Green Cars, New Alliances Expected at Frankfurt Show

By CHRISTOPH RAUWALD
FRANKFURT -- Battered by the worst industry downturn since World War II, car makers heading to the International Auto Show in Frankfurt on Monday are pinning their hopes on early signs that a slow market recovery might be gaining traction.
How much the industry will be hurt by the end of "cash for clunkers" rebates, which mainly will affect mass-market makers such as Volkswagen AG and Fiat SpA, is expected to be in the spotlight during the show, along with electric cars and plans for new alliances between companies to share costs.
Some analysts say car markets are suffering from distortions created by the government-backed scrapping incentives in many countries. Analysts believe that BMW AG and Daimler AG's core Mercedes-Benz brand, the world's two largest luxury auto makers by sales, will be affected less by a downturn in sales once these scrapping incentives expire.
"BMW is a high-quality way to gain exposure to the potential we see for positive U.S. market surprises," said Morgan Stanley analyst Adam Jonas in a note to clients, when he upgraded the stock to overweight on Tuesday. BMW was hit hard by the downturn in the key U.S. market.
Driven by investments as part of economic stimulus packages around the globe, auto makers have been ramping up efforts in the field of green technologies, such as hydrogen-powered vehicles and plug-in electric cars, despite some persistent technological and financial obstacles.
At the Frankfurt show, Mercedes-Benz will show a fuel-cell version of its compact B-Class, powered by hydrogen. Mercedes says it is the first production car using the technology, which creates electricity through a chemical process. The company says the first 200 or so cars will be offered to customers in the U.S. and Europe at the beginning of next year.
Toyota Motor Corp. is presenting an electric plug-in version of its Prius model. Its Japanese rivals Honda Motor Co., Nissan Motor Co. and Mitsubishi Motors Corp. won't be present at the show as they seek to cut costs.
General Motors Co.'s European Opel brand plans to present the new generation of its best-selling Astra compact just days after the sale of the unit to a consortium led by Magna International Inc. was clinched Thursday. The Astra's success is crucial to help Opel and its British sister brand, Vauxhall, through the looming restructuring.
French auto maker Renault SA is showing a new version of its Megane along with several electric concept vehicles. French peer PSA Peugeot Citroën SA is focusing on two new small cars, the DS3 and the C3, as well as the sleek Peugeot RCZ sports car.
Italian auto maker Fiat plans to show the revamped Punto model as well as a cabriolet version of its 500 model, while the new-generation C-Max minivan will be in spotlight at Ford Motor Co.
Write to Christoph Rauwald at christoph.rauwald@dowjones.com