http://www.forbes.com/business/manu...ral-motors-chrysler-oped-cx_jf_1009flint.html
Oldies Can Be Goodies
Jerry Flint 10.09.07, 6:00 AM ET
Auto industry executives keep promising that they will offer us the latest and greatest. Sometimes that is a bad idea.
Look at the small pickup market.
Ford Motor (nyse:
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Ford plans to shutter the Ranger plant next year, and the belief is that it is getting out of the small pickup business. Ford’s standard-sized pickup, the Ford F-150, sold so well, and the company has so many other pressing needs, that it stopped investing in the Ranger.
General Motors (nyse:
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Nissan (nasdaq:
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Toyota (nyse:
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people ) is a notable exception. While its competitors retreat from this segment, it has expanded its Tacoma small pickup line. I figure that Toyota will sell about 180,000 Tacoma pickups this year, about the same as last year’s number. That is not bad business. If Ford kills the Ranger, as it seems it will, Toyota could grow past 200,000, maybe to 250,000 a year in volume. In today’s environment, any vehicle with a quarter of a million sales a year is a winner.
Look at the pony cars. Remember when every company offered a stylish, rear-wheel-drive sporty coupe to compete with the Ford Mustang? Even American Motors and Toyota fielded entries. Then these cars all disappeared--all but the Mustang. For years, Ford had this market all to itself and profited handsomely from it. Then Ford sleeked up its Mustang and had even more success. Now Chevrolet will build a Camaro again, and Dodge is readying its Challenger. Mustang will not be the last one standing for long.
For years, Ford was the last American manufacturer still offering large traditional rear-drive sedans, the Ford Crown Victoria, Mercury Grand Marquis and Lincoln Town Car. Having amortized the tooling for these cars ages ago, these cars put billions into Ford’s coffers. Unfortunately, Ford neglected these sedans and the company now seems resigned to letting them die. Meanwhile, in 2004, Chrysler came out with a stylish new rear-drive sedan, the Chrysler 300, and later the Dodge Charger, and these models are a hit. GM is getting ready to jump back into this market.
The same thing is happening with minivans. Ford is out of the business, and GM will be quitting. That leaves Chrysler and the Asians. At one time this market was good for over a million units a year, but demand is shrinking. Even so, as one of the survivors Chrysler will still sell near 300,000 minivans this year. With GM and Ford out, and with new, restyled models, Chrysler will still have a healthy minivan business.
The big fad today is the crossover, a sport utility vehicle based on a car chassis instead of a truck frame. These CUVs, as some people call them, are grabbing market share from both the truck-based sport utility market and from minivans. Consumers are flocking to CUVs because they are smoother riding, lighter and use less fuel. CUVs cannot tow as much, and aren’t as good off-road, but that trade-off is worthwhile for people who do not need to tow large loads or do not plan on taking their vehicle down rugged unpaved trails.
It looks as if car makers are planning to phase out some standard-sized SUVs and replace them with crossovers. The Chevy Trailblazer and GMC Envoy, for example, are apparently not part of GM’s future product plans. Sales of the two vehicles last year, 249,000, were down 29% from the year before, and sales this year are running 27% behind 2006.
While those sturdy SUVs are losing ground, GM is doing quite well with its three new crossovers (Saturn Outlook, Buick Enclave and GMC Envoy). The three--all built off a common architecture--are selling at a 150,000 a year rate, and next year GM will begin building a Chevy version of this crossover. GM’s plan is to have these vehicles take up the slack from its older SUVs. Of course, it will still have the larger Chevy Tahoe and Suburban models and its GMC versions for customers who want truck-like sport utility vehicles.
Now Ford already has a new crossover called the Edge, along with a Lincoln version called the MKX. They are selling well--120,000 in nine months. Ford’s traditional SUV, the Explorer, is fading. Last year’s sales, 179,000, were down 25% from the year before. This year they are off another 23%. We hear that Ford’s next Explorer will probably be another crossover instead of a truck-based SUV.
It is a similar story at Chrysler. Its big Dodge Durango SUV is slumping and its counterpart, the Chrysler Aspen, introduced in 2007, never gained much traction. The company announced that in it is going to close the Newark, Delaware plant where it builds those two vehicles. What happens to those traditional truck-based SUVs when the plant shuts down is still a question, but the company is planning to build some hybrid versions before the plant closes.
Think about it. By the time Ford gets around to killing the Explorer, most of the others of that size will be gone. Plenty of folks still will want a vehicle like the Explorer or the Dodge Durango. Why not be the last one standing instead of leaving all the business to Toyota, which will certainly keep building its 4Runner?
Ford could make the Explorer--and its Mercury sidekick, the Mountaineer--more appealing. It could put extra effort into the six-cylinder versions instead of V-8s, and work to improve power and fuel economy as well as trim costs.
We all know that the trend is away from minivans and truck-based SUVs. That does not mean that all the business is going to disappear.
Ford in particular has killed so many models that it is time its executives started thinking about how to save a business instead of destroying it.
It can pay to be the last one standing.
