An industry divorced from reality?

Despite the market malaise, car firms still compete to be "fastest" and "most expensive"

Despite the market malaise, car firms still compete to be "fastest" and "most expensive". It's what makes it all so fascinating, writes Michael McAleer.

Nothing is too beautiful. Nothing is too expensive - Ettore Bugatti

Clearly Bugatti was not an accountant by profession. Nor did he seem to listen to the number crunchers too intently. Of course, goes the chorus of the financially prudent, look what happened to his firm, often bankrupt and now under its latest foster parent, VW.

Yet many would suggest the car industry at present is led more by a Bugatti ethos than a budgetary one. To the independent eye it would seem that either the car firms think themselves immune to the everyday World in which the rest of us live, or they are fiddling while Rome (or Detroit) burns.

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In fairness, thanks to the long development cycle of cars, manufacturers can't be distracted by the mere fluctuations of global economics. It takes a seismic shift to bring development to an end, and despite the dreaded 'recession' word cropping up in everyday conversation both in Europe and the US in the last two years, the car industry has continued headlong into a phase of glorious excess.

While Irish car dealers prepare to do battle over the small family fleet of five-door hatchbacks, manufacturers remain hypnotised on one overriding goal: to produce the most lavish, opulent and powerful cars ever.This year we've seen the launch of the new Rolls-Royce, the Maybach and Bentley's Continental GT coupe to name but three.

Basic business sense suggests an oversupply to a small elite segment may lead to competition. Yet, to even utter the word "discount" is sacrilegious in such circles. So with that avenue closed, car firms are pushed to outdo each other in the arena of performance and extravagance.

This amid reports of financial woes in the big car firms. GM and Ford straddled with enormous pension commitments, Fiat's problems well documented, DaimlerChrysler being dragged through the courts and facing calls for a break-up of the merger/takeover (take your pick depending on who you believe). Even VW is facing criticism from major shareholders like the local German State Governor for delving too deep in the luxury end at the expense of its bread and butter products like Polo, Golf and Passatt.

As proof of this, reference is made to its poor showing in the JD Power & Associates, where American consumers ranked VW-brand cars 34th, ahead of only Suzuki, Daewoo, Land Rover and Kia. That's quite a tumble for the Volkswagen Group with brands including Audi, Seat and Skoda. And it's the firm that will bankroll the €1 million Bugatti Veyron.

For these firms to then compete in the supercar market seems bizarre. Yet they all have at least one entrant from their stables of marques.

In the 1980s only Formula One cars put out 500bhp. Now 500bhp is barely enough to enter the supercar club. This year we've seen the Ferrari Enzo with 650bhp, followed by Porsche's response, the Carrera GT with a paltry 612bhp. The Mercedes-McLaren SLR was to have had a sluggish 550bhp but its supercharged V8 has now been upgraded to match the Porsche.

However, resting on laurels is not a common occurrence at this level and next year all of these will be trumped by the Bugatti Veyron, which promises 1001bhp and, with a top speed of more than 250mph, will be the fastest as well as the most expensive new car ever made. The Veyron will also beat most of them on price: the others coming in at around €500,000, but the Veyron labelled for sale at €1m. Which must slightly spoil the broad grin from those who've just spent €500,000 on an Enzo of SLR and instead of hero worship are now being asked: "what, couldn't afford the Veyron then?"

The car is named after Pierre Veyron, the French driver who won the 1939 Le Mans 24-hour race. The aim is to sell 300 Veyrons, producing them at a rate of 70 a year in Molsheim, France. The first is due for delivery next April.

Incidentally the last time supercars did battle - at the turn of the 1990s when the McLaren F1 faced off the Jaguar XJ220 and Bugatti EB 110 - the economy recorded a downturn, the bottom fell out of the supercar market and many fingers were burnt. McLaren planned to make 250 F1s, but sold only 107. At that time Bugatti launched its last supercar at a price of £250,000 in the sort of extravagance last witnessed in the court of Louis XVI. The then owners said they had 400 orders, but just 135 were sold and the firm went bankrupt in 1995.

This time there's concern that the latest McLaren offering, the SLR in conjunction with Mercedes, could well suffer from over-production. Mercedes and McLaren plan to build 3,500 over seven years, but in a recent comment to British car magazine Autocar, a British supercar dealer voiced his concerns that it's not a good investment and could lose as much as 50 per cent of its value in the first year.

There's more bad news for supercar race. According to reports in the Wall Street Journal, VW boss Bernd Pieschetsrieder tested the Veyron earlier this year and is rumoured to have had serious concerns about the car's handling.

Another poor omen was the car's first on-track unveiling in America this autumn. At the Laguna Seca racetrack in Monterey, California, in front of packed hospitality stands the car accelerated fast off the line then spun off into the gravel at the first turn.

There's other signs that the sobering reality of the market may give the industry a severe kick up the exhaust pipe and bring them back to reality. Rolls Royce and Maybach sales are said to be sluggish at best.

For all the comments about potential benefits of selling supercars at a time when interest rates are low - most of them are bought on credit - and the long production runs, its coincidence that the arrival of the Bugatti Royale along with the Cadillac V16s and Lincoln V12s coincided with the Wall Street crash and the depression of the 1930s. But then Bugatti's spirit may also reflect the financial strategy of the big car bosses. When criticised over the poor braking performance of his race cars, he commented: "I build them to go not to stop."