Friday, December 31, 2004

By Don Hammonds, Pittsburgh Post-Gazette

This past year can be summed up in two words for the auto industry: "sedan" and "hybrid."

For years, Detroit has been accused of ignoring the sedan market while concentrating on profit-rich sport-utility vehicles and trucks -- even as Toyota Motor, Honda Motor and Nissan Motor have cleaned U.S. car companies' clocks with such family cars as the Toyota Camry, Honda Accord and Nissan Altima.

Now, all three American companies have sedan models to crow about -- and they are all drawing strong sales. General Motors has Cadillac's new STS luxury sedan; Chrysler has the stunning 300 sedan; and Ford Motor has the conservative, Euro-style and technology-laden Ford Five Hundred.

"What's driving all of this is the competitive pressure. Even though sedans have lost market share to trucks and SUVs, they are still a very large segment of the market," said Jeff Schuster, executive director of global forecasting for J.D. Power Associates.

Yet there are mixed answers to the question of whether SUV sales were hurt all that much this year by rising gas prices. While humongous brands such as the Hummer saw sales slip, some luxury brands such as Cadillac's Escalade remained hot-sellers and sales of smaller SUVs were as strong as ever.

"There's a lot of pressure now on traditional SUVs that are based on pickup trucks, like Ford Explorer, Chevy TrailBlazer and Dodge Durango ... because many SUV variations now offer better fuel economy and meet the demands of most consumers out there," Schuster said.

Still, he said, "With respect to gas prices, I'm inclined to believe that it has had a minimum effect" on overall SUV sales. Indeed, light truck sales in the United States -- pickups, vans and SUVs -- were up nearly 4 percent for the first 11 months of the year, while car sales were off 2.7 percent, according to the research firm Autodata Corp.

Higher gas prices did help fuel consumer enthusiasm for another new product -- hybrid cars -- though once again, it was the Japanese automakers who for the most part met the demand. Only Ford's Escape SUV hybrid and a handful of Chevrolet and GMC pickup models were available from U.S. automakers this year.

"By 2010, we expect that there will be almost 500,000 hybrid vehicles sold in the U.S.," Schuster said, before adding that even then, such sales will only represent no more than 3.5 percent of the overall U.S. market. "We see diesel technology ... actually exceeding hybrid activity."

It is on the sedan front where Schuster sees domestic automakers gaining the most ground. However, because U. S. companies have ignored the family sedan market for so long, it will take extra effort to win over consumers that have become loyal Honda, Toyota and Nissan customers.

Most industry observers agree that it will take strong marketing, a continual introduction of new models and interesting styling that contrasts with conservative Japanese and German designs if Detroit is to capitalize on the growing market for family sedans.

For now, U.S. automakers are taking three vastly different approaches to their new sedan products.

Ford went after the mass market with its Five Hundred, and thus decided upon relatively conservative design masking technology not seen on American sedans in the past, such as CVT transmissions, six-speed automatics and the availability of all-wheel drive. In doing so, Ford trumped the competition by offering such features at prices unheard of for family sedans. Neither Toyota, Honda, Chevy or Nissan offer anything similar for under $30,000.

Ford has been pleased so far, While it won't release sales figures, the company does say that more than 40 percent of its sales of the Five Hundred in October and November have been to formerly non-Ford owners. And more than 85 percent of sales have been to retail customers, quite a change from recent practice when fleet sales made up the lion's share of Ford's sedan market.

Chrysler, for its part, aimed straight for the daring with the 300 and 300 C sedans. Both have a dramatic, muscular look that, like them or not, turn the heads on the street and ring in plenty of sales at the cash register. " Chrysler passenger car sales are up 70 percent from January through the end of November [from the year-ago period], and the 300 line is driving a lot of this," said Scott Flagle, senior brand manager for Chrysler passenger cars.

One nagging problem for Chrysler has been inventory, he said. "We've been turning our inventory over extremely fast, and we're looking at ways of increasing the production. Even in California, which is a heavily import oriented market, we only have about a six-to-10-day supply of these cars."

Flagle said he believed the 300 was helped by the readiness of the market for a new sedan design.

"The 1950s and 1960s were the pinnacle of American car design, and people have been searching for that. That's why the 300 works so well," he said, adding: "Why would consumers want a car by an American brand that's an imitation of a European sedan or Japanese sedan?"

For Cadillac, going after the top European and Japanese luxury sedans was the plan all along. And if the reaction by automobile writers and industry observers is any indication, its STS has been a resounding success.

"You definitely notice the STS when it arrives," said Jay Spenchian, marketing director for Cadillac. "It's the party crasher thing like what you see in one of our recent television ads. You just can't help but notice it when it arrives. We've found there's been a real audience out there waiting for the arrival of the American sedan, and they've been looking for something like this."

Sales have been strong -- the "fastest ramp-up of any new vehicles launches we've had so far" -- , but "the best news for us is the traffic we have been getting," Spenchian said. "We're getting people [who] have not had Cadillac on the radar screen for a while. We're really, really pleased with that."



-Matt-