Crossovers Disappoint Detroit

[Ming]

Crossovers Disappoint Detroit
Vehicles Intended as Bridge Between Cars and SUVs Continue Sales Decline
By MATTHEW DOLAN and SHARON TERLEP
August 4, 2008
Wall Street Journal

Already struggling with a downturn tied to gasoline prices, auto makers have another headache to deal with -- falling crossover-vehicle sales.

Crossover vehicles, car-based wagons designed to look and function like SUVs but with modestly better fuel economy, were booming coming into 2008. But sales have dropped off as consumers have flocked to less expensive and more efficient passenger cars.

This is forcing auto makers to further rethink a business model largely dependent on the sales and profits of large vehicles.

Despite a flood of new models in the segment, sales of crossovers were down 11% in July compared with July 2007, according to Autodata Corp., representing the third straight month of sharp declines amid a wider downturn in the overall market.

Even though the segment continues to outperform vehicle sales in general, and despite car companies' big hopes for crossovers, auto makers have been forced to scale back production plans as sales of crossovers have missed the mark.

Crossovers were supposed to be a cushion buffering auto makers against the sport-utility-vehicle decline that has been gradually picking up steam in recent years.

Designed to look like truck-based SUVs, these vehicles behave more like station wagons because they are built on lighter car chassis with the goal of being more fuel efficient.

Because of this, auto makers touted vehicles such as the Edge by Ford Motor Co. and General Motors Corp.'s Buick Enclave as the perfect bridge for consumers who wanted a way out of their gas guzzlers but didn't want to sacrifice size.

But instead of boosting crossover sales, demand has been crippled.

"With gas hovering around $4 a gallon, even the crossover category continues to show signs of slowdown, as many consumers looking to replace traditional trucks are experience falling resale value of their old vehicles, freezing buyers out of the crossover market and pushing them to look at options such as compact and midsize cars," Lehman Brothers analyst Brian Johnson wrote last month.

"Anybody with a large SUV [is] coming in and finding out how much the market's changed," said Joe Serra, a dealer who does business in Michigan and Alabama.

Crossovers are generally costly products, meaning consumers may not be able to swallow losses on SUVs and still afford to stay in the large-vehicle market.

"They're expensive vehicles at a time when there's a lot of economic uncertainty and distress," said Mark LaNeve, North American sales chief for GM.

FULL ARTICLE

[RamJet502]

The problem is that the economy is in the crapper and people are buying what they can afford to own.

[Ming]

I bought a traditional sedan-based station wagon last spring, before gas prices (and the economy) really went from bad to worse -because:

1. I didn't feel the need to buy a fat, expensive profit pig only moderately more fuel efficient than a tradtional SUV just to help "cushion auto makers against the sport-utility-vehicle decline". If I feel the need to donate to GM as a charity, I'll do that in some other way.

2. A sedan-based station wagon has the same cargo room and passenger room as many so called "crossovers".

3. A sedan-based traditional station wagon is not jacked up on stilts, so while it can't climb every mountain or ford every stream, it feels and drives like a regular car, for the most part.

4. A 4-cyl. FWD wagon is hard to come by anymore in the U.S. (just not profitable enough to "cushion auto makers profits"), and I felt my last chance was slipping away in the fat, inefficient but "cool and SUV-looking" Crossover hysteria.

5. I've always liked FWD 4-cyl. wagons. It's a thing from my youth. Good memories. I always hoped GM would get back into them, and not just with a little retro trucklet-looking PT Crusier car, or some Toyota 4-door hatchback that pretends to be a wagon.

Of course price was also a consideration, but it wasn't at all like I "settled" for a wagon. I wanted one.

So glad I bought a wagon and didn't give in to the advertising and allure of a 17/22 MPG crossover thingy...not like I'd ever seat 8 passengers, but I'm talking about the smaller ones, too. Unless you look at the 4-cyl. models of some automakers, in general, they're pigs at the pump, and just because they look like SUVs --- no one seriously wants to take a Saturn Outlook or Hyundai Santa Fe off-road regularly -- or even once and a while intentionally.

All that said, I did seriously consider the Ford Freestyle. But man, what happened to that fuel economy after the ratings changed? It was like 27MPG highway...

[oct1]

Originally Posted by Ming

I bought a traditional sedan-based station wagon last spring, before gas prices (and the economy) really went from bad to worse -because:

1. I didn't feel the need to buy a fat, expensive profit pig only moderately more fuel efficient than a tradtional SUV just to help "cushion auto makers against the sport-utility-vehicle decline".

2. A sedan-based station wagon has the same cargo room and passenger room as many so called "crossovers".

3. A sedan-based traditional station wagon is not jacked up on stilts, so while it can't climb every mountain or ford every stream, it feels and drives like a regular car, for the most part.

4. A 4-cyl. FWD wagon is hard to come by anymore in the U.S. (just not profitable enough to "cushion auto makers profits"), and I felt my last chance was slipping away in the fat, inefficient but "cool and SUV-looking" Crossover hysteria.

