Detroit's Hot Pursuit

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The big news out of Detroit this year: cars are cool again. As Ford Motor Co. puts it, this is "the year of the car." The Big Three's discovery of the automobile might seem odd at this point, but over the past 10 years, Detroit has focused much of its energy and money on SUVs and trucks, which command high prices and high profits and see less competition from imports. Carmaking has been a loser for Detroit lately, but with the foreigners now muscling into the SUV and truck markets while holding on to their car sales, the Americans have to respond or risk a further erosion of market share.

They're fighting back with gusto. This year about 40 new vehicles will hit showrooms, the result of an estimated $12 billion to $15 billion development effort to reclaim American buyers. Eye candy like the redesigned Ford Mustang and a trimmer, more powerful Chevrolet Corvette are sure to draw some of the biggest crowds at this week's North American International Auto Show in Detroit. Everything from the dated Ford Taurus to Chevy's entry-level Cavalier has been either retooled or replaced altogether. Even boring old wagons are enjoying a renaissance, with better styling and handling, and creature comforts like reclining rear seats. "For the first time in three or four years, there's a good feeling that a turnaround is under way," says analyst Kevin Tynan of Argus Research. "The Big Three are starting to regain momentum."

This surge has a foreign flavor. All three automakers have teamed up with their European subsidiaries to bring new models to market in record time and improve both safety and styling. Budget models are getting a more upscale feel thanks to more tailored designs, added soundproofing and other niceties. The Big Three have also revved up performance by reviving rear-wheel drive and adding smarter transmission systems that can automatically adapt to driving conditions. "At the end of the day, the best car wins, so we've got to have product out there that not only matches the competition but exceeds it," says Gary Cowger, president of GM North America.

That's always the goal, of course, and skeptics question whether the flurry of new offerings will be enough to get Detroit back on track. Market share of the Big Three, plagued by increased competition and poor reliability ratings, fell from 73% of all vehicles sold in the U.S. in 1996 to just 60% in 2003. That's an estimated loss of some $13 billion in profits in a $400 billion U.S. market. Ford hasn't released a new car since 1999, when it launched the compact Focus. Because foreign-car brands have become so alluring, "the biggest challenge for domestic manufacturers is not so much keeping customers but getting them in the first place," says Joe Ivers of J.D. Power & Associates, who notes that GM's Chevrolet nameplate has the highest consumer-loyalty ranking of any brand. Nonetheless, Ivers says of its vehicles, "A lot of young folks just won't consider them."

In a recent report, Morgan Stanley gloomily predicted that the Big Three will probably face the "same problems, just less of them." The falling value of the dollar, which makes imports more expensive, should help somewhat. Although an improved economy and job market are expected to nudge 2004 vehicle sales to about 16.8 million (from about 16.6 million in 2003), Detroit's share will probably remain the same or even slip slightly, according to several analysts, as aggressively priced import brands continue to dominate. Here's how the Big Three are fighting back:

GM: Revving up Chevy

America's no. 1 automaker has gone for an overhaul of its fleet, unleashing 29 new or updated models. The company hopes to entice young buyers with zippy entries like the Chevy Cobalt. Replacing the aging but best-selling Cavalier, the compact Cobalt offers extras — heated leather seats, an MP3 player and a power sunroof — that should help it compete with the more upscale Honda Civic and Volkswagen Jetta. But the upgrades aren't just aesthetic: relatively large 15-in. tires come with the coupe and the sedan, and a peppier, 170-h.p. engine will be standard on the coupe.

For teenage dreamers and overachievers with $50,000 to spare, the 2005 Corvette, called the C6, sheds its pop-up headlights for the first time in more than 40 years. Instead of door handles, the lighter, more powerful C6 has membrane-activated switches hidden behind recesses. Keyless entry and engine starting means owners will never have to fish around in their pockets for keys before zooming off into the sunset.

Perhaps the most innovative of GM's new cars is the Malibu Maxx, a cross between a sedan and an SUV. It was designed in part by Saab, as are the Cobalt and the new Pontiac G6 sedan. The Maxx offers excellent ride and handling, rear seats that recline and slide back for added legroom, and a hatchback that opens to a generous-size trunk. Rear-seat passengers even get their own skylight, with adjustable sunshades for each passenger. "The old Malibu was a very average car," says Consumer Reports' David Champion. "We're very impressed with the new model," he adds, noting its improved handling and classier interior.