Little engine, the car industry is proving

John Sommers II / Reuters

Newly assembled 2013 Ford escapes sit on plant lots ready to be shipped out to dealers at the newly transformed Louisville assembly plant in Louisville, Kentucky.

By Paul A. Eisenstein, NBC News contributor
The subject will be politics but the economy will be one of the dominant factors playing out as Democrats begin their convention today. And with a desperate need to put a positive spin on what is, at best, a struggling economy expect to see the spotlight focus on the auto industry.

At a time when housing starts are sputtering and there are few other solid signs of a recovering economy the U.S. auto industry has become the little engine that could.

Once all the makers weigh in with their August numbers by day's end sales for the month likely show wants to about a 16 percent year-over-year gain. And while the market, at best, is well off from its 17 - million peak, expected to total 14.5 million this year, "there's not much else we can point to these days that's anywhere near as buoyant," said analyst Joe Phillippi of car WebTrends consulting.

Analysts point to a variety of factors that helped drive strong demand last month – from soaring fuel prices to hurricanes and heat waves. High on the list is pent up demand, but the increasingly availability of credit, especially for sub-prime buyers so played a clear role. And one area of strong demand - a surge in pickup truck sales - holds out hope that builders and contractors are looking beyond recent problems to prepare for better business in the months ahead.

Among the makers leading the August charge, Volkswagen was up a solid 62.5 percent year-over-year, much of that surge driven by demand for its American-made Passat model. Reflecting the latest rise in fuel prices, meanwhile, more than a quarter of those vehicles were sold with gas-stingy diesel engines, with VW's sales chief Frank Trivieri forecasting that could soon rise above 30 percent.

Asked what is driving the automotive upturn - and countering some forecasts that the market would begin cooling down by late summer - Trivieri pointed to "pent up demand." "Are still customers who say it's time there to trade in now rather than continue to pay for repairs."

Since the collapse of the US market – generally seen to have begun in 2008, sales bottoming out at 10.4 million in 2009 - American motorists have purchased perhaps 10 million vehicles less than they would have had the industry stayed close to its normal trendline.

Nowhere does pent up demand seem to be more apparent than among the big three Japanese makers, and especially Toyota and Honda. The latter is reporting a jump 59.5%; the bigger of the two saw a 45.6 percent gain in August and analysts most believe a sizable chunk of both makers' gains came from buyers who postponed trading in last year as the result of Japanese product shortages caused by that country's March 2011 earthquake and tsunami.

One factor clearly helping potential buyers is the growing availability of credit. Most makers now offer leasing again - albeit at a higher price - after the lease market all but dried up in 2009 and 2010.

Meanwhile, subprime lending is on the rise again after so largely vanishing during the recession. In fact, a new study by Experian Automotive found that during the second quarter, nonprime, subprime and deep subprime lending rose and even exceeded pre-recession levels, accounting for 25.4 percent of all vehicle loans for the quarter - a trend believed to continue into the third quarter.

"Because the overall lending environment has improved, lenders are making loans available to a wider range of customers." "This is good for manufacturers and dealers, as it allows them to sell more vehicles," said Melinda Zabritski, director of automotive credit for Experian Automotive. "However, the lower loan-to-value ratios show that lenders are not willing to throw caution to the winds."

One of the more significant factors from August what the fourth consecutive monthly decline in incentive spending which dipped to on average $2,457 per vehicle compared to $2,614 in August 2011. Hyundai had the lowest givebacks in the industry, at just $1,071 - down nearly 17% year-over-year. The maker has also been struggling to meet growing demand, especially following weeks of targeted strikes at its factories in Korea.

Hyundai reported record sales for August. According to TruCar.com, Hyundai - and its sibling KIA - had the highest average transactipn price in its history.

But other makers, including Ford, so warn they are struggling to meet market expectations after the sharp capacity cuts of recent years.

All three of the Detroit makers made gains in August, showing a payoff from the "Chevy confidence" GM marketing program that has allowed buyers unhappy with one of the's brand products to return it for a full refund.

, The domestic makers sold more than 121,000 full-size pickups led last Collectively Ford month, by - whose F-series line has been the best-selling motor vehicle in the U.S. for three decades - at 58,201.

That's a potentially very good sign for the broader economy, according to analyst Phillippi, who noted that the so-called "personal use" truck market has largely vanished, so those who buy the vehicles now typically need them for work. And for demand to be so strong "despite near-record fuel prices...might bode well for the construction industry."

Clearly, another factor working in the automotive industry's favor is the glut of new product that has been and will continue coming to market of late. That's especially apparent in higher-mileage passenger car segment. For 2013 alone Honda, Ford, Chevrolet and Nissan are all launching new midsize sedans.

Chrysler's new Dodge Dart has been rapidly gaining ground in the compact segment, meanwhile, posting 300% monthly increases since its spring launch. Company officials admit they can't keep up that pace long but believe the DART will continue the maker's string of monthly sales gains that have handily outpaced the industry average.

That's so allowed the maker to begin paring back its incentives - long the highest in the industry. "As we continue to refresh our product portfolio, you'll see that number (continue to) shrink," Chrysler CEO Sergio Marchionne said.

Expect to see the Democrats highlight the Chrysler turnaround this week. The maker paid back all the loans it received during the Obama administration as part of its bankruptcy bailout several years early. Making a case for the White House handling of GM may be a bit tough considering it needs to nearly stock price to recover that portion of the 2008 - 2009 auto double the maker's bailout. But strong sales by the Detroit giant - which last year regained its place as world's best-selling automaker - should help create at least a somewhat positive spin.

