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Automakers putting brakes on options to trim costs
DETROIT -- When American consumers start buying new cars again, they'll likely find fewer combinations of moon roofs, seat upholstery and stereo systems to choose from. As with better fuel economy, it's a case of U.S.
automakers taking a cue from their Japanese counterparts.
A buyer of the 2008 Ford Fusion could choose from the various models and extra features available and come up with 2,600 combinations. For the 2010 version due in showrooms this summer, the number drops to 104.
The Toyota Camry and the Honda Accord were the two best-selling cars in the U.S. in 2008. The people who purchased more than 800,000 of them combined last year picked from a total of just 15 versions. For the Accord, the models or trim levels were limited to just four, each level complete with a variety of extra bells and whistlesThe American car makers need to cut costs.
Sales are at a 26-year low. General Motors Corp. and Chrysler are surviving on government loans. A reduction in options not only streamlines the manufacturing process, but also cuts engineering, design and marketing costs, said Laurie Harbour-Felax, an industry consultant. Those costs often total more than the manufacturing costs.
"The industry has way too many brands, too many models, too much choice, to be efficient," said Mike Maroone, president and chief operating officer of AutoNation Inc., the largest automobile retailer in the country. The Japanese companies' approach "may not serve every niche but it's a much more efficient business model."
Domestic automakers and dealers have tried to guess which combinations will resonate with consumers, and build more cars of that configuration. Still, if only 1,000 people buy a particular combination the company will keep offering it, even if it's not cost effective, said Harbour-Felax.
"It's driven hugely by the sales and marketing guys, that's 1,000 people they don't want to lose," she said. "The Japanese will not create complexity at really low volume to keep one customer."
Harbour-Felax said Honda Motor Corp. is a leader when it comes to simplicity and eliminating customer confusion. The car buyer spends less time in the dealership.
And customers save money because adding options individually often costs more than upgrading to the next trim-level. For example, a Chevrolet Impala LS sells for about $23,000 while the Impala LT costs $800 more. It would cost $2,000 to add the LT's additional options to the LS model, said Michael Carr, sales manager for Bobby Layman Chevrolet in Columbus, Ohio.
Honda's CRV crossover, for example, comes in three versions or trim lines: The LX or base level, the EX, a midlevel option, or the EX-L, a high-end option that comes with leather seats. Consumers can choose to install a navigation system in the EX-L model only.
"The reason we do that is to keep manufacturing simple, but we work within that theory to make sure customers still have that choice," said American Honda spokesman Chuck Schifsky.
The most complex choice Michelene St. Amand had to make when purchasing a new 2006 Honda Accord -- her third -- was whether or not to get a spoiler on the vehicle.
"I didn't have to dicker about getting a model with a moon roof, but without seat heaters. It made the whole process relatively pain free. That would seem like an example Ford and the others should emulate," said the Watertown, Mass. resident.
The Detroit Three, meanwhile, continue to streamline features to keep up with Honda and Toyota Motor Corp., Harbour-Felax said.
General Motors Corp. streamlined options for many of its models over the last two years, offering three to four main trim levels for its popular Chevrolet Malibus and Cobalts.
It was common for Chrysler LLC to offer 10,000 different vehicle combinations, accounting for different variations of transmissions, safety, and interior features.
Now they're trying to get the number of combinations down to 1,000 for some of their major models, such as the Sebring.
"People don't have the money to spec out a $50,000 car anyway," Harbour-Felax said.