Surprise: Detroit Is Motor City To Asian Brands Too

Toyota, Nissan, Honda and Hyundai all turn to Detroit to make top selling models.

Four months ago, Chrysler took the highly unusual step of advertising its Detroit roots during the Super Bowl.

The campaign has drawn a lot of attention, as well as mixed reviews for its effectiveness. Detroit, indeed most of Southeast Michigan, after all, has a reputation as a broken and battered city. What will surprise many car buyers, though, is that the leading Asian auto makers turn to the expertise found in the greater Detroit area to engineer many of their most important vehicles for the U.S.

Take the Toyota Tundra pickup truck. A slow seller so far since Toyota introduced the brawny pickup in early 2008, the Tundra is nonetheless a very capable pickup that Toyota expects to eventually challenge the Ford F Series and Chevy Silverado with builders and contractors once the pall lifts off the new-house construction industry. The truck was not engineered and developed in Japan, though, but rather at Toyota's technical center in Ann Arbor, Mich., about 45 miles west of Detroit.

Best Selling Car in America Born in Detroit -- To Toyota

Toyota's tech center, which has also led engineering on such important models as the Toyota Camry (the best-selling sedan in the U.S.), Toyota Avalon and Highlander, and Lexus ES350, is not alone in choosing greater Detroit as a center for engineering and technical development. Hyundai, Nissan and Honda also have major presences here.

"The best asset southeast Michigan has for the future is not so much labor, but the enormous intellectual property development that is here and the experience of engineers," says David Cole, chairman emeritus of The Center or Auto Research, in Ann Arbor, Mich. Cole is also leading a new venture, AutoHarvest, an Ann Arbor-based firm that seeks to being together auto companies, other industries and university researchers together to exchange intellectual property.

Indeed, as General Motors, Ford and Chrysler have downsized in the last decade, thousands of engineers have found work at the Asian transplants hoping to tap their know-how, especially of the U.S. market. And the tech centers have presented key opportunities for engineering graduates from the University of Michigan and Michigan State University.

Korean automakers Hyundai and Kia, for example, share a tech center in Ann Arbor that led the way on the current Hyundai Sonata and Santa Fe.

"Hyundai leverages our Michigan engineering talent in a way that dramatically impacts our product line here in the U.S.," says Hyundai Motor America CEO John Krafcik, an engineer who formally worked at Ford and Toyota.

Hyundai's Michigan-based team handle various critical tasks such as the certification of the Hyundai power-trains according to U.S. federal safety and emission standards, and drive many aspects of the in-car entertainment, navigation, and Blue Link telematics systems in the vehicles. The Michigan tech center also oversees a separate vehicle engineering center in California, which handles chassis and noise-vibration-harshness tuning for all U.S. Hyundai products."

Toyota's Ann Arbor-based tech center has proved invaluable to the company's rise in the U.S. While the Japanese company is known for quality, innovation of hybrid systems and world class efficient production of its vehicles, it had its share of product duds before it turned over engineering on several models to its Michigan-based staff. Early versions of Toyota minivans and pickup trucks developed in Japan were flops. It wasn't until the Sienna minivan and Tundra pickups got Michigan makeovers that they were competitive and ready to challenge Ford, GM and Chrysler in those categories.

There is a community of auto industry engineering and research that is part of the University of Michigan, and has been built up by nearby GM, Ford and Chrysler, as well as the numerous auto supplier companies with headquarters or facilities around Southeast Michigan.

Detroit has gotten a bad name with a lot of the public because of some really bad management at the top of the U.S. companies in the last two decades. But with the wealth of intelligence and talent among engineers, designers and the universities in Michigan, the Asian companies could hardly have gone anywhere else in the U.S. to find the same talent pool.

Ford and Chrysler are examples of how management changes at the top have unleashed talent that was always there at the companies. Ford CEO Alan Mulally has made very few changes of people at Ford, and the same is true of Chrysler CEO Sergio Marchionne. Dramatically better products are coming from largely the same people but with much smarter people calling shots at the top.

Nissan's Farmington Hills, Mich., tech center was opened in the 1990s, and has been the home base for developing the Nissan Altima sedan, Quest minivan, Titan pickup, Versa sub-compact, Leaf electric vehicle and others.

Understanding "Quality"

Reputations for quality still separate brands, and a lot of the systems that customers score for quality on surveys are all hatched and engineered in Michigan where the company is Ford or Toyota. In the most recent J.D. Power and Associates Initial Quality Study, Chrysler and Ford tumbled in the ranking, which measures quality as reported by customers in the first 90 days of ownership. Lexus (Toyota), Honda and Acura (part of Honda) were the top three brands. General Motors Cadillac and GMC brands were the only U.S. brands to score above the industry average.

Sounds like bad news for the U.S. brands again. But there really isn't that much separating the top from the middle. As J.D. Power officials explained, Ford, for one, has lost ground because its buyers are having a hard time getting used to new engines that are more fuel efficient but do not drive exactly like the old one, and from new-fangled communications and entertainment systems. It takes time to get used to the new way things work and 90 days isn't that long. If the poor ranking persists at when Power measures three years of ownership, then Ford will have a real problem, not just a perceived one.

It's even hard to find big gaps in quality when looking at the actual ranking. Take Chevy, which placed 11th in the survey, 25 points below number-two Honda. Honda customers reported an average of 86 problems per 100 vehicles, while Chevy averaged 111 problems reported per 100 vehicles. What appears to be a huge quality gap doesn't appear to big.

In any case, as Toyota, Honda, and Hyundai all topped GM, Ford and Chrysler in the IQS ranking, it's a sign that the know-how to get things right does reside in and around Detroit, the Motor City, if the managers at the top of the companies know how to extract it and put it in our driveways.

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