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From the Detroit Free Press:

SUV sales teeter at turning point with mixed signals from buyers

May 1, 2006

BY SARAH A. WEBSTER

What Would Jesus Drive?

That question was first asked in 2002, when some environmental, political and religious groups demonized SUVs as immoral, gas-guzzling polluters.

The Sport Utility Vehicle Owners of America fired back in its own ads -- "What Does Jesús Rivera Drive?" -- that he proudly drove an SUV, the vehicle that brought prosperity to Detroit automakers and southeast Michigan in the 1990s.

When automakers report their April sales results Tuesday, SUVs -- especially the most popular midsize models like the Ford Explorer, Chevrolet TrailBlazer and Jeep Grand Cherokee -- are expected to take another hit as gas prices approach the feared $3-a-gallon mark.

But Jesús Rivera, a retired General Motors Corp. worker who lives in Oxford, is still driving his beloved SUV, and he has no plans to trade it. An estimated 29 million other Americans are still driving their SUVs, too.

Experts say customers who stick with their SUVs now probably are die-hard SUV lovers like Rivera: drivers who need the utility that big, powerful vehicles offer or simply refuse to give up the hardy feel of driving a big SUV, no matter what the pain at the pump.

Rivera told the Free Press in an interview last month that his family would stick with their 1999 and 2004 TrailBlazers because of the vehicles' roominess, handling and safety.

"It's hard on the gas, especially my 2004, because it's got a V8," he said. "But, you know, I wouldn't trade in for a car."

Automakers, dealers and investors are eager to see how many consumers like Rivera there really are in America, because it helps them make crucial decisions. For example, it may help companies determine how many SUV plants will remain open, develop competitive product plans and estimate future profits or losses.

But planning in the world of SUVs has become a difficult and risky venture in recent years, as the sport-utility market has matured and suffered through a midlife crisis.

Although rugged Jeeps have been around for decades, the debut of the Ford Explorer in 1990 seemed to mark the beginning of an SUV craze that brought big profits to Detroit.

By the end of the decade, though, some critics grew increasingly vocal about the big, powerful vehicles, which changed the way roads and services were designed. Even drive-through restaurant windows and drive-up ATMs are built higher today for the popular vehicles.

By 2002, criticism of SUVs reached a fever pitch.

Some blamed the so-called gas-guzzlers for inspiring terrorist attacks against the United States.

Others blamed them for damaging the environment. A group of protesters started vandalizing and torching SUVs at dealerships across the country. SUVs were demonized as the Axles of Evil.

Four years later, an awful lot has changed in the world of SUVs, causing pain for Michigan's automakers and economy.

Sales of SUVs dropped by more than 100,000 last year, the first year sport-utility sales fell in more than a decade. Some customers bailed out after the gas shock last summer resulted in $75 fill-ups. Others didn't think the big vehicles were so stylish anymore.

And automakers started cleverly designing more fuel-efficient crossovers that look like SUVs. Although they don't tow loads as big and often don't drive as well off-road, they are easier to handle and offer most of the same usefulness as SUVs.

For the first three months of this year, nearly 1.1 million SUVs were sold, an increase of 3.6% over the same period a year ago. That performance was better than the overall new car and truck market, which posted a gain of 1.1%.

But that SUV figure includes traditional models such as the Ford Explorer, which are built on truck platforms, as well as crossovers such as the Saturn Vue.

Unfortunately for Detroit automakers, different SUVs bring different benefits to their pocketbooks.

The larger, truck-based models are far more profitable to build and sell, largely because automakers can charge more for them.

But many consumers are choosing crossovers instead. Sales of crossovers were up 12% through March, offsetting losses by traditional SUVs, which were down 2.7%. While the new Chevrolet Tahoe, a traditional SUV, posted a 37.3% gain, many other traditional SUV models posted huge double-digit losses.

Detroit automakers have their fingers crossed that there are enough consumers like Rivera to keep their traditional truck-based SUV sales, and their bottom lines, strong. But there is worry that sales of the most profitable SUVs are dropping faster than anyone expected, and there may not be enough Jesús Riveras out there.

"I think the segment is in trouble," said George Pipas, the top sales analyst at Ford Motor Co. "This shift is important from many different aspects. ... That's where we've made our bed, historically. That was where we made our money."

Fritz Henderson, GM's chief financial officer, discussed his concern, especially about midsize SUVs, during a conference call last month.

"We have seen a substantial decline in mid-utes versus prior years. That trend began last year and continues this year," he said. "There are customers who still want the utility of a full-size sport-ute. They're looking for better gas mileage from their full-size sport-ute, and we think we deliver that with our new offerings."

Whenever gas prices start rising, Wall Street analysts, the national media and academic researchers begin speculating about the impact on Detroit automakers as consumers inevitably shift away from big vehicles.

But Paul Eisenstein, publisher of TheCarConnection.com, said he's optimistic there are probably more SUV loyalists than the experts think. He said the staying power of gas-guzzling vehicles has always surprised him and proved him wrong over the years.

"There is a fundamental desire by American motorists to drive big vehicles and powerful vehicles," he said. "The ability of the American motorist, the ability of the American car buyer, to adapt to shocks in fuel prices is quite astounding."

Mike Jackson, chief executive officer of AutoNation Inc., the nation's largest chain of auto dealerships, said he thinks traditional SUVs will remain viable. He said he even believes the SUV segment will pick up again this year, despite concerns about gas prices.

He predicted that although many consumers will move into crossover SUVs, plenty of them will remain in traditional SUVs because they need or love them. Overall, he predicted the SUV segment would keep growing, because people love SUVs and the flexibility they offer.

Indeed, several drivers who recently purchased SUVs said last week they are simply shrugging off the threat of $75 fill-ups.

When he traded in his Lexus RX300 in March, Christopher Poci, a banker in San Diego, said he wanted something bigger and that rising gas prices were not a concern. He bought a 2007 Tahoe.

"The Tahoe is so much cooler," he said. "Our income is at a level where the gas prices aren't going to change us."
 

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moparman said:
Rivera told the Free Press in an interview last month that his family would stick with their 1999 and 2004 TrailBlazers because of the vehicles' roominess, handling and safety.
His family must be on crack if they thinks a 99 Blazer and "handling and safety" belongs in the same sentence.

Has he looked at the crash tests on those things? The thing's got the lowest rating ever in the 40mph offset crash test, and has a rollover rating of 2star. He call that handling and safety?
 

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Discussion Starter #4
You know how it is RJ. Everyone who owns those damn things think they're safe. They also think they handle well. If you put them in a 'real' good handling car I bet they'd have trouble driving it. I bet we'd hear nothing but complaints. It never ceases to amaze me when people think their suv's handle well. Some may handle better than others (Jeep SRT8 though it is an anomaly) but not when compared to cars.
 
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