nearly identical Mercury Sables.

The LaCrosse falls into another segment, the full-size, five-passenger car, the standard American sedan. Chrysler sold 10,500 of the hot 300C in July. That's a significant number for the company, exceeding sales of the car the 300C replaced. Also, it sold most of those 300Cs without the deep discounts that swept the domestic industry that month. Yet Chevy sold 17,250 Impalas in July, and Ford sold 13,500 of those "boring" Five Hundreds, which proves the Big Two still exert pressure on the market.

But the numbers need a context, Selling about 17,000 Impalas--6,000 fewer than the year before--isn't good enough for a company the size of GM, not even for a car on the verge of a model change. At Chrysler, 10,500 sales of the 300C in July is significant, although not as good as the previous year's 12,000.

Buick sold 13,300 LaCrosses in July, but you could buy the least expensive one for just more than $20,000, a bargain that runs counter to GM's plan to position Buick against the midlevel luxury cars from Lexus, Acura and Infiniti. The LaCrosse epitomizes the failure of nerve that Car and Driver's Swan mentioned. It was a beautiful concept car, but Lutz, among others at GM, didn't trust Buick's audience to accept a bold design. Perhaps they needed the ghost of Soichiro Honda at the meeting. He always said you must take the customer to a new place.

Most telling, Toyota sold 9,400 of the new Avalon, its entry in the full-size family car segment, nearly tripling July sales of the previous version and signaling an important change to anyone in Detroit paying attention.

Detroit originally gave away the small-passenger-car business because it thought the Japanese might as well dominate the low-profit mini league. This misstep coincided with the beginning of a dramatic 30-year increase in the number of licensed women, a previously underappreciated group of consumers. As it turned out, Toyota, Honda and Nissan were creating customers for future products. They stepped those customers up from Civics and Corollas to Accords and Camrys, and then to Odysseys, 4Runners and RX330s.

It's important to remember that the best-selling vehicle in the U.S. is Ford's F-series pickup truck. Ford sold 939,000 of them in 2004 and an astonishing 126,000 in July 2005 during its own version of the employee discount sale. Last year was the first in which light trucks outsold passenger cars in the U.S., and the trend will continue now that the import brands have become significant participants in the truck market. We now have Nissan Titans, Toyota Tundras and Honda Ridgelines, trucks built with the same eye for detail and convenience evident in Maximas, Camrys and Accords.

Chevy's HHR wagon shows there's life at GM when it comes to convenience, storage and nice torches in new vehicles. But GM, Ford and Chrysler are about to be shocked by the innovations the Japanese are going to bring to each new generation of pickup truck. The Honda Ridgeline, with its fold-up backseats and hidden storage space, is simply the first trick on the table. Next will come folding, stuffing, clamping, storing and towing at the back end as well as advanced power trains, fuel economy, horsepower and towing ability at the front. A ferocious battle is coming. It will be much harder for GM to convince people to replace Civics with Cobalts than for Toyota to sell Tundras to Texans.

At the other end of the vehicle spectrum, we have the spectacular marketing story of the Prius. In 1998 I tested a right-hand-drive Japanese-market Prius. It was cute, and the display that tells you which engine is running and how many miles a gallon you're getting was addictive. The first Prius was unprofitable as well as disappointing in the mileage it achieved. "Don't forget," Toyota's Michael says, "the first Prius was an environmental contribution; it was about air quality and meeting California's smong emissions standards. Gas was 90 cents a gallon when we made the first version." Toyota stayed with the project even though it was unprofitable and appeared unlikely to become profitable anytime soon. The second Prius is a tribute to marketing in all its dimensions. When Leonardo DiCaprio and Robin Williams showed up at the Oscars driving Priuses, it was a more significant score than an invitation to the Vanity Fair party. Put it this way: DiCaprio and Williams didn't show up at the Oscars in Azteks.

Right now the combination of Toyota's engineering excellence and deft American marketing best explains how Toyota has been transformed from a modest car company to the mightiest. Without a more ambitious home office and the contributions of American marketers such as Robert McCurry, David Illingworth, James Press and many others, Toyota wouldn't be writing this chapter of its history. Press recently became president of Toyota North America sales, the highest position within the corporation ever achieved by an American. Among other things, he is credited with the decision to build a factory to make full-size trucks in Texas, the largest U.S. market for big pickups.

