U.S. Makers Facing Glut of S.U.V.’s as Gas Rises

The New York Times



May 3, 2006

U.S. Makers Facing Glut of S.U.V.’s as Gas Rises

DETROIT, May 2 — Americans shied away from large sport utility vehicles and pickup trucks in April as gas prices approached $3 a gallon. With a battery of new S.U.V.’s waiting in the wings, domestic automakers are now facing the very situation they had hoped to avoid.

Despite gains at Toyota and Honda, declines at General Motors, Ford, DaimlerChrysler and Nissan kept vehicle sales in the United States flat in April, according to Ward’s AutoInfoBank. General Motors recorded the biggest drop, selling 7.3 percent fewer vehicles than it did last April.

For the first time, Toyota became the nation’s No. 3 car seller for the month, passing DaimlerChrysler. That was a symbolic victory for Toyota, which occasionally outsells Chrysler but had never outsold all of DaimlerChrysler, including Mercedes-Benz, in the United States.

The latest surge in gas prices poses a long-term problem for the domestic auto companies, which had been hoping that gas prices would moderate and make S.U.V. sales easier. Now, analysts warn it may be harder to get consumers to buy a gas-thirsty vehicle when the oil market remains so volatile.

“Last fall when we had this first spike, then people could write it off as a one-time deal,” said Stephen J. Hoch, a professor of marketing at the Wharton School of the University of Pennsylvania. “The fact that it spikes twice means it can spike again. Now, this time people will say there’s enough evidence that this is going to be a recurring if not frequent phenomenon.”

Last month, big S.U.V.’s and pickup trucks were among the vehicles that had the sharpest sales drops. The Ford Explorer was down 42 percent compared with April 2005. Sales of the Jeep Grand Cherokee declined 41 percent. Sales of Ford’s top-selling F-Series pickup fell about 9 percent last month, as did sales of the Nissan Titan. The Chevrolet Colorado pickup was down almost 30 percent.

Gas prices aside, the decrease in sales of big S.U.V.’s may signal a realignment of the entire S.U.V. segment. Analysts said that with more auto companies building S.U.V.’s of all sizes and consumer tastes shifting toward smaller vehicles, the heyday of the big truck is over.

“I think all truck-based S.U.V.’s are on a downward path,” George Pipas, Ford’s chief sales analyst, said Tuesday. Noting the unabated decline of Ford’s large S.U.V.’s, he said, “It’s pretty eye-popping.”

Since 2004, when the number of light truck sales, which include pickup trucks and S.U.V.’s, peaked at 55.7 percent of vehicle sales in the United States, the American love affair with large vehicles has cooled. Last year, light truck sales fell to 54.9 percent of the market, according to Autodata. For the first three months of this year, light truck sales were down even more, to 53.8 percent.

That complicates the fortunes of G.M. and Ford. Both companies have begun sweeping overhaul plans, which will eliminate a combined 60,000 jobs and close all or part of more than two dozen factories in North America.

But shutting plants and getting rid of employees will not ease all of their woes. So, the two companies are looking to their product portfolios to help accelerate their turnarounds. Especially at G.M., large S.U.V.’s have been assigned a huge role. Already this year, the company introduced new models of its Chevrolet Tahoe, Cadillac Escalade and GMC Yukon. Next month, the Chevrolet Suburban also goes on sale, and will be followed by several new large pickup trucks later this year.

Despite fuel economy improvements in G.M.’s new S.U.V.’s and pickups, experts warn the vehicles will be a hard sell.

“Frankly, the portfolios they have were designed for $1.50-a-gallon gasoline,” said Walter S. McManus, a scientist with the Transportation Research Institute at the University of Michigan. “So they’re going to have trouble. The longer prices stay high, the harder it will be to sell S.U.V.’s.”

For now, G.M.’s new S.U.V.’s are selling well. Last month, the company said sales of its Yukon and Tahoe were up more than 30 percent. Escalade sales jumped 127 percent. The success of the new S.U.V.’s helped offset sales declines among other G.M. S.U.V.’s and pickups, which in many cases fell by double digits. Over all, light truck sales at G.M. rose 1.5 percent. Car sales, meanwhile, dropped 18.3 percent.

G.M. has the newest S.U.V.’s on the market, but later this year it will face more competition. Ford has new models of the Expedition and Lincoln Navigator coming out — direct competitors to the Tahoe and Escalade — while Chrysler has the Aspen, a new luxury midsize S.U.V. Chrysler will also introduce a fleet of new Jeeps.

Competition from foreign makers has already chipped away at the domestic auto companies’ share of the pickup and S.U.V. market. In the late 1990’s when S.U.V. sales were booming, G.M., Ford and Chrysler sold four out of five S.U.V.’s and pickup trucks in the United States, according to Autodata. By last year, their share had dropped to about two-thirds of the American pickup and S.U.V. market. That drop came as companies like Hyundai entered the S.U.V. market for the first time and Toyota and Honda introduced new light truck models.

“Things have changed,” said Ron Pinelli, president of Autodata, the New Jersey-based auto sales tracking firm. “These companies are counting on their new S.U.V.’s as instrumental to their turnarounds, but it’s not going to be that easy. It’s not the slam dunk it would have been 10 years ago.”

 

 

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