US: SUV Drivers Reconsider

Publisher Name: 
The Philadelphia Inquirer



When he was shopping for a car two years ago, Kyle Kaufmann found
everything he wanted in a Ford Expedition: horsepower to haul his
22-foot skiff, cargo space for fishing and golf gear, and more leather
than Michael Jackson's Thriller years.


But as fuel prices climbed to record highs this year, Kaufmann took a
sales job that had him behind the wheel 750 miles a week.


Like thousands of other Americans, he reached a conclusion that's proving quite costly for the makers of large SUVs:


Some vehicles aren't worth their weight.


"The truck was great, but between the payments and gas, it cost me $700
a month," said Kaufmann, 31, of Marlton. "At that price, I should be
driving a Ferrari."


The relentless rise of the SUV has fallen off, and most precipitously
for such 7,000-pound behemoths as the Ford Expedition, Chevrolet
Suburban and GMC Yukon, recent sales data show.


After a decade and a half of tremendous growth, total SUV sales are
down 10.2 percent for the first quarter of 2005. In April, the biggest
class of SUVs dropped 21.7 percent from the same month in 2004,
according to WardsAuto.com, a sales-tracking firm.


Industry experts point to a number of causes: sky-high pump prices that
show no sign of abating, growing consumer preference for smaller SUVs
with better handling and fuel economy, and late-stage product cycles
that have many buyers waiting for the next generation of their favorite
trucks.


SUVs exploded in popularity during the 1990s. Annual sales more than
tripled between 1990 and 2000, when a record 2.98 million were sold.


Built on the same platform as pickups, SUVs coupled the height and
off-road performance of trucks with the interior comfort of luxury
sedans, commanding top dollar amid America's increasing wealth.


But the sweet spot for monstrous SUVs was "an image thing" that is
quickly losing its luster in the era of the $65 fill-up, said Jeff
DeFelice, owner of DeFelice Chevrolet in Point Pleasant, N.J.


"It's fading away because now people realize it's just not a good
value," DeFelice said. "The guy who went into debt to buy a Hummer is
probably real tired of it by now."


The slump is taking its toll on some automakers.


At Ford and General Motors, diminished SUV sales have contributed to
falling share prices and the recent downgrade of their bonds to "junk"
status.


Having long relied on healthy profit margins from SUVs to buoy their
entire product lines, both companies are seeking a foothold in the
market for smaller -- or "crossover" -- SUVs, which have been
enormously successful for Japanese and European makers.


Based on sedan or wagon platforms, crossovers offer the taller stances
and cargo room of traditional SUVs, but with better road agility and
fuel efficiency.


Models such as the Lexus RX 330, BMW X3, Acura MDX and Toyota
Highlander have helped make crossover vehicles among the fastest
growing auto segments, and the only SUV type with increasing market
share.


Car companies are taking notice. GM plans to launch more than a dozen
crossover models in the coming years. To boost efficiency even further,
Ford, Toyota and Lexus have released gas-electric hybrid versions of
their crossover SUVs.


In April, the national gas average hit a record high of $2.28 a gallon,
up from $1.26 in 1990 and $1.51 in 2000, according to the AAA.


Prices now hover at $2.11 a gallon.


Still, GM executives, who saw sales of large SUVs plummet by 35.6
percent in April, insist that fuel prices have had only a "marginal
impact" on flagging sales.


Fuel prices are not "the primary cause" of weak SUV sales, said GM
spokeswoman Deborah Silverman, adding that a late product cycle -- GM
will offer redesigned Suburban and Yukon models for 2007 -- and the
rise of crossovers are more significant factors.


For many drivers, however, the lure of smaller SUVs is all about gas prices.


Take Carmen Pagan: A commercial truck driver from North Philadelphia,
she feels claustrophobic in small cars. A few years ago, Pagan settled
on a Chevy Tahoe and its 15 miles per gallon.


But as the cost of fill-ups crept above $60 a week, Pagan reconsidered
her needs, opting instead for a Lexus RX 300, which gets closer to 20
miles per gallon and costs only $40 to fill.


She expects to save more than $1,000 a year on gas.


"I just need enough space to fit a barbecue grill and some beach
chairs," said Pagan, 33. "I still get that with the Lexus, but I'm
saving money."


The sheer number of choices available in today's vehicle market could
put a permanent dent in large SUV sales, said Walter McManus, a former
GM economist who is now an analyst at the University of Michigan's
Transportation Research Institute.


A few years ago, drivers who wanted high seating and ample cargo space
had little choice but to buy a large SUV, he said. That's no longer the
case.


"If all you ever wanted was that feeling of being above other people on
the road, and you can get that look without some of the cost ... then
you'll do it," McManus said.


Drivers who tow boats or campers, haul heavy loads, or travel off-road
will still buy SUVs, but they are "fewer in number," McManus said.


So on car lots across the country, sales managers are offering steep
incentives to keep their SUV inventories from stagnating.


And truck owners such as Kaufmann, who wants to unload his Expedition
for a midsize pickup, are seeing the bottom drop out of resale values.


"I listed mine for $500 less than the dealers are asking, but the
market seems flooded with these things," Kaufmann said. "I'll probably
have to trade it in."

AMP Section Name:Transportation
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