If Looks Could Kill

In February 2003 Toronto Star journal is Jim Kenzie wrote a mostly negative review of the Pontiac Grand Prix, complaining of an inadequate engine and a harsh transmission. It's the sort of statement that hard-core automotive critics toss off without ever being called to account. Vice chairman Lutz, however, maintained that the Grand Prix is tuned to a high standard and handles as well as more expensive European cars. He issued a gentleman's challenge to Kenzie, inviting the writer to GM's Milford track and offering him his choice of vehicle. Kenzie chose a Nissan Maxima, a car GM named as one of the benchmarks for the segment. Lutz took a stock Grand Prix and trounced Kenzie's Maxima. Lest the victory be chalked up solely to Lutz's expertise behind the wheel, Kenzie took some laps in the Grand Prix and found his own times had improved.

At the beginning of my Detroit adventure, automotive journalist Michelle Krebs told me that one of GM's problems is that "it doesn't have a plan. A vague statement to build better cars is not a plan." The first time Lutz told me he thought the heart of the business was to "hit home runs," I thought Krebs was right. That's not a plan.

Many months later I stood next to a 2006 Chervolet Impala, and if the earth didn't move, it at least shuddered. For the first time, I got it. This was the plan. First, remake the manufacturing system. Then try to face off against Toyota on quality. Then show improvement in the key product. The new Impala is terrific, with a vastly improved interior and exterior. The fit and finish are at a high level, and the car is solid and quiet. Visibility is excellent. Chevrolet is reminding everyone that it owns the keys to the standard American sedan.

Looking back, I see that GM's enemy hasn't been Toyota or the Koreans. GM's enemy has been the ghost of GM--more than two decades of sometimes awful and sometimes merely ungainly vehicles. What GM needed was to maintain a higher level of quality across the brands without breaking the bank. With the exception of that darn LaCrosse, it looks as though Lutz has done the job.

If the machines are better conceived and better to drive--not incredible, not cutting-edge, just better--they will, as Bobby Knight used to say, get GM in position to be in position.

Gentle Ferocity

For the rest of the car business, faultless engineering, way-cool industrial design and ferocious competition are the future. In his 1986 book on the car industry, The Reckoning, David Halberstam writes that one of the things Americans didn't understand about early Japanese imports was that the companies that came here had survived an intense culture of competition in Japan that would have appalled the gentlemen scoundrels who ran Detroit. The Japanese were honed on fierce competition--in essence, to the death. But unlike Detroit, Japan made constant improvement of the product its key competitive weapon.

For the past two years Nissan, in the midst of a turnaround, has brought forth a series of aggressively designed SUVs and spectacularly engineered sedans. For example, that portion of the automotive press that likes to break cars on the rocks of absolute performance has called the new Infiniti M series Japan's first serious challenge to BMW's long reign as the performance leader.

Toyota is on its own design-and-engineering tear, primarily using the Lexus division to bring out models with advanced traction controls, driver-warning systems and stabilizers. Both the TV show Motor Week and the enthusiast journal Auto Week complained that the new GS430 was so skidproof that testers didn't enjoy trying to break it. But Toyota knows its customers, and these features will make ordinary drivers safer in dicey conditions. It will also allow them to drive faster in safe conditions and satisfy the need for speed in leathery surroundings.

A hundred years of the car industry has led to a point at which micro-engineering, macro-thinking and cool industrial design are the crucial tools of the business. But management does the winning and losing. Each new generation of men and women is a battleground. Toyota knows that. It will be interesting to see if Detroit figures it out.

As the press saw it, the menace that was going to kill off the American giants was a creature called the Prius.

U.S. car people accuse the Japanese of imitation as if it were a sin. But one of GM's and Ford's problems has been that they haven't been imitative enough.

When Leonardo DiCaprio and Robin Williams showed up at the Oscars driving Priuses, it was a more significant score than an invitation to the Vanity Fair party.