SUV Sales Down Sharply
Friday, December 2, 2005
Gas prices have fallen in recent weeks, but U.S. consumers are still avoiding big sport-utility vehicles in favor of passenger cars, forcing domestic automakers to slow truck production.
Sales of all new vehicles in the United States were off 2.8 percent in November from a year ago, with Detroit automakers bearing the brunt of the industry slowdown, according to Autodata Corp. Sales of some SUVs were off more than 50 percent from last year. Meanwhile, U.S. sales by Toyota Motor Corp. and Honda Motor Co. continued to surge.
At General Motors Corp., the world's largest automaker, sales were down 7.6 percent. The slump coincided with the company's announcement last month that it would cut 30,000 jobs by 2008 and close several plants. GM sales have lagged since it ended "employee pricing" discounts in September.
Ford Motor Co., the No. 2 automaker, said sales fell 15 percent. In response, GM and Ford announced yesterday that they will make fewer trucks in coming months while boosting car output. Ford said it will increase first-quarter car production by 21 percent from a year earlier.
U.S. sales of DaimlerChrysler AG products were down 2.7 percent last month.
Industry-wide, passenger cars gained market share from light trucks in November. Toyota's U.S. sales rose 13 percent, and Honda reported an 8 percent increase. Nissan Motor Co. trailed its larger Japanese rivals in the United States; sales fell 4 percent.
The sales spiral of the Ford Explorer demonstrates consumers' shifting tastes. It was once one of the nation's most popular vehicles, but Ford sold fewer than 12,000 last month, a 52 percent drop from November 2004.
At the height of the SUV boom in 2002, Ford routinely sold 25,000 to 40,000 Explorers a month.
Ford is looking to offset the weakness in trucks with more sales of passenger cars, including the Ford Fusion and Lincoln Zephyr.
GM also felt the SUV crunch. In November, sales of the Chevrolet Suburban and Cadillac Escalade dropped 46 percent and 48 percent, respectively, from November 2004.
Analysts have blamed slumping SUV demand in part for the automakers' deteriorating financial condition. The automakers blame high labor costs, including health care costs and payments for pensions, and inflexible union rules.
U.S. consumers remain skittish about buying sport-utility vehicles after the fuel-price volatility during this year's hurricane season, said Robert H. Schnorbus, chief economist at J.D. Power and Associates. "Even though prices are down from their peaks, I think there is still a big concern or big issue in buyers' minds," he said.
The hurricanes raised consumers' awareness of the oil market's vulnerability to shocks, Schnorbus said, and added to their worries that more bad news may be on the way. "Each shock doesn't have to be a 9/11 or an Iraqi war," Schnorbus said.
Schnorbus said the uncertainty about gas prices could make people think twice about buying SUVs. The national average price for unleaded gasoline is $2.14 a gallon, up from $1.94 a year ago, according to a AAA-sponsored survey. The highest average price for unleaded gas recorded by the survey was $3.06 a gallon in early September.
Analyst Jim Sanfilippo, executive vice president of Automotive Marketing Consultants Inc., said tastes simply have changed, perhaps in the same way they changed after the oil crisis of the 1970s. "Big cars suddenly were ugly. They were useless. They looked like dinosaurs," he said. "Small cars looked beautiful."
In telephone conference calls yesterday, sales executives at GM and Ford downplayed the impact of higher gas prices on the sales declines in November. Paul D. Ballew, GM's executive director of global market and industry analysis, said gas prices are affecting the auto market "on the margins."
Ballew said GM's poor sales in November were partly the result of a spike in sales in the summer when GM's "employee pricing" discounts drove big gains. He also said the SUV segment suffers from increasing competition from "crossover" SUVs that are built more like cars than trucks. He said he expects sales in the large SUV category to remain stable.