(Published Saturday, February 10, 2007 12:58:04 AM CST)
A d v e r t i s e m e n t
By Mike DuPre'/Gazette Staff
CHICAGO
GM remains king of the hill when it comes to full-size SUVS, but the hill is now a lower plateau, no longer a lofty summit, auto executives say.
In Chicago for the media preview of the 99th annual Chicago Auto Show, the brass at General Motors and other key players in the big sport-utility market finally are acknowledging that escalating gas prices reduced their overall market.
But while the mountain is no longer as high, the automakers do not think they are on a slippery slope.
Evidence of that came Thursday. Nissan took the wraps off its redesigned Titan, a full-size pickup, and then added the news that a freshened Armada, the big SUV built on the Titan platform, will roll into dealers' showrooms with the pickup in May.
"The market has shrunk significantly in the last two years. We think it's plateaued," said Larry Dominique, vice president of product planning for Nissan North America.
"People still in the segment say they love their SUVs," Dominique said.
The people still driving and buying sport-brutes are those who need them for their families and recreation, such as towing boats, he said.
Those customers also might have a smaller vehicle or two, but they depend on their big SUVs, Dominique said.
"The people who weren't towing left the market," he said. "Those who remain are those who do tow, and that's who we're catering to."
GM redesigned its big SUVs-the Chevrolet Suburbans and Tahoes and GMC Yukons made in Janesville-just more than a year ago. The new trucks' popularity kept GM's annual sales of big SUVs in 2006 at the same level as in 2005.
But GM's 2005 sales were 20 percent lower than in 2004-440,569 in '05 versus 550,463 in '04-as the entire market dwindled.
"We've expanded our market share to the point where the decrease in the market hasn't hurt us," said Bob Lutz, GM's vice chairman of global product development.
That's not entirely true.
GM is short the almost $1.1 billion in profits that selling 110,000 more big SUVs would bring. But 440,000 annual sales are enough to keep two shifts working in Janesville and in Arlington, Texas, home to GM's other big-SUV-only plant.
As income levels rise, more affluent households own a variety of vehicles, Lutz said. "Some people are so well-to-do, they will say, 'I want an (big-SUV Cadillac) Escalade. I don't care what gas costs.'
"And there are a lot of people like that."
But he and executives from Ford and Toyota acknowledged that gas prices have and will affect big SUV sales, something they had been reluctant to say previously.
Lutz said he was leery of projecting what the U.S. big SUV market will be. But he said:
"I don't think it will grow. And if gasoline goes to $3.50 (a gallon), the market will respond immediately."
Cisco Codina, head of sales and marketing for Ford, bobbed his hand up and down when asked to forecast the SUV market.
"My feeling is that it's plateaued and will come down over time as other vehicles appear," Codina said. "But it will be volatile and follow the price of gas.
"We saw that when gas hit $3."
Nissan's Dominque also noted the market's fast reaction to gas prices: "As soon as gas prices go up, V8 (engines in most big SUVS) sales go down, and as soon as gas prices go down, V8 sales pick up ...
"The quick spikes and quick drops, that's where you get the emotional response, the panic if you will."
Don Esmond, senior vice president of automotive operations for Toyota Motor Sales, said of the market for big SUVs:
"It's pretty flat. I don't think it's deteriorating, but I don't see much growth."
Esmond didn't see a specific gas price that could cripple the market, "but when they popped up a year ago, it put a dent in the market."
But he added many people still need, want and love their sport-brutes.
And so Toyota will redesign its full-size Sequoia and build on the same platform as Toyota's new, bigger pickup, Tundra.
Built in Indiana, the new Sequoia should be available early next year, Esmond said, but he would not reveal the launch date.
The novelty of and improvements in GM's large sport-utilities are what allowed the automaker to maintain its sales level from 2005 to 2006.
The new Armada is getting a nose job and completely new interior. Sequoia will be bigger and, no doubt, better.
Both will threaten to slice into GM's piece of the pie and, consequently, the number of workers it needs to make the big SUVs.
But GM will be ready for them "because it's so important to us from the point of profitability," Lutz said. "We will cycle the product in such a way as to always have the best, newest products."
GM will continually improve technology and safety, he said, but continuing to improve fuel economy will be the key.
GM plans to equip some of its big 2008 SUVs with a two-mode gasoline-electric hybrid V8 engine. The new powerplants are scheduled to debut in the fall.
"When we introduce that two-mode hybrid fuel-economy system," Lutz said, "there will be no more fuel-efficient full-size sport-utility in the world."
