January 5, 2006 - Mercer University



January 5, 2006

A Comeback for the Car Species

By MICHELINE MAYNARD

DETROIT, Jan. 4 - Last year will go down as the one when cars made a comeback and sport utilities stumbled.

It will also be remembered as the year when Detroit's auto companies held their lowest market share, although Chrysler broke from its Motor City rivals and posted the only sales increase among the Big Three.

Sales by the major automakers, tallied Wednesday, reflected shifting consumer tastes and the effect of higher gasoline prices, which spiked above $3 a gallon in much of the country in the summer.

For cars, long overshadowed by hefty pickups and powerful S.U.V.'s, the share of the American market climbed for the first time since 1992, according to figures from the automobile companies. Cars picked up about one percentage point, giving them 45.1 percent of the market, their largest share in two years.

S.U.V. sales fell to their lowest level since 1998. And big expensive S.U.V.'s that once commanded a premium, like the Lincoln Navigator, Cadillac Escalade and Toyota Land Cruiser, all posted double-digit sales declines in 2005.

"Cheap fuel in America is a thing of the past," said James Press, president for sales operations for Toyota in the United States. "There's a lot more awareness of the impact of a gallon of gasoline."

Ron Pinelli, the president of Autodata, an industry analysis firm in Woodcliff Lake, N.J., said, "I don't know if 2005 is the turning point for trucks, but it's some kind of milestone."

While no one is about to write off the S.U.V., analysts say the appeal has finally waned. "Not unless the consumer really needs one are they going to buy one," Mr. Pinelli said.

The year ended on a sour note for the automakers, with sales falling 3.8 percent in what is usually a blow-out month. Full-year sales rose 0.8 percent, to 16.9 million vehicles, with that small gain aided by incentive wars that cost the carmakers $42 billion during the year, according to , a Web site that offers car-buying advice.

The decline in S.U.V. sales last year was bad news for Detroit. Together, General Motors, the Ford Motor Company and Chrysler, a unit of DaimlerChrysler, held 56.9 percent of the American market in 2005, down 1.8 percentage points from 2004, according to sales reports.

In contrast, Toyota and Honda of Japan, BMW of Germany and Hyundai of South Korea all posted strong performances, helping import brands capture a record 43.1 percent market share in 2005.

Sales at G.M., the largest American car company, fell 4.3 percent in 2005, while sales by Ford, the No. 2 player, dropped nearly 5 percent. A bright spot for G.M. was Chevrolet, which was the best-selling brand in America in 2005, topping Ford for the first time in 19 years.

In November, G.M. announced a restructuring plan that included cutting 30,000 jobs and closing all or parts of 12 plants in the next three years.

G.M. is also banking on the stronger performance of a new lineup of S.U.V.'s, including the Chevrolet Tahoe, and is promoting the vehicles' technological features and improved fuel economy.

Jeremy Anwyl, the chief executive of , said the Tahoe had a good chance to be a hit, as long as gasoline prices remained stable.

But he said G.M. had trained buyers to wait for big rebate plans, like the employee discount program it made available to customers last summer. The plan produced a spike in warm-weather sales that quickly diminished when the incentives were discontinued.

"You have to convince people that the price is real and that there isn't going to be a sale next week," Mr. Anwyl said. "Whatever hand they've got to play, they're going to make it happen. And if they don't, they don't have anything left."

G.M. is not alone in banking on sport utilities. Chrysler has four new Jeep models set for 2006 and like G.M., it is emphasizing their improved fuel economy.

"The cost of fuel matters," said Gary V. Dilts, Chrysler's senior vice president for sales.

Chrysler's sales rose 4.5 percent last year, helped by the continued popularity of the 300C sedan. It is a favorite among rap musicians like Snoop Dogg, who appeared in Chrysler's ads along with its well-known former chief executive, Lee A. Iacocca.

But Toyota, which is in a close race with G.M. to become the world's biggest maker of automobiles, did even better than Chrysler. Toyota's 2005 sales rose 10.1 percent. Its Lexus division was the best-selling luxury car company in the United States for the sixth consecutive year last year, while its Camry sedan remained the nation's best-selling car.

Toyota also sold 150,000 hybrid-electric vehicles, including its Prius sedan, which has a one-year waiting list, and two crossover vehicles, the Highlander and the Lexus 400H. Mr. Press said he expected Toyota's sales to rise another 4 percent to 5 percent in 2006, when the company has a "product-rich strategy."

Later this year, Toyota will begin selling a big pickup truck built at its new plant in San Antonio. It also plans a new version of the Camry, including a hybrid model.

Mr. Press said he was impressed with one Camry competitor, the Ford Fusion, which he said had broken ground in styling for midsize sedans, not generally known for their panache. The Fusion, on sale since fall, was a rare bright spot last year for Ford, which will announce its own restructuring plan on Jan. 23.

Ford is expanding its lineup with more crossover vehicles and hybrid models. But like its Big Three rivals, Ford still depends heavily on sport utilities, which led to record profits in the 1990's before the market became flooded with offerings from other companies.

On Wednesday, Ford's sales analyst, George Pipas, said he did not expect a rebound in S.U.V. sales this year, although he said, "Even a dead cat bounces if you drop it from 10 floors up."

More seriously, he said that "the best we can hope for is stable sales, and I would make that prediction only in the face of stable energy prices."

The increase in gasoline prices last year helped Honda, which posted a 5.2 percent sales increase in 2005, its ninth straight year of record sales. Nissan of Japan said it sold one million vehicles in the United States for the first time last year, achieving a goal set by its chief executive, Carlos Ghosn, in the turnaround plan he started in 1999.

Hyundai said its sales rose 17.2 percent, its fifth consecutive record year. Likewise, BMW sold more than 300,000 vehicles in the United States last year for the first time. Its sales rose 4.1 percent, putting it second, behind Lexus, in luxury brands.

Mr. Pinelli said the companies that consistently performed well this year, including Toyota, Honda, and Hyundai, all had diverse lineups able to carry them through the ups and downs of the market. "The image is there; the substance is there; the value is there," he said.

Jeremy W. Peters contributed reporting for this article.

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December 2005 Results

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