5. I've always liked FWD 4-cyl. wagons. It's a thing from my youth. Good memories. I always hoped GM would get back into them, and not just with a little retro trucklet-looking PT Crusier car.

So glad I bought a wagon and didn't give in to a 17/22 MPG crossover thing.

Which station wagon did you buy? There are not that many in the market...

[steinravnik]

Originally Posted by RamJet502

The problem is that the economy is in the crapper and people are buying what they can afford to own.

Very true. The housing bust is having all kinds of repercussions. A lot of people/corporations have been caught off guard.

[Ming]

Originally Posted by oct1

Which station wagon did you buy? There are not that many in the market...

I always like to say -- well, it's as much "GM manufactured" as a Pontiac GTO, and has a Holden engine, too!:

Ming's New Daily Driver (It's a GM car, but...)

More shots: #2 Ming's New Daily Driver (It's a GM car, but...)

I must admit my obsession with GM trivia (where things are made, Holden and Daewoo stuff) got me thinking about it, then I took the plunge.

Oh, and I've always liked Suzuki. I'd have a WagonR if I could.

15,000 trouble free miles as of last week.

[dav305z]

I think GM and analysts alike underestimate the measure to which consumers are rejecting SUV's. Car buying has always been emotional. The same irrationality that once drove Americans to pass over perfectly functional sedans and wagons in favor of SUV's is now driving them to reject anything that looks remotely like a truck.

Small cars are "in" not because they are practical (which they are) or because they are economical (which they are). They're in because people think they're cool right now, and want to be seen in them.

[Smaart Aas Saabr]

It's strange, you'd expect them to swell as big SUV drivers go to little SUV

but the crash in car buying in general...

Personally less of these and more regular cars the better. I hate following these vehicle because I can't see traffic ahead of them.

[tgunnd39]

"Even though the segment continues to outperform vehicle sales in general, and despite car companies' big hopes for crossovers, auto makers have been forced to scale back production plans as sales of crossovers have missed the mark."

If you read between the lines, as I like to think I do, you will see that even though this article attempts to paint a doom and gloom scenario for crossovers, the truth is, the entire auto industry, with the exceptions of Honda and Mini at the moment, is in a slump and this includes the vaunted Toyota. The proof that crossovers are performing is contained in the statement, "the segment continues to outperform vehicle sales in general," and can only lead to the logical conclusion that perhaps crossovers are not as bad off as the WSJ would have us believe?

Seems to me that the attempt to mislead the reader has fallen flat with the above statement. Maybe they will couch their bias more carefully next time.

My .02

[Ming]

Doesn't need to be a negative, tgunnd39. If all automakers are down like you say, then it doesn't matter how they are down, does it?

Consider that GM's 4-cylinder sales mix was near 40% a month ago. 40%. That's double the mix compared to the same month in 2007.

So GM can sell small (or 4-cylinder powered) cars, too. You'd think they'd be happy.

But then we get stuff like the line their guy fed us last week about "we'll be ready to make smaller engines when Americans want to buy them". Garbage. Utter poo-poo. They want to keep selling us their more profitable cars, that's all, and they can't figure out why an Astra, stripped of the little things that made it so attractive that people said "bring it here!" isn't selling like they hoped. Maybe if the Astra looked like some of those photos we saw with the fancy navigation and multi-toned interiors....and not gray fabric with a monochrome amber screen that looks like a terminal from a 1970's computer...

That they rely too much on the profits of larger vehicles and dismiss smaller ones while MINI can sell trendy small, fuel efficient yet profitable cars is the result of bad decsions and poor foresight - and for no lack of people like me telling them so on forums like GMI for many years now.

If GM had brought the MINI to the U.S., it would have an interior no more exciting than a Cobalt's, a bigger engine than needed "for American tastes", and they'd try to keep it under the price point of the next larger class of car at a brand -- instead of letting it just BE a MINI and attract people willing to pay more for style and features, regardless of the size of the package.

[zete]

The problem is the analysts and others assumed folks who had SUVs need SUV space, etc. That's simply not true. A lot of folks had SUVs but had no need for the space or towing capacity. It was just the "in" vehicle.

These self same people now are opting for sedans and coupes.

Who buys a crossover? Someone like myself who needs the space -- to haul around the kids and their friends and their gear. Once the kids no longer require mom and dad to chauffeur them around we'll be buying a sedan or, at most, a 5-seat crossover.

So what's happening is folks who had the big SUVs and didn't need them are bailing to sedans or coupes, and a few are going to smaller crossovers. Why this is a surprise eludes me as it only makes sense. But most folks who watch the auto industry seem surprised when anything happens. Sigh.

What they should be seeing is a few logical trends. I think those trends will be towards sedans that have a higher stance -- higher than typical sedans, lower than crossovers. Fuel economy will be of interest for at least another year or two, assuming no further oil shocks because within a year or two the current prices will be the new normal. They'll also want luxury accouterments in their vehicles -- especially the boomers. Plus, boomers and some of the younger generations will want "fun" cars. We can already see that with cars like the Mini but the Camaro and other cars should see a similar level of interest because boomers will be retiring or becoming empty nesters en masse soon and when they do they'll become even more focused on themselves and fulfilling dreams that were put on hold for a variety of reasons.

