Lessons from the Auto Show

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Porsche returned to The North American International Auto Show after a three-year absence and brought with it the devastating Porsche 918 RSR hybrid race car.

The North American International Auto Show, in residence at Cobo Hall in downtown Detroit until Jan. 23, provides a teachable moment. It turns out, lazy and overfed car companies can lose weight and come out fighting (hello, General Motors). Conversely, a stable of the smartest executives on the planet is no guarantee your company won't stumble into a clearly marked minefield (VW, I'm looking at you).

Other takeaways: It was naive of naysayers to judge an emergent technology such as electric mobility by its previous limitations. They will dine on crows in the coming years. And it's perfectly permissible for national governments to save giant employers in a moment of crisis, because flesh and blood is more important than ideological purity. Just don't make it a habit.

Interested? Antagonized? Then read on. Here are my lessons from the Detroit auto show.

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The Mercedes-Benz SLS AMG E-Cell

Automotive engineers have the most beautiful minds: Porsche returned to the show this year after a three-year absence and brought with it the devastating Porsche 918 RSR hybrid race car, which won the annual EyesOn Design award for Best Concept.

A competition version of the 918 Spyder seen last year, the mid-engine, carbon-chassis 918 RSR marries a fire-spitting 563-hp V8 with two traction motors on the front wheels, providing up to 204 hp of temporary, corner-exiting electric boost.

The key component is the car's flywheel accumulator, a washer drum-sized device sitting in the cockpit that stores electrical energy mechanically, in a toroid-shaped mass spinning at up to 38,000 rpm. When required, this rotational momentum is converted back into electricity in an elegant display of the first law of thermodynamics.

WSJ's Rumble Seat columnist Dan Neil takes a walk through Cobo Hall and discusses some of the most significant finds, the good, the bad, the ugly.

It would be achievement enough to build such a car, a synthesis of horsepower and computational muscle, a car that dares the limits of physics and mechanical engineering. But to make such a car beautiful? These guys are poets with wrenches.

The Germans are inclined to overreach: At the annual preshow media gathering at Detroit's "Firehouse" on Sunday, Volkswagen Chairman Martin Winterkorn was introduced as "Dr. Professor," as if anyone would doubt he's quite clever. But the buzz around the new Passat midsize sedan, to be built in a new $1 billion facility in Chattanooga, Tenn., was less than ardent. The new Passat will sell for $8,000 less the previous model and, frankly, it feels it, with a palpable loss of heft and substance from the door handles to the windshield wipers. The styling is inert, virtually invisible. VW calls the new American Passat "accessible." I think patronizing is more like it.

On Sunday Mr. Winterkorn repeated VW's goal of reaching 800,000 annual U.S. sales by 2018, part of the company's plan to overtake Toyota as the world's biggest car maker. But is it wise for VW to so publicly nail itself to those sales goals? VW will be lucky to hit 300,000 sales in 2011. Won't anything less (799,000 sales in 2018, for instance) be seen as a failure? And is "biggest," a priori, always a good thing? Ask GM.

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Chrysler 300C

The Detroit bailout was the right thing to do: Grit your teeth if you must. Two years later, GM is profitable, right-sized, globally competitive and an engine of automotive change—as evidenced by the Chevrolet Volt extended-range electric vehicle, named the North American Car of the Year. The government's stake in "Government Motors" is down to 25%. When GM's stock reaches the low $50s range, analysts expect the Treasury will likely sell the remaining stake and actually make money on the deal. That's about as good an outcome as could reasonably be hoped.

As for the government-financed Chrysler-Fiat merger, Chrysler CEO Sergio Marchionne says he expects to pay back the U.S. Treasury this year (not least because of the punishing interest on those notes). The company's U.S.-market offerings have been renovated, including a successful reboot of the Jeep Grand Cherokee. Chrysler lives to fight another day.

The Fiat 500 will be a hit: "Iconic" is a much-abused word, but it fits the Fiat 500, which was modernized in the manner of the BMW Mini a couple of years ago. As part of the Chrysler-Fiat merger, the 500 will go on sale in the U.S. this month, and the Alfa-Romeo MiTo next year. For high-school girls, the adorable Fiat 500 will be the new sparkly phone.

Meantime, it satisfies my sense of the absurd that Italians will get a chance to buy the restyled Chrysler 300, rebadged as a Lancia. Can the world ever get that small?

Gasoline is going through the moonroof: Every car company is bracing for $4-per-gallon gasoline in the U.S. as the global economic recovery drives up demand; and every executive who would venture an opinion thought that price range would be the new normal. A key difference from price spikes of the past, however, is that automakers have more product in cadence with the energy market. To name a few examples: GM unveiled the tidy subcompact Chevrolet Sonic at the show (with expected 40+ mpg) as well as the compact Buick Verano; Toyota is diversifying its Prius lineup with a Prius hatch-wagon (the Prius V) and a smaller hatch (the Prius C). Ford debuted the U.S.-spec version of the C-Max multipurpose vehicle (an MPV in the argot), a smaller and leaner people mover. The hybrid version of the C-Max is expected to get better than 40 mpg and will be capable of motoring electrically at nearly 50 mph.

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Fiat 500

More CAFE, s'il vous plaît? A cynic would look at the spray of all-electric vehicles on display in Detroit—cars like the Ford Focus electric and the Mercedes-Benz SLS AMG E-Cell—and say the car companies are just building these cars because they get extra credit for zero-emission vehicles under the feds' rules for Corporate Average Fuel Economy. And I would say, exactly. CAFE helps companies up the EV learning curve. That is right and proper.

The death of diesel prejudice: Almost literally. Most who were in the market in the 1970s and 1980s—when diesel powertrains were loud and sooty—have likely aged out of the pool of car buyers. Younger buyers have no such prejudice against oil-burners, which are on the order of 30% more fuel-efficient than gasoline-powered cars. For them there are cars such as 2012 Mercedes-Benz S350 BlueTEC 4Matic, powered by a 3.0-liter V6 putting out 240 horsepower and 455 pound-feet of torque through a seven-speed transmission and all-wheel drivetrain. The fuel economy should be in the range of 30 mpg combined. Mercedes will field eight diesel models by 2014. Audi will diesel-fy its A6 and A8 sedans (the A3 and Q7 SUV are available now with diesel powertrains) and expects diesels will eventually represent a third of its sales.

Hyundai, big and getting bigger: One of the few companies to have true "concept cars" on the stand was Hyundai, which displayed the millennial-minded hatchback Veloster and the "urban tough" Curb compact-ute. Indeed, the Hyundai stand sprawled with new products, including the revised Elantra, a 40-mpg-plus compact up against the Ford Fiesta, Chevy Cruze and Honda Civic; and the mighty Equus luxury sedan. Hyundai sold a staggering 530,000 vehicles in the U.S. in 2010. In conversations with auto execs, it was clear that the Korean giant is being viewed with a new gravity and respect, even—yes—fear. While VW is attacking Toyota from the front, it will want to guard its flank.

Entropy is Toyota's co-pilot: At the moment, The Toyota Way is down, with declining sales, an aging product line and badly battered quality reputation. It's still a great company with tremendous capital and intellectual resources. And yet, when you walk through the dour energy field of the Toyota stand, the company's slide is more cosmically instructive. No company, no one, stays on top forever.