Niche A Ride

It was a year ago at the North American International Auto Show that Robert Lutz placed his considerable clout behind a new kind of car company.

The Cunningham Motor Co. would be a “virtual” enterprise that wouldn't need expensive factories or a lot of workers — just capable, enterprising suppliers and some two dozen employees.

Lutz described the Cunningham C7 Grand Touring Concept as a 2+2 coupe with V-12 power and a rich heritage in American motor sports. The veil was lifted, revealing a sleek, curvaceous jewel of a car.

The former Chrysler vice chairman — still several months from accepting his current post at General Motors Corp. — said there was plenty of wealth to support a new American prestige marque, and that the Cunningham C7 would fill a specific niche.

Then it was time to introduce the crew that assembled the C7 concept. Two guys in baseball jackets, blue jeans and tennis shoes sauntered from the crowd, as if they'd just stumbled in from a smoke break on the Cobo Center loading dock.

They couldn't build 10,000 — or even 1,000 — Cunninghams a year. But filling a niche isn't about numbers — it's about intentionally creating a vehicle that excites a very small pool of buyers. In the case of the Cunningham, suppliers, led by Roush Industries Inc. of Livonia, MI, will build 600 C7s a year. Selling for $250,000, C7 will be profitable.

But a specialty niche vehicle doesn't have to sell for outlandishly big bucks to make money. Dozens of unique, sporty, if not quirky, cars and trucks are in various stages of development and will be cruising U.S. streets in the near future.

Some derivatives, including the 1999 Ford Harley-Davidson F-150, last year's Ford Mustang Bullitt and Corvette Z06 and the 2002 Lincoln Blackwood, already have arrived.

And the bean counters will be satisfied, as auto maker sources vow that upcoming specialty vehicles will be profitable, even in low volume.

The niche vehicle phenomenon runs counter to the auto industry's conventional wisdom, which requires massive movements of sheet metal to make even meager money. But today's industry allows for greater creativity, lower-cost tooling and significant contributions from suppliers to help keep costs down when the volumes are low.

The rear-drive Chevrolet SSR, the poster child for this new breed of niche vehicles, begins pilot production late this year as an '03 model at the Lansing, MI, Craft Centre. GM's development partner for SSR has been ASC Inc. of Southgate, MI, which designed and will assemble the retractable hardtop for the roadster pickup. ASC also provided significant engineering support for the entire vehicle.

“It was some stuff we could have done within GM, but it might have been more expensive or taken longer,” says Thomas Wallace, GM vehicle line executive of midsize trucks, overseeing SSR.

It appears GM is discovering the value of shorter time to market. The SSR was a hit as a 2000 Detroit auto show concept. A consumer clinic wasn't necessary.

Partnering with ASC would merely speed along the process. At meetings, Wallace says he often can't tell the difference between the GM and ASC engineers.

Visit The Parts Bin

The formula for SSR is simple: cut no corners on styling, handling, suspension, steering — all the things that matter to a performance car buyer. But elsewhere under the skin, borrow generously from the GM parts bin to keep a lid on costs.

For instance, the hydroformed frame is structurally the same as that of the award-winning Chevy TrailBlazer and GMC Envoy sport/utility vehicle. The suspension pickup points are the same. The drivetrain and components — parts that are expensive to capitalize with new tooling — also come from the midsize SUVs.

It makes for an attractive profit model for OEM and supplier alike, Wallace says. Sounds like a no-brainer for GM, a company that has lost money on many cars it sells, especially small ones. There's nothing to lose — but a lineup of lackluster high-volume products. Perhaps GM could apply this formula across a raft of exciting concepts and eventually “niche” its way back to profitability on the car side of the business.

So how many SSRs will hit the streets? GM doesn't want to produce too many, lest the novelty wears off. Wallace says the sweet spot is about 10,000 to 15,000 units. Why? Because the target audience is small, although it has the discretionary income to put this third vehicle in the garage. Price is expected in the high $30,000 range.

Wallace's counterpart, David Hill, GM's vehicle line executive for performance cars, is leading development of the Cadillac XLR, which debuted in '99 as the Evoq concept and will begin production (no word on when) in Bowling Green, KY.

Like SSR, volumes will be low. The 2-seat XLR will have a retractable hardtop and will sell for between $60,000 and $85,000, competing against the Lexus SC430, Jaguar XK8 and Mercedes SL 500. Luxury-sport is a small segment (only about 30,000 sales in the U.S. last year), but Hill is confident.

“We think we'll take a significant share of that segment,” Hill says, adding that the vehicle architecture is solid. It will be the first rear-drive Cadillac to receive the celebrated Northstar V-8 engine.

Just last month, auto aficionado David E. Davis Jr. spoke at the Ward's 10 Best Engines awards banquet at the Detroit auto show and says the automotive landscape desperately needs exciting, new specialty vehicles.

“I truly think America is trying to tell us something,” he says. “America is looking for a kind of automobile it has never seen and cannot describe, a unique car that doesn't exist today. Until that car comes along, America experiments, tries other kinds of cars on for size, and complains.”

Meanwhile, those who can't buy what they want at the dealership try the customization route. Today, the specialty automotive industry is a $25 billion enterprise, and some 300,000 cars in the U.S. are in the process of being restored or customized, according to the Specialty Equipment Market Assn.

Ford Motor Co. wanted a piece of that action, so two years ago it formed its new vehicle personalization unit, a branch of the customer service division.

