Detroit, we have a problem
Foreign carmakers gain market share, as high gas prices leave more trucks, SUVs on the lot.
General Motors Corp. is still banking on big trucks and SUVs - but emphasizing that its newest can run mostly on ethanol. The Chrysler Group is rolling out a few more smaller models like the Dodge Caliber, priced below $14,000. At Ford Motor Co., the ad pitch is largely about image - that the company is making "bold moves" on fuel economy, style, and safety.
The product lines of America's homegrown automakers reveal what each thinks customers want. But if sales so far this year are any indication, they all appear to be missing the mark in this new era of $3-per- gallon gasoline.
Figures released this week show a continued slide in market share for US automakers as high fuel prices prodded shoppers to shy away from the large trucks and sport utility vehicles that have long anchored Detroit's marketing plans.
A sign of the competitive times: Toyota is outselling the Chrysler Group this year, so the Big Three in name are no longer the biggest three in sales.
"They've got a whole lot of very good cars, but 'good' just doesn't cut it," says Brett Smith, an analyst at the Center for Automotive Research in Ann Arbor, Mich. "They've got a big challenge ahead of themselves."
Detroit's brand names still account for more than half of the cars and light trucks sold in the United States, but the erosion by foreign brands has been relentless. The reasons go beyond fuel economy. Issues like reliability, value, and comfort have also impelled the shift toward brands like Honda.
But rising gasoline prices have caught the Big Three flat-footed before, as when consumers' gas-pump anxieties opened the door to a tide of Japanese imports a quarter-century ago. Some analysts worry that today, even after years of jousting with Asian rivals, US automakers could let that happen again.
The competitive landscape is far different today, but no less challenging.
In the early 1980s, "the domestics were really caught without products," says Tom Libby, an analyst at J.D. Power's Power Information Network. "That probably won't happen again."
First, US carmakers already have a wide range of models, including small cars. GM's linchpin division, Chevrolet, is selling a lot of Cobalts alongside its big Silverado trucks. Chrysler's newly launched Dodge Caliber is doing well. The domestic brands tend to lag behind foreign ones in fuel economy, but the gap isn't wide.
Second, if the upward jolt in gasoline prices proves to be a long-term trend, as some energy experts believe, all carmakers will be scrambling, not just the Big Three. That's because it typically takes at least five years to launch a new car, from initial conception to showroom floor, Mr. Libby says.
Given those long lead times, and the possibility that gas prices might go down, he doubts that US carmakers are adjusting their long-term plans in light of this year's price spike at gas stations.
But if high fuel prices create challenges for selling all types of cars, the burden falls heaviest today on the Big Three.
Sales data from April, which companies released Tuesday, show that overall vehicle sales fell from last year's pace for the month. (For the first four months of the year, however, the pace is similar to last year's.)
In this difficult environment, Toyota, Honda, and many European carmakers saw sales grow, while year-to-date sales are down 6.7 percent at GM, 3.9 percent at Ford, and 0.1 percent at Chrysler.
Central to the dropoff is the smaller number of people buying large SUVs and trucks. Most full-size SUVs have seen double-digit sales drops from last year's pace.
Americans are still buying more light trucks than cars, but the gap is narrowing as consumers respond to the pinch at the gas pump.
Against this backdrop, here's how the Big Three are positioning their product lines, according to industry analysts:
General Motors. GM's biggest rollout this year is a line of full-size trucks and SUVs, from Tahoe to Avalanche.
The company also makes plenty of smaller cars, but big ones have been the key to its profitability, and these trucks are a sign of a company sticking to its knitting during hard times.
"Given this crucial time in their recovery, they're going with the tried and true - large trucks," says Greg Gardner, an analyst at Harbour Consulting in Troy, Mich.
But as gas prices jumped, GM is advertising the ability of many new models - including the full-size ones - to run on E85 (85 percent ethanol) as well as gasoline.
Ford. The new Fusion sedan is off to a solid start, and the gas-electric hybrid model of the Escape SUV doubled its sales in April. Ford has launched a major new ad campaign, titled "bold moves."
Still, analysts see a company running too much on fumes, with not enough new products on the horizon. Of the Big Three, "the one that scares me the most is Ford," says Mr. Smith in Ann Arbor. "It's hard to see them resolving the product issue in the next couple of years."
Chrysler. The smallest of the Big Three, Chrysler is also seen as the healthiest of the bunch. It's the one that, as a unit of Germany's DaimlerChrysler, is no longer American-owned. In today's fuel-conscious market, it can point to new offerings such as the Caliber and Dodge Nitro, a small SUV that promises to help Dodge get a piece of a hot market segment.
For all the challenges the Big Three face, consumers' taste for full-size vehicles won't evaporate overnight. "They've been doing the right things" to improve quality and design, says Kevin Wilson of AutoWeek.