Friday, August 04, 2006

Big 3's future rides on new models

Thursday, August 03, 2006
Big 3's future rides on new models
Brett Clanton / The Detroit News

MILFORD -- General Motors Corp. Chairman and CEO Rick Wagoner could not have been clearer Wednesday in explaining what's at stake with a lineup of full-size pickups the automaker begins launching this fall.

"They are the most important component of the most important part of our turnaround plan," he said as he stood in front of a small armada of 2007 Chevy Silverado and GMC Sierra pickups, unveiled for the first time Wednesday at GM's Milford Proving Grounds.

GM isn't the only automaker counting on a lift from new models in the second half of the year.

Ford Motor Co. hopes a new Edge crossover can help offset this year's startling drop in truck sales. DaimlerChrysler AG's Chrysler Group is emphasizing new cars and small crossovers, while Nissan will launch a redone Altima midsize car as other foreign automakers jump in with new entries.

For Detroit automakers, vehicle launches in the second half of 2006 are at the heart of an effort to rebound from disappointing sales and spotty earnings this year. But the companies will continue to face a challenging environment in the months ahead.

Rising gas prices threaten sales of the Big Three's hugely profitable trucks and SUVs. Asian automakers continue to make inroads. And Detroit carmakers' profit outlook is still hazy.

Perhaps never before have they been under such pressure to get it right with the cars and trucks they introduce in their home market.

"No one gets to make mistakes now," said Jim Sanfilippo, analyst with AMCI Inc., an industry consultancy in Bloomfield Hills. "Failure is not an option with product launches. It's like NASA."

Major automakers are expected to launch 30 percent more vehicles in the next three years -- an average of 46 a year -- than they did during the nearly 20 years between 1987 and 2006, according to Merrill Lynch analyst John Murphy, who in July published an in-depth forecast of the U.S. automotive market for the next four years.

Why the increase? As the U.S. auto market becomes more competitive, automakers must bring to market more vehicles faster to grab the attention of today's buyers.

GM, Chrysler are faster

Among the domestics, GM and Chrysler will have the highest replacement rates in the second half of 2006, which could bode well for their sales in coming months. But Ford is expected to continue losing ground because it is launching fewer vehicles.

New products may come at the best time for GM, which after reporting improved second-quarter earnings last week and progress with a restructuring plan is trying to woo buyers back to its brands.

In coming months, GM will trot out three models for Saturn: the Aura midsize car, a hybrid-gasoline version of the VUE crossover and the Outlook, the first of a trio of full-size crossovers. But the new pickups are the most crucial piece of the automaker's product plans this year.

The current pickups are GM's top-selling vehicle line. GM hopes to boost sales higher with the 2007 models, which boast class-leading safety features, a more upscale interior and engine options that achieve more than 20 mpg in highway driving.

Yet GM Vice Chairman Bob Lutz said Wednesday that the automaker does not expect the full-size pickup category to grow beyond current sales levels, saying it may decline further amid rising gas prices.

"It's very much dependent on fuel prices, and it depends on whether fuel stabilizes at $3 or whether people say, 'Boy, it was two bucks last year, it's three bucks this year, it's going to be $4 next year and $5 the year after that.'

"If the public has that expectation, I would expect the segment to suffer. If it stabilizes at around $3, I think the segment is going to be just fine."

Sales of Ford's F-Series pickups, the country's best-selling vehicle, are down 12 percent this year, while the Dodge Ram is off 11 percent. Demand for big gas-thirsty SUVs is also down sharply this year. But sales of more fuel-efficient cars and crossovers are on the rise.

"Gas prices are part of the issue," said Mike Maroone, president and chief operating officer of AutoNation Inc., the nation's largest auto dealer chain. "But if you really look at the statistics, the average miles per gallon of this year's sales are unchanged from last year."

The average remains at 21 mpg.

Car, crossover sales grow

The bigger driver, he said, is the rash of new products in the car and crossover segments, he said.

Chrysler will roll out eight models in the second half of 2006, including several new fuel-efficient cars and small crossovers that may be hitting the market at the right time. Among them are the Jeep Patriot crossover, a redesigned Chrysler Sebring midsize sedan and Dodge Nitro midsize SUV.

Meantime, Ford will have a much lighter launch schedule, which analysts say could cause the Dearborn automaker to see sales and market share slip further in coming months.

Ford plans are highlighted by the introduction of the Ford Edge and Lincoln MKX crossovers, heavy-duty pickups and a few spin-offs of existing models. But the replacement for its lagging minivan and a redesign of the F-150 pickup are still years away.

In July, the combined market share of domestic automakers fell to 52 percent, an all-time low. Also last month, in an industry first, Toyota Motor Corp. passed Ford to become the nation's No. 2 auto seller, and Honda Motor Co. overtook Chrysler in the No. 3 spot.

The moves may represent a permanent reordering of the U.S. auto industry, said Christian Wardlaw, senior analyst with, a car shopping Web site.

"Given what's coming out for 2007 by the Asian manufacturers, that's probably an inevitability."

In the back half of the year, Honda will introduce a redesigned CR-V SUV and a new Acura MDX SUV, while Toyota brings a new version of its Lexus flagship, the LS sedan.

You can reach Brett Clanton at (313) 222-2612 or

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