Ford CEO says shift to small cars here to stay

Americans' switch to buying smaller, more fuel-efficient vehicles is permanent, not a temporary shunning of big SUVs while they wait for record fuel prices to drop, Ford Motor CEO Alan Mulally says.

Mulally says the stampede is a "structural change" and if, as Ford f predicts, fuel prices stay up, "That shift to small and medium-size cars and utilities … is going to be permanent."

Detroit automakers are accelerating development of fuel-efficient cars, hoping not to surrender huge chunks of the auto market to foreign-brand small cars, as they did during the fuel shortages and high prices in the 1970s and early '80s. Even so, Mulally is first to declare the move to small vehicles will last.

Certainly it has been dramatic.

The first four months of the year, sales of the smallest, least-expensive cars — typically the most fuel-efficient — exploded 33% in an overall market down about 8%. Small cars of all types were up 8%, and sales of midsize cars were about even with last year. All other vehicle sales were down, according to industry tracker Autodata, which will report May sales Tuesday.

In an interview with USA TODAY reporters and editors Monday, Mulally said Ford is betting on high petroleum prices: "With everything we see, we're assuming that the fuel prices are going to stay up."

He says, "It's not like we have a shortage of oil," but recovering what's left under the earth has become very expensive, ensuring continuing high prices.

The nationwide weekly average price for regular gas rose 3.9 cents to a record $3.976 a gallon, the U.S. Energy Information Administration reported Monday. Diesel dropped 1.6 cents, EIA said, to $4.707.

Cars could make up 60% of sales by 2009, up from 47% now, says Rebecca Lindland, analyst at Global Insight. She had forecast that would happen in 2010 but has moved up the date because of the sudden shift toward vehicles that use less fuel. She predicts, though, that "most Americans will miss the functionality of an SUV," and go back to them if SUV mileage improves.

In the USA TODAY interview, Mulally also said:

•Ford-owned Swedish automaker Volvo is not for sale. "Our strategy on Volvo is to fix the Volvo business. We need to move them up more toward the premium brand, which they were," and cut costs.

Mulally had said April 4, 2007, however, that Ford's Jaguar brand wasn't for sale, and Ford closed the sale of Jag on Monday to Indian automaker Tata. Mulally said circumstances changed, requiring the sale.

•Ford has enough cash, much of it borrowed, "to manage the business through this cyclical downturn" and invest in new products to transform Ford "from a large truck and SUV company into a full product line of small, medium and large-scale vehicles."

Contributing: Sharon Silke Carty

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