Toyota turns up the heat in US car makers' home town

Executives from the world's major car manufacturers will gather in Motor City tomorrow for the start of the annual Detroit Auto Show, an event that might give clues as to whether the big three American car makers can pull out of their spiral of decline.

The ailing trio - General Motors, Ford and DaimlerChrysler - are all based within a few miles of the giant exhibition centre in downtown Detroit, and they are determined not to be upstaged in front of up to 700,000 people by their foreign nemesis, Toyota.

However, it is far from clear that the three will have the exciting new models and technologies needed to convince Wall Street they can stem their losses and reverse their fortunes.

GM's US sales were down 10 per cent in December, Ford's fell 13 per cent and Chrysler's were in effect flat - and even these dire figures were propped up in part by deep discounting. Combined, the three accounted for 55 per cent of light vehicle sales in the US in 2006, down from 63 per cent in 2002, and the figure could fall a further 2 percentage points next year.

Previewing the Detroit show, Rod Lache, a car industry analyst at Deutsche Bank, believes the US carmakers are doomed to continue losing market share in North America "for the foreseeable future".

"We believe that successful new products are the best, if not the only, way for automakers to mitigate reliance on incentives and to defend or grow retail market share. As a result, investors will be placing considerable importance on the attractiveness of automakers' new product pipeline."

The open question is whether executives will use the motor show to promise shake-ups to the structure of their businesses, as they have done in previous years. GM and Ford are both handing redundancy cheques to tens of thousands of US workers in the Detroit area in an effort to drive down costs. That would help erode the cost advantage that Toyota has been able to achieve by building its factories in the south of the US and using a younger, more flexible workforce. Industry observers are expecting Chrysler to come up with restructuring proposals of its own, if not at the show then soon afterwards.

Toyota won't be indulging in as much hoopla as its US rivals in Detroit, but the Japanese firm will maintain a menacing presence and will find itself the focus of much interest, whether it likes it or not.

"In the end, all eyes will be on the Tundra launch as Toyota attempts to take a share from the domestics in what has been a weakening pick-up market," Mr Lache told his clients. "With plans for about 200,000 sales, Toyota is set to confront the domestics head-on in one of the their last bastions of significant profitability."

The company is also likely to unveil new hybrid petrol-electric cars, including early versions of a new hybrid sports car. The idea is to push home its advantage in environmentally-friendly cars by broadening their appeal beyond green consumers to drivers of a racier bent.

Rick Wagoner, GM's chief executive, can't escape the shadow of Toyota, particularly now that the Japanese firm's progress in the US and overseas threatens to topple GM as the world's largest carmaker. Toyota last month announced a global production target of 9.42 million vehicles for 2008, well above the 9.2 million vehicles GM is estimated to have produced in 2006. GM certainly has the capacity to build more than 9.4 million cars worldwide, the question is whether it is confident of finding buyers for that many.

Mr Wagoner admits it would be a dent to GM's pride to lose the number one slot. "It won't be a happy day for me, but I've lost basketball games before in my life. You get ready and you learn and you go back the next day, and that's what we'll do. We're going to fight to keep the position, and if one day we lose it, we'll fight to get it back."

Toyota also appears set to move up into the number two slot in the US, pushing decisively above Ford in the coming year. Meetings between Ford's recently-installed chief executive Alan Mulally and his opposite number at Toyota generated much excitement in the industry, but it seems any collaborations between the two companies - in manufacturing or in alternative fuels - may be a way off.

Instead, the focus at Detroit will be on Ford's legacy businesses, including the UK-based Jaguar, which Mr Mulally has signalled could be put up for sale. The loss-making luxury car division will be one marque taking the covers off a crucial new car in Detroit. The Jaguar XF, which will replace the S-Type and is being unveiled as a concept car at the show, could be its last shot at generating a buzz that might persuade Ford the business has a future.