Image: Hyundai ‘Nuvis’ concept
The world will peer into Hyundai’s future when the ‘Nuvis’ concept makes its world debut at the 2009 New York auto show this week.
By Roland Jones
updated 4/8/2009 10:46:45 AM ET 2009-04-08T14:46:45

With the U.S. auto industry likely going through its worst period in history, surely this is the worst possible time to throw a party for the world’s top automakers.

But in the best New York Broadway tradition, the show must go on.

Starting this Friday, over 1 million visitors are expected to pour into Manhattan’s Jacob Javits Convention Center during the 10 days of the 2009 New York auto show to see as automakers unveil 35 new vehicles. The show is the nation’s oldest and usually the best-attended of the year.

It’s taking place as two big automakers — General Motors and Chrysler — teeter on the edge of bankruptcy, credit remains tight as a clam, the jobless rate is at a 26-year high and Americans are in no mood to plunk down thousands of dollars on a new car. U.S. car sales are at their lowest level in three decades.

Still, the automakers have little choice but to grit their teeth, show their wares and try to get buyers interested in cars again, said Aaron Bragman, an auto analyst with consultancy IHS Global Insight.

“Automakers have the immediate challenge of restructuring their businesses, but the other challenge they face is to get people buying cars and trucks again,” he said.

“We are still in a pretty deep recession, and people haven’t overcome their fears about spending, but they’ll never start buying cars again unless we have events like this,” Bragman added. “If Detroit stopped doing auto shows altogether it would send the wrong type of message.”

This year, New York’s line-up of North American and world debuts includes: the MazdaSpeed 3 sport compact; the GMC Terrain, GM’s newest crossover utility vehicle; Ford’s new flagship, the 2010 Taurus; a new Mercedes E-class; and an experimental “micro subcompact” from Scion.

On the “green” front, Hyundai is expected to show a new gas-electric hybrid called “Nuvis,” while the all-electric Mini E, Honda’s Insight hybrid and the new generation Toyota Prius will all be on display. The winner of the prestigious “World Green Car” competition will also be announced at the show.

When it comes to the usual flashy displays put on to unveil their latest cars, there are indications that the automakers are pulling in their horns in New York this year.

Some 325 truckloads of cars and displays (which amounts to between 10.5 million and 11 million pounds of freight), have arrived at the Javits center for this year’s show, down from about 350 truckloads with 12 million pounds of freight that arrived last year, according to the show’s president Mark Schienberg.

Ford and Nissan, two large automakers, will not hold news conferences at the media days that precede the public viewing that starts this Friday. Pre-registrations from the media are down just over 3 percent from last year, when 4,830 members of the press registered for the event.

“I think we’ll do fine, but we are more cautious,” Schienberg said. “Spring is car-selling season, so I think people will want to come out and see the cars on show. And New York is an international city, so when a vehicle is shown here it’s picked up by media around the world. I think we’ll get a lot of press coverage.”

Press coverage isn’t something Detroit’s big automakers have lacked over the last few months, as every twist and turn in their efforts to salvage their failing businesses has grabbed the attention of the world’s media.

In the latest news event, the Obama administration said at the end of March that the turnaround plans GM and Chrysler had presented to Congress earlier this year hadn’t gone far enough. He imposed a tough timeline for them to turn their operations around.

GM has until June 1 to restructure or face the threat of bankruptcy, while Chrysler was given a 30-day deadline to forge a partnership with Italy’s Fiat or go out of business.

IHS Global Insight’s Bragman isn’t optimistic either deadline can be met without the automakers going into some form of bankruptcy. The two companies must hammer out pacts with their various constituents, including creditors, the United Auto Workers union and a national network of dealerships protected by a byzantine system of state franchise laws.

“For GM to work out those sorts of agreements outside of court and within 60 days is just not doable,” Bragman said. “So many things have to happen for them to become viable companies, and I think this can only happen quickly through a limited bankruptcy filing.”

A plan to split the automaker into a new company made up of its most successful units, and an “old company” of its less-profitable parts, is gaining momentum and is seen as the company’s best configuration for the future, according to reports.

Using a specific part of U.S. bankruptcy laws known as Section 363, the company’s creditors and the union can take a stake in a new, leaner “Good GM.” The rest of the company would be bundled into a “Bad GM,” which would include failing brands such as Hummer and Pontiac and would remain in bankruptcy.

This bad company would also take on GM’s billions of dollars of debt, the proceeds of which would be used to pay back the creditors of the old company. A similar split-company deal would be worked out for Chrysler.

GM is now in “intense” and “earnest” preparations for a possible bankruptcy filing, a source familiar with the company’s plans told Reuters Tuesday. GM’s Chief Executive Fritz Henderson said recently that the company prefers to restructure out of court, but could go through a bankruptcy procedure if that is required.

“GM will likely say to its various constituents, such as the auto dealers, ‘You can come on board with us as we go through bankruptcy and see if you get something out of it, or you can take your chances in court,’” said Bragman.

Reuters contributed to this report.


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