With 100 people, mostly engineers, the unit modifies production vehicles from the factory, which are then sold through dealers. The buyer doesn't have to bother with sometimes-sloppy aftermarket shops, and they get the advantage of a full OEM 3-year, 36,000-mile (57,600 km) warranty.

In mid 2001, the vehicle personalization unit launched the derivative Mustang Bullitt, an updated version of the legendary 1968 Mustang Fastback that Steve McQueen pounded through the streets of San Francisco in one of Hollywood's most famous chase scenes for the film Bullitt.

The vehicle personalization unit made 42 changes to the production Mustang GT to make it like the movie version, including new seating surfaces, instrument clusters, hood scoop and aluminum shifter.

Meanwhile, Roush re-engineered the 4.6L V-8 powertrain for more torque and a more aggressive exhaust tone. Ford built 6,000 Mustang Bullitts, and all sold out in about four months, says Charles Kopeika, Ford's planning manager of vehicle personalization.

Dealers and the auto maker both make money. Volumes are lower, so the division can use aluminum tooling that costs less to produce, Kopeika says.

Like his competitor at GM, Kopeika says agility is king in the niche vehicle segment. Production of Mustang Bullitts may last four months, but his division must follow consumer trends closely so it can quickly come to market with another product that may run for three to six months.

He declines to identify other vehicles soon to be introduced, or whether Ford's restructuring is impacting his division.

And despite a slow economy, Kopeika says, demand for specialty vehicles and aftermarket goodies remains strong.

The consensus within the industry is that a niche vehicle constitutes volumes of about 10,000 units a year, not to exceed 20,000.

Bordering on the upper end of that range will be the 2004 Chrysler Crossfire, a low-slung sports coupe that is destined for “halo” status in Chrysler showrooms.

Chrysler Group President Dieter Zetsche says the Crossfire combines passionate American design with German engineering. In other words, the Crossfire will receive some of Mercedes' best technology, including the world-class 3.2L V-6 engine and 6-speed manual or 5-speed automatic transmissions. Some 40% of Crossfire parts will come from Mercedes-Benz. With this technology, Chrysler dealers can expect a price premium.

Suppliers As Assemblers

And DaimlerChrysler isn't even building the car, making the cost equation even more attractive. Early next year, Germany's Wilhelm Karmann GmbH, a well-known builder of niche vehicles, will begin assembling the rear-drive Crossfire. Again, time to market is greatly condensed. Crossfire debuted as a concept car just last year.

Since 1949, Karmann has produced 3 million complete vehicles, nearly all of them low-volume units. In 2001, the company assembled 26,000 Mercedes CLK convertibles, 16,000 Mercedes CLK coupes and 15,000 Volkswagen Golf Cabriolets.

Karmann is not alone in assembling specialty vehicles for auto makers. A prominent European competitor, Italy's Pininfarina SpA, has built 1 million vehicles in its 70 years in business. Its current models include the Peugeot 306 convertible and 406 coupe.

Later this year, it will begin assembling a convertible version of the Ford Ka in Europe, says Andrea Pininfarina, whose grandfather founded the company. He was in Detroit last month for the North American International Auto Show, where Pininfarina and supplier Webasto AG announced a 50-50 joint venture to produce convertible roofs of all types. The venture, Open Air Systems, will be run by Webasto in Munich and seeks 15% of the convertible market.

Two years ago, Pininfarina reorganized into three business units, including one devoted to niche vehicle development. The company has two vehicle assembly plants in Italy. Pininfarina says his company has no plans for U.S. vehicle assembly plants.

Contract assemblers may be common in Europe, but not in the U.S., where labor disputes would surely surface with the United Auto Workers union. Magna International Inc., for instance, owns the bustling Steyr vehicle assembly plant in Graz, Austria, and has attempted to replicate that model in North America (see WAW — April '01, p.46).

In December, the supplier began discussions to purchase DaimlerChrysler AG's Eurostar vehicle assembly plant, also in Graz (see WAW — Jan. '02, p.22).

Zetsche tells Ward's at the Detroit auto show that Magna approached DC about the Eurostar plant because the supplier needed capacity to assemble another vehicle. That vehicle is believed to be BMW AG's upcoming X3 small sport-activity vehicle.

Niche vehicles don't require a lot of new assembly capacity — North America already has too much. Instead, Magna officials refer to “second-stage manufacturing,” in which a partially completed vehicle rolls of the OEM assembly line, then gets the finishing touches at a supplier plant nearby.

Lear Corp. had such an arrangement in O'Fallon, MO, where it completed luxury conversion vans for GM. But after about a year of production, GM discontinued the vans in December because of weak demand.

Still, Rich MacDonald, executive vice president of marketing and planning at Magna Steyr, sees a need for a “second-stage plus” service from suppliers such as his. “We do more of the assembly, more of the engineering, more of the build of the actual vehicle,” MacDonald says. “And I think as the market evolves we will see more and more necessity for the OEMs to do that and get it out of their assembly plants.”

Craig Winn, executive vice president of engineering, research and development at Steyr, says niche vehicles are important and can help rescue a struggling auto maker.

“And it doesn't have to be a radical new Ram pickup,” Winn says. “It can be tape stripes and wheels — it just depends on the product, the demographics. You can do a lot with very little if you have the process and the ability to turn it around quickly.”