March 20, 2005
By Rick Haglund
Detroit Bureau


DETROIT -- Domestic automakers profited in the 1990s by adhering to the immutable law of automotive marketing: Americans like big vehicles.

Detroit fed the sport-utility-vehicle boom with increasingly outrageous vehicles, such as the military-like Hummer H2 and the Ford Excursion, an SUV so tall it won't fit in some parking structures.

But sales of big SUVs are crumbling faster than Michigan roads in the winter. Buyers are turning to smaller cars and SUV-like crossovers, everything from the Chevrolet Cobalt SS compact car to the Ford Freestyle crossover.

Higher gas prices aren't the only reason for the switch. Analysts say the era of the big SUV maybe be over for another, more important reason: The SUV just isn't "phat" anymore.

"Before, buying a Hummer H2 was kind of cool. Now it's seen as a little excessive," said Mike Chung, pricing and market analyst at Edmunds.com, an automotive-buying information service in Santa Monica, Calif.

Filling up a Hummer, which gets about 10 miles to the gallon, also is a little excessive these days.

AAA Michigan said Monday the average price of regular gasoline has jumped 39 cents a gallon in the past 12 months to a current average of $2.09 a gallon.

Sales of full-size SUVs, including such vehicles as the Chevrolet Suburban and Ford Expedition, fell 21 percent in February compared to a year ago. That's after a 31 percent decline in January compared to January 2004, according to the Power Information Network in Westlake Village, Calif.

"Rising gas prices are certainly a contributing factor to this trend," said Tom Libby, Power's senior director of industry analysis. "We've had two dramatic increases in gasoline prices in the past year, and that begins to have an impact on consumers."

Others say consumers are tiring of the boxy-looking, awkward-handling SUVs. They are turning to more stylish crossover vehicles, which are based on car platforms and provide nearly as much usable space as the truck-based SUVs.

"We're recouping lost SUV sales with crossovers such as the Ford Freestyle," Ford sales analyst George Pipas said.

Ford still sells more than twice as many trucks, a broad category that includes SUVs, pickups, minivans and some crossovers, as it does cars.

But in the first two months of this year, Ford's car sales rose 2.7 percent while truck sales fell 12.1 percent, a trend that most other automakers experienced.

Wes Brown, an auto marketing analyst at Nextrend Inc. in Los Angeles said one reason SUVs were so popular in the 1990s was that their supersized proportions appealed to people trying to stroke their egos.

"We, as a society, are very worried about our self-image," he said. "We're very insecure. We want to feel good about the things we buy."

But as the big SUV gradually turned into the replacement for the minivan in the suburbs, its cachet as a vehicle for the adventurous type plummeted, according to Brown.

"It became a soccer dad car and that tainted its image," he said.

In the past few years, automakers have developed new vehicles segments that allow vain car buyers to draw attention to themselves while saving a few bucks on fuel.

Among those are sport wagons, such as the Dodge Magnum, and small vans, such as the Honda Element and Scion xB, which are so boxy they're cool again.

The Chrysler Group also is finding success with traditional, rear-wheel-drive American sedans, such as its hit Chrysler 300 and the Dodge Charger.

And although compact cars languished during much of the past decade, they're making a bit of a comeback.

J.D. Power & Associates in Troy forecasts that the small-car segment - including the Chevy Cobalt, Ford Focus, Honda Civic - will grow slightly from 13.7 percent of the market today to 15 percent by 2008.

Americans are finding buying a small car doesn't mean they have to go without luxury items, such as leather seating and a premium sound system.

"Now you can get all the bells and whistles on a small car," market analyst Chung said.

But automakers, worried that a prolonged downturn in SUV sales could mean a big dent in long-term profits, aren't ready to declare the SUV boom over just yet.

Paul Ballew, GM's top sales analyst, said sales of truck-based SUV are down mainly because GM's Chevrolet Suburban and Tahoe, and GMC's Yukon, are nearing the end of their life cycle.

Those vehicles make up two-thirds of the entire large-SUV market, Ballew said. GM is expecting SUV sales to rebound when its restyled vehicles hit the market next year.

"We have had a hard time finding evidence that SUVs are in a long-term decline," Ballew said.

But some analysts say they've found that evidence in buyers' desires for more stylish vehicles than the conservative-looking SUV.

"If you buy a new vehicle, you want people to know you've bought a new vehicle," analyst Brown said.

from: http://www.mlive.com/news/statewide...28205280100.xml

 

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