Looking Beyond the SUV

Jan 9, 2006 — -- After a bleak 2005 for the American auto industry, the big three American car makers, GM, Ford and Chrysler, are showing off their wares at the North American International Auto Show in Detroit. Among the wares is a new kind of vehicle called the crossover, which is something in between a car and a sport utility vehicle.

Last year saw the decline of once-explosive SUV sales while foreign car makers continued to make record-breaking sales in the United States. Foreign rivals like Toyota, Honda and Hyundai are gaining in the American market. With declining sales and rising domestic gas prices just scraping the surface of the automotive industry's ills, U.S. car makers have finally declared that they must change.

And that's just the beginning of the bad news. Last year GM announced a restructuring plan that would cut 30,000 jobs and close all or parts of 12 plants in the next three years.

"We're confronting some structural issues here, some issues that have been around for a long, long time and it certainly hurt our bottom line significantly in 2005," said Rick Wagoner, the CEO of General Motors. "And we really need to improve those results this year."

Ford is expected to announce its own layoffs and plant closings as well.

"The Japanese on the luxury end and the Europeans continue to gain ground and steal new buyers," said David Welch of Business Week.

Sales of the SUV -- once heralded as the savior of the American car industry -- plummeted this past year to their lowest level since 1998. And most industry analysts said this could be the end for the SUV's popularity -- marking a huge shift in auto trends.

At the auto show in Detroit, evidence of this shift can be found around every corner. The hybrid is now the focus of attention.

With sales of combination gas and electric cars expected to at least double in 2006, U.S. automakers have jumped on the bandwagon. Ford now offers a hybrid, and GM is unveiling two.

In 2006, federal tax credits based on the hybrid's gas mileage will be offered. Some people could get up to $3,000 back in their pockets.

Recently, however, the Consumer Reports test of fuel efficiency found that hybrids had huge discrepancies averaging 19 miles per gallon less than what the sticker claimed. In addition, the gas would have to cost $4.41 a gallon for a hybrid to be a better deal according to estimates. In the end, hybrids represent only 1 percent of the American car fleet.

Car makers are placing a lot of hope in the crossover, which is really a scaled-back SUV. Crossover sales in 2005 outpaced the growth of SUVs when they were most popular. By the end of 2006 sales, nearly 2.5 million of these cars will be on the road.

Crossovers have better fuel efficiency but are still rugged. Among the models shown at the show in Detroit were the Buick Enclave concept vehicle, the Ford Edge, the Jeep Compass, the Acura RDX and the Mercedes GL.

"They look like SUVs, same functionality as the SUV, but more practical, better gas mileage, easier to drive, less tip over, easier to park," said Csaba Csere, editor-in-chief of Car and Driver magazine.

Csere said the Enclave cost more than $35,000 and represented GM's first venture into the crossover market. Like the Mercedes GL, it is roomy and has three rows of seats with room to spare. The four-wheel-drive Jeep Compass is actually quite affordable at $16,000, Csere said. The Acura RDX is all-wheel-drive and good for getting through snow. The Ford Edge costs less than $30,000 and has two rows of seats, Csere said.

At the auto show, Toyota unveiled its crossover concept car, the F3R. It was revealed for the first time on "Good Morning America." Toyota calls it a van for people who hate vans. It has room for up to eight people, and the back seats can be arranged in a "lounge style" to resemble the back of the limo.

Whether the crossover is going to be the answer to U.S. automakers' woes remains to be seen. Foreign car makers are making ever-impressive strides in America. Their share of the road was at a record 43 percent of the market last year.

Although the crossover is giving American automakers some hope, there comes yet another threat from the East: the Geely. The tiny car from China made its first U.S. appearance at the car show and could hint at the future of American cars.

If American car makers are going to regain complete dominance of the United States market, the first thing they need to do is design vehicles that change the way Americans feel about American cars.

"Their brands just aren't as respected," Welch said. "It's scary times in Detroit."