Autos: Back on the Fast Track

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The Big Three are also beginning to score some solid gains in the crucial areas of product quality and customer satisfaction. Although U.S. manufacturers as a group still lag the Japanese some 22% by such measurements as defects per new car, they are rapidly closing the gap. Nine of the top 10 quality-ranked vehicles in the J.D. Power survey remain Japanese, but seven of the 10 most improved vehicles are U.S. brands. Ford Ranger pickups, to take just one of many examples, are 32% better than the models they replaced. At GM, Smith has instituted railhead inspections of cars after they leave their assembly plant. These quality checks nearly doubled the start-up times for GM's new products this fall, causing delays in dealer deliveries that numbered in the tens of thousands. Says Ronald Haas, who has become Jack Smith's point man on quality and reliability: "No one will remember how many vehicles GM turned out in September, but everyone will remember the quality of the one car they bought."

Detroit's sales charts are starting to look healthier. The U.S. companies are being helped by improved products, a price advantage of 16% against Japanese rivals because of currency differences, and the fact that so far both European and Asian competitors have almost entirely missed the fastest-growing market segment of all: vans, trucks and sport-utility vehicles. In the past decade, although car sales have been 30% off their 1985 peak and have suffered two of their poorest years since the 1960s, the truck and van market has exploded to 60% of car sales.

Over the next two years, the Big Three will bring out about 26 new models. Among them: Oldsmobile's four-door luxury sedan, the Aurora -- the industry's first direct aim at the Lexus -- and Ford's front-wheel-drive minivan, the Windstar. But each American automaker still has tough work to do. Chrysler must overcome a reputation for spotty quality; Ford must pump up its profit margins after years of cutting prices to increase volume; and GM, of course, must find ways to turn out new products and restore solid profitability at the same time.

To stay on the fast track, U.S. carmakers must not only win back former customers at home but also enter the much faster-growing markets abroad, particularly in Latin America and Asia. Markets such as China could explode from 5 million vehicles to 40 million in another decade. Ford's exports this year have already grown 68% to Latin America and 283% to Asia and the Pacific. Ford and GM remain the second- and fourth-ranking manufacturers in Europe, the world's largest car market -- where Ford introduced its $6 billion compact Mondeo this year -- while Chrysler exports a small number of vehicles. However, Europe and the U.S. are the most saturated car markets and therefore have less margin for growth. By the end of the decade, the U.S. will account for only 25% of the 10 million growth in new vehicles worldwide.