What do I think will hurt? SUVs and trucks, obviously, but also large luxury cars will also suffer. I think small and medium luxury cars will be in demand and niche cars will become very popular as folks try to differentiate themselves from one another. Remember, boomers used to mostly drive the same thing -- Chrysler minivans, Camrys, Accords, Impalas, etc. Now they're going to want to stand out but not pay some stupid price for it. Personally, I think part of the appeal of the Kappa twins is that they stand out and are affordable. All the automakers need to do more of that. But can they build sufficiently flexible platforms to create a variety of exterior designs in a cost effective way?

Some may say that this differentiation is egotistical and self-centered. All I'd say is "You've defined a boomer to a T". After all, boomers view themselves as having made the world we live in, rightly or wrongly.

[Hoosier Red]

Here's part of the problem that few people mention - most of us don't need to buy new cars. Period. In other words, even if I'm driving a petro pig, it's probably cheaper to keep driving it until the wheels fall off. Modern cars will last much longer than most of usually drive them. Yes, there's a shift to smaller cars when people need to buy something, but if people are making truly rational decisions, they are usually better off just continuing to drive their car for another few years through the bad economy. I don't know the exact numbers for the auto market the last few years, but we as a nation could probably lop off a few million of those auto purchases each year and not suffer greatly other than sacrificing that new car smell every couple years. I have a 2005 Ford Freestyle for a family of 5 (one on the way so soon to be 6). We've driven it cross country twice and we really can't go much smaller. I can afford to buy a Saturn Outlook - and really like them - but there's really no need to get rid of the 2005. That sour milk smell isn't as bad as the bite my wallet would take to get something shiny and new in this economy. The whole point? Besides the gas prices, I think we're finding that a lot of the car purchasing that was going on the last few years was very discretionary when mortgages were easy and everyone was awash in equity.

[AMERICA 123]

This article is more than a bit over stated - I guess somebody needed a headline.

According to motor intelligence aka AutoData and as printed in the WSJ 'auto data page' - contained here -

http://online.wsj.com/mdc/public/pag...=topnav_2_3000

- CUVs are the third best performing segment out of eleven - close behind #2 the midsize car segment YTD.

On a non adjusted basis #1 small cars are at + 10.9% - and the only positive segment YTD.

#2 are the midsize cars at -2.8% YTD.

#3 - the CUVs at -4.0% YTD

Industry is at -10.5% YTD - nonadjusted as are all these numbers.

**********************

While CUV's did have a lousy month for JULY 2008 - they still came in third out of eleven.

#1 Small cars + 12.4%

#2 Midsize cars at + 2.8%

#3 CUVs at - 11.4%

Industry is -13.2%

Worth noting, CUVs have outperformed (obliterated ) Large cars ( -18.8% july 2008 /-31.2% YTD) and have and just did outperform the Luxury car group ( -12.4% july 2008 / -14.5% YTD).

So bottom line, if you want to get rid of the 'weak performers' ( or write a useful as opposed to useless article ) luxury and large cars go away first along with all the SUVs and Trucks - but CUVs get to stay - midsize cars are barely ahead YTD.

Given the tone and choice of words and phrases - besides the information missing - from the author's own newspaper....... it's a lousy article - sorta of a smear on Detroit - which is funny because many of the weak performing CUVs are from import brands.

Gm's positive performance ( best four ) - here stands out - best in the industry.

[Copcarz]

GM should make wagon versions of all their cars. An Impala or Malibu wagon would be cool. A Saturn Aura wagon would look good too.

[AMERICA 123]

Originally Posted by tgunnd39

"Even though the segment continues to outperform vehicle sales in general, and despite car companies' big hopes for crossovers, auto makers have been forced to scale back production plans as sales of crossovers have missed the mark."

If you read between the lines, as I like to think I do, you will see that even though this article attempts to paint a doom and gloom scenario for crossovers, the truth is, the entire auto industry, with the exceptions of Honda and Mini at the moment, is in a slump and this includes the vaunted Toyota. The proof that crossovers are performing is contained in the statement, "the segment continues to outperform vehicle sales in general," and can only lead to the logical conclusion that perhaps crossovers are not as bad off as the WSJ would have us believe?

Seems to me that the attempt to mislead the reader has fallen flat with the above statement. Maybe they will couch their bias more carefully next time.

My .02

Exactly - well almost - MB and RR are on track for a bang up year and Jaguar had a great or good month depending on how you want to look at it.

Also for the month, GM's CUVs pulled up the segment numbers that were being pulled down by Toyota and Honda as well as just about everybody else.

Their performance ( best four ) is in their own class as a group.

There are a few others who are doing 'more than ok' - all things considered - like Kia.