Small Breakthrough

By Nichole Christian/Detroit

At the auto industry's annual coming-out party in Detroit last week, carmakers sent a loud message to baby boomers: Get in the backseat. Young, young, young--the word came up over and over again at virtually every one of the North American International Auto Show's glitzy vehicle unveilings. And when the industry's boomer executives weren't making impassioned pleas for attracting younger buyers, they simply turned to the babies themselves, who appeared in person or on MTV-inspired videos, twentysomethings and teeny boppers cooing over the many cars now aimed directly at them. Two of the industry's new youth magnets, the Ford Focus and the Nissan Xterra, were voted car and truck of the year last week--coveted awards issued by North American auto journalists.

Ford, Nissan and other carmakers are focusing their attention on a generation barely old enough to drive, because the 70 million or so echo boomers (born between 1977 and 1994) may grow up to be the most affluent generation ever. But unlike their parents, the echo boomers claim to have no interest in driving elephantine, fuel-swilling sport-utility vehicles and trucks.

That's why carmakers are redefining the long-forgotten small-car segment, for which they are dreaming up new vehicles like DaimlerChrysler's PT Cruiser and the Ford Escape. These latest creations may not be quite as fuel thrifty, but they are vast stylistic improvements over the lackluster econo-boxes of the 1970s and '80s. They have to be. The next generation wants a lot more for its money (or Mom and Dad's money), so today's small cars are bulging with what the trade calls content--everything from power windows to CD players to telescoping steering wheels.

"The car companies haven't spent this kind of money since the baby boomers moved en masse into the market," says Wesley Brown, an auto analyst with Nextrend in Thousand Oaks, Calif. "They know it's much easier to bring new buyers to a brand while they're 16 than it is to start conquering them at 40."

Don't worry, boomers, carmakers are still banking on you to buy those profit-priming monster sport-utes and plushmobiles. In 1998, for instance, about 2 million small cars were sold, a minimally profitable 14% of the total. "The baby boomers are still the lion's share of the market," says Marty Levine, DaimlerChrysler's vice president of Chrysler Plymouth Jeep. That's precisely why DaimlerChrysler has been careful not to refer publicly to its new PT Cruiser--which is built on a small-car chassis and whose voluptuous curves are reminiscent of the cars of the '30s--as a youth attraction.

At the same time, Daimler has so far confined advertising for the Cruiser to the Internet, where it has lined up 250,000 young, prospective buyers. And that list may get longer since the company put a budget $16,000 sticker price on the Cruiser. "You want to attract younger buyers, but you don't want to tag it and say [to boomers], 'This car isn't for you,'" says Levine. Call it "Sell but don't tell." Yet he and other executives know the clock is ticking on the boomers' control over the industry. By 2007 Generations X and Y will account for 40% to 45% of total vehicle sales.

That's troubling for companies like Toyota, which had great success marketing to the young boomers in the '70s but has stumbled trying to appeal to their children. The new $10,480 Echo is the first in a line of upcoming cars designed to test whether the company, whose average buyer is now 45 years old, is ready to think young again. "We made our name in this country by going after the boomers at very young ages. We grew up with them," says Don Esmond, group vice president and general manager of the Toyota division. "But frankly, while we were providing the boomers with more and more sophisticated products, we took our eyes off the youth market. We have to figure out what they want." With that in mind, Toyota established an internal task force called the Genesis Youth Project to try to get a grip on how younger consumers think about cars and car marketing.

Honda has already backed into some of these insights. Young careerists have long made the trusty, frumpy Civic a top seller. But to the surprise of Honda execs, teenage hot rodders in California also liked the Civic. Or at least parts of it. In their busy hands, Civic went from conservative to cool. They tore out the wimpy engine and added souped-up, after-market power plants and exhaust kits. Honda heard the roar. Last year the company rolled out the Civic Si, a sporty coupe with 15-in. tires, chrome exhaust tips and a 160-h.p. engine--50% more powerful than the standard one--that scoots from zero to 60 m.p.h. in less than 8 sec.

In Detroit, Ford is taking the most forthright approach to wooing echo boomers, especially with its new Focus, the car-of-the-year winner. A sharp-edged, Euro-styled sedan priced at $12,660, the Focus, says Ford, is the first car designed specifically for 20-year-olds. And the company is betting young buyers will also be smitten with the Escape, a small suv with five cup holders, a roof rack and an optional six-disc CD changer in the dash. Ford offers first-time buyers a generous 3.9% finance rate.

To help create these new makes, Ford hired a consultant who specializes in urban youth culture to teach executives how to think hip. The Ford crew quickly found themselves hanging at the X Games and frequenting shopping malls and nightclubs in New York City, Miami and Los Angeles. They had to learn street terms such as phat (cool), tricked out (wildly customized) and 24-7 (around the clock). Engineers and designers were sent on "life tests," in which they rode around with young drivers and filmed them as they discussed their vision of the perfect car.

Those sessions led Ford to add custom packages to the Focus so that status-conscious younger buyers could personalize their cars. For dashing dotcom-ers, a passenger-side workstation cradles precious laptops. Pet lovers can add a safety seat for Fido as well as a lint brush and air purifier. And then there is the limited edition, available this spring, that comes with a customized Kona mountain bike or Sony's 460-watt Xplod sound system. "We have to show this generation right now that Ford is hip and cool," says Julie Roehm, Ford's 29-year-old brand manager for the Focus. "If we wait until they're old enough to buy a car, we've lost our opportunity to connect to them."

If nothing else, Ford has at least figured out where to reach its next generation of buyers. Rather than rely on conventional ads, the company hired comedian Annabelle Gurwitch to star in 64 live commercials, shown during The Simpsons, Ally McBeal and Friends, that feature her tooling around the country in a Focus. To heighten its phat factor, the company parked Focus vehicles in 50 of the nation's busiest Sony Loews theaters and passed out 120 tricked-out versions to select deejays, nightclub managers and celebrity personal assistants in five trendsetting markets. Ford sponsored Ricky Martin's fall tour and scored a few extra cool points when Britain's Prince William learned to drive in a Focus.

Where's GM? Until recently, idling. Perhaps anxious that it would be too long before the echo boomers could contribute much to profits, the No. 1 car company has relied almost solely on its Saturn brand, particularly the popular Saturn SC, to satisfy the urges of the youth-minded market.

In Detroit last week, GM finally acknowledged the potential of youth. Executives made a show of their newfound enthusiasm for the energetic world of the echo boomer by staging a rave to introduce Pontiac's new crossover vehicle, the Aztek. Screaming kids (many looked too young to drive) mobbed the stage to a deafening background beat, brandishing signs declaring IT'S THE VERSATILITY, BABY. Then the crowd parted to unveil the unwieldy-looking bright yellow Aztek, which like several of its competitors is supposed to combine the comfort of a car with the ruggedness of a truck. Said GM president Richard Wagoner: "We must create new market segments." GM had better not hesitate to embrace the power of this one.

--With reporting by Joseph R. Szczesny/Detroit

With reporting by Joseph R. Szczesny/Detroit