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Review: Little Chevy Sonic boasts style, pep

 

Brian Konoske (Photographer) / GM

The 2012 Chevrolet Sonic hatchback.

By Dan Carney

Only a block from the media introduction of the 2012 Chevrolet Sonic, the San Francisco Museum of Modern Art hosted an exhibit of products created for the Braun electronics company.

The exhibit demonstrated how the designs, by Dieter Rams boosted the appeal of consumer products and  influenced today’s paragon of industrial design: Apple.

This is relevant to the new Sonic because if carmakers from time to time lose focus on the importance of the styling of their vehicles, they especially seem to think that people who buy low-priced subcompact cars have no taste, style or aspirations.

Subcompact cars, outside a few niche premium products like the Mini Cooper and Fiat 500, have been doomed to wear dull, indifferent styling.

But Braun, and then Apple, showed that it is possible to design affordable, mainstream, high-volume products that look like they belong in a museum. I wouldn’t necessarily predict that the 2012 Sonic is museum-ready, but the car’s adventurous, expressive styling does offer small-car shoppers some redemption from the too-often invisible style of cars in the segment.

The vivid flair of sport motorcycles provided the Sonic’s inspiration inside and out. The influence is most apparent in the quad circular headlamps and in the instrument binnacle atop the steering column. 

Elsewhere, well, it’s hard to find much else on a compact car that resembles the spare appearance of a sportbike. But a prominent exhaust or faux handgrips molded into the steering wheel would have been an overwrought interpretation of the theme.

Some un-motorcycle-like details: Engineers sought to make the Sonic as safe as possible with a profusion of airbags. It’s hard to imagine where they could fit 10 airbags in such a small car, but that fact certainly cultivates the mental image of the entire cabin stuffed with pillowy cushions in the event of a disaster.

Of course, those cushions are no good if the metal box around them is flimsy, so the Sonic is reinforced with high-strength steel that yields a body shell 77 percent stiffer than that of the outgoing Aveo model.

Some other upgrades? How about available sunroof, heated seats and remote start? Here is some substance to support the Sonic’s style that lets customers escape the feeling that they’ve shortchanged themselves by buying a subcompact.

One miss: the outgoing Aveo model offered a lumbar adjuster for the driver’s seat that is absent from the Sonic. We brothers of chronic lower back pain beg for its return.

Also un-motorcycle-like: sluggish, indifferent throttle response that lags disappointingly on the application and churns onward after lifting off the gas with the inertia of a temporary government program.

The tiny 1.4-liter four-cylinder engine produces an impressive 138 horsepower and a more surprising 148 pound-feet of torque thanks to a turbocharger. Once a shibboleth connoting maximum performance, turbocharging is now a tool applied to improve fuel economy because it lets small engines do the work of big ones. Seeing a torque number that’s bigger than the horsepower rating is the proof Chevy’s engineers have accomplished that feat because in small engines that order is normally reversed.

But it seems that tuning engines to sip gas like espresso rather than to gulp it like Gatorade saps them of the crisp response epitomized by the zing of sportbikes. Even the masters of small engine tuning at Honda struggle with this. Hopefully GM's tuners can continue to improve this detail.

Of course it’s a detail that matters only to us unreformed enthusiasts who insist on choosing the Sonic's superb six-speed manual transmission, with its precise shifter and smooth clutch take-up. Most Sonic buyers will choose the automatic, which masks the engine's throttle response characteristics.

Behind the wheel the driver's eye falls on a vast expanse of plastic. What did you expect in a subcompact, Terrazzo tile? But Chevy's designers wisely chose not to pretend otherwise.

"We do have a plastic dashboard," noted design manager Kathy Sirvio. "Instead of trying to make it look like something it is not, we put a nice technical grain on it."

If you have ever wondered what a reviewer means when discussing "good" vs. "cheap" plastic, this is it. Good plastic is honest enough to not pretend it is something else, without surrendering all pretense of style so that it looks like something found at the bottom of your kid's toy box.

The high-strength steel in the body shell contributes to the Sonic's solid feeling, both on the road and when closing doors. Standard aluminum wheels trim away a couple decibels of road noise, further refining the drive. 

Both motorcycles and subcompact cars are supposed to get good fuel economy, and the EPA says the Sonic is superlative, with a 40 mpg highway rating for the tested manual transmission. But fuel economy depends substantially on how the car is driven, and a few days of fun driving pushed my test car's mileage down to an un-motorcycle-like 25 mpg.

I'll take the blame for that this time, but it was surprising to see such a low number. Drivers who were born to be mild but appreciate motorcycle-influenced style can aim for the EPA's 40 mpg rating with their own Chevy Sonic.

Vital stats: 2012 Chevrolet Sonic

Base price: $16,495

As tested: $17,195

EPA fuel economy (city/highway): 29/40

Pros: The only subcompact made in America, 10 standard airbags, premium options, such as seat heaters.

Cons: A sluggish, disconnected throttle response.

Verdict: Not just GM's first great subcompact; the Sonic is the first one that’s good.

Standard equipment: 138-hp, 1.4-liter turbocharged four-cylinder engine, aluminum wheels, tilting and telescoping steering, power windows and door locks, heated outside mirrors.

Major options: Six-speed manual transmission.

Safety equipment: Electronic stability control, 10 standard airbags, antilock brakes.

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