It's hard to rationalize purchasing a high-price luxury car like a Mercedes,, or Jaguar. Sure, they are better from a quality and performance standpoint, and it's probably true they have features you would not find in higher-volumes cars.
I'm sure that you'll agree, however, that this in no way can justify the additional cost of these cars. But the people who buy them are not particularly interested in justifying the higher price. They want to make a statement, plain and simple. To them it's a status symbol. It tells the world that they have arrived.
The styling of these luxury cars may not be outstanding, but they certainly are distinctive. Most people couldn't tell if you are wearing a real Rolex or that the jewelry you are wearing is glass or real diamonds. But if you drive up in a Jaguar, they know it is the real thing.
I've seen people at auto shows look at the sticker price on a Mercedes, shake their heads and say they could buy three American luxury cars for the same price. It's true, but it's not the same.
One reason American luxury cars are so much cheaper is they use a lot of common parts. People know this, and to them American luxury cars are not unique. The "snob appeal," I guess, just isn't there. People who drive a Mercedes are viewed differently from people who drive Cadillacs, or Lincolns.
Until now, U.S. automakers have not been too concerned with the competition from these high-priced luxury cars. The market is small, volumes are low and, although the margins may be high, it wouldn't impact the total profit picture that much.
The picture, however, is beginning to change. Foreign luxury-car makers are no longer satisfied with their little niches and are expanding into other segments. They're taking advantage of their reputation, coming out with small cars, sport/utilities, and other cars right down the line. They are committed to this plan because they're building plants in this country to produce these vehicles.
The U.S. Big Three need to wake up to the fact that change is taking place in their market. For one thing, the U.S. economy has been strong for several years and consequently people have more money in their pockets. A lot of these people feel that one way to show their new-found affluence is by owning a small car or sport/utility made by an overseas-based luxury car maker.
It's time for American car makers to counterattack and get back into this market, but, not by what they are doing now - producing luxury cars with a lot of common parts. That would be like a younger brother passing down his clothes to his older brother. It should be the other way around. The good ideas developed in a luxury car eventually should filter down to higher production models.
The luxury car that I'm talking about should be completely unique, with special design features, and be produced using innovative manufacturing processes in a separate factory. The low volumes normally associated with these cars would allow new ideas to be properly developed and passed down to volume models.
I wouldn't worry about price. From a marketing standpoint the higher cost could be an advantage. Cigar makers found that out when they sold cigars for $1 or $2 they could barely make out. Their sales skyrocketed when they began making $15 to $20 cigars. It's hard to figure out. I guess it just makes people feel good or like big-time operators.
A true high-end U.S. luxury car would prove to the world that American labor, engineers and craftsmen can produce a real luxury car. The American automotive writers would then have to admit that the U.S. could still produce a like-to-own car. The advertising impact of a luxury car on the full product line also would be more effective and probably cheaper than what was spent on sponsoring curling at the Olympics.
I think it's important that this car be produced in a separate building. I assume that this would not be a big deal becauseCorp., for example, produces the Viper and the Prowler in a separate building.
A separate plant would give everyone associated with the project a sense of pride, in that they would be involved in producing the company's "flagship." o
- Stephan Sharf is a retiredCorp. executive vice president for manufacturing.