Detroit's New Push for Better Interiors

After years of ignoring interiors in favor of horsepower, Detroit is finally discovering its inner beauty.

Finally, it seems Detroit is figuring out what Japanese and European automakers have known for years: Inner beauty is the path to success.

For too long U.S. automakers kept costs down by focusing more on what was under the hood than on what was under the roof. They believed if their typical buyer had to choose between horsepower and design aesthetics, the ponies would always win. The resulting interior of the average American car was a bland expanse of poorly fitting, low-quality plastic and cheap chrome.

But after years of talking about improving their interiors, at long last Detroit is doing it. The recent North American International Auto Show in Detroit was a strong indication that Detroit is now pushing to compete with the Toyota Motors ( TM ) and BMWs ( BMWG ) of the world, both inside and out. Two cars at the show provided strong examples of how U.S. carmakers are beginning to get it right.

The 2008 Chevy Malibu , one of General Motors' ( GM ) most important releases in years, has lived up to the enormous hype of its monster marketing campaign. Externally, the car is a big improvement over the bland outgoing model, but the inside is the real revelation.

In fact, a panel of journalists chose the 2008 Chevrolet Malibu as the North American Car of the Year at the show. "For me, the whole inside is what tipped me over. I like the outside, but the interior is just so nice and so well-proportioned and so modern, it's just a joy to be in," says Jim McCraw, a freelance journalist and one of 45 members of the Car of the Year jury. "They've upgraded the quality of the materials," he says.

Manufacturing tolerances are tighter for the new Malibu than for previous models, says Chevrolet's General Manager Ed Peper. The improved fit and finish reduces squeaks and rattles and increases customer-perceived value. Peper bragged that improved quality, plus a high level of standard features including satellite radio and an upgraded version of GM's OnStar communication system will make people feel like they're getting a "$40,000 car for $20,000."

The Malibu is aimed squarely at the reigning midsize sales champs, the Toyota Camry and Honda Accord (BusinessWeek.com, 11/19/07), both known for offering simple, comfortable, and well-made interiors at competitive prices.

Much of the reason GM can afford to spend more money on interiors is that it's cutting costs in other areas, by sharing parts such as wiring, windshield wiper motors, and air-conditioner compressors that are out of the sights and minds of customers, and putting that money into higher-quality interiors.

The other American-made standout was the subcompact Verve concept from Ford Motor ( F ) that's expected to come to market in the U.S. by 2010. The Verve, which was designed in Europe and reflects a European design aesthetic, will be sold globally.

The interior is simple and sporty, with high-quality materials that look and feel good, especially for a small car. Wing-shaped buttons in the center "stack" control heating, ventilation, air conditioning, the telephone, and other features.

Carmakers are also betting that cool new technology features will be as well received as more stylish dashboards. For example, working with Microsoft ( MSFT ), Ford has developed Sync, a factory-installed, voice-activated command system that lets drivers make hands-free calls, listen to audible text messages, and play music from the radio or a mobile device.

Upgrading interiors and technology can also have a positive impact on the bottom line. Features that were once high-priced options, such as satellite radio and Bluetooth technology, are becoming increasingly common as standard equipment, thus letting the manufacturers charge a correspondingly higher sticker price.

To save development costs, all automakers are spinning off more variants of their basic models, such as the Mini Cooper Clubman from the Mini Cooper and the BMW X6 from the X5―both of which were at the Detroit Auto Show. The variants share underpinnings, including engines, transmissions, and suspensions, while the automakers differentiate them as much as possible with different interiors and exterior styling.

Much of the reason for this sudden push to improve interiors has to do with the rising price of gasoline that has hurt Detroit's traditional lineup of big-engined cars, trucks, and SUVs. As they make the transition to building smaller cars, the Detroit 3 realize, since muscle isn't as alluring as it once was, they need to offer other features to convince drivers that small cars are not only desirable but also worth a premium price.

This is something automakers have always known in more gas-conscious markets such as Europe―even the European subsidiaries of Ford and GM. But they have been reluctant to bring that expertise to the U.S. until now. And Europeans are willing to pay more for snappy design.

Fritz Henderson, GM's vice-chairman and CFO, says GM's Opel unit offers its top-selling Astra model in Europe for ?8,000 to ?0,000, or close to $30,000 at present exchange rates. "How many $30,000 Cobalts do you see?" he says, referring to a comparably sized compact with a nondescript interior that sells in the U.S. for $15,000 to $20,000.

He adds that, if anything, U.S. customers are likely to be more, not less, demanding in other areas including roominess and performance, while still insisting on better gas mileage.

But nicer interiors aren't simply cosmetic improvements. Many of the new designs incorporate safety features that were unheard of 20 or 30 years ago.

"People don't really recognize that change has been massive, massive, massive, massive, massive in their likelihood [of surviving] a crash," says Chris Bangle, an American expatriate and BMW Group's chief of design. For instance, today's BMW 3 Series has seat belts with automatic pretensioners; front, side, and head air bags; head restraints; antilock brakes; traction control and yaw control; while the 1970s 2002 models had little more than a padded dashboard and seat belts.

"What has happened in interiors has been so dramatic, especially the amount of stuff that's inside an instrument panel," like air bags, says Bangle. He adds that U.S. crash-test safety standards assume occupants aren't wearing seat belts, which makes meeting the standards that much tougher.

Plenty of today's other standard interior features were once pricey options, if they were available at all. Leather seats, for example, were once found only in the most expensive cars; now they're available for practically any model. The same can be said of climate control, radios, CD players, even cupholders.

Despite this new focus on interiors, don't expect the industry to start neglecting exteriors. After all, exteriors are still what we see first, and first impressions are critical.

"I started out 27 years ago at Opel in interiors, and we were all convinced back then that interiors were the New Frontier," Bangle says. "Maybe one of these days we're going to be right."