NEW YORK (CNNfn) - The latest accusations of safety problems with the Ford Explorer and Mitsubishi Montero Limited has captured headlines and sparked investigations, but experts in the field don't think that will dent sales in the popular sport/utility vehicle segment.|
In fact, the greatest threat to sales of most SUV models isn't safety concerns or persistently high gasoline prices, say the experts. It's the introduction of new SUV or SUV-like models flooding the market.
The 2001 Montero Limited was given a rare "not acceptable" rating by Consumer Reports Wednesday, as the publication said its tests showed the SUV was prone to tipping up on two wheels in accident avoidance maneuvers. The Japanese carmaker, which is controlled by DaimlerChrysler AG (DCX: up $0.31 to $44.11, Research, Estimates), has defended the vehicle as safe, and said it has conducted its own test to prove its safety.
The Explorer, the key profit producer for Ford (F: down $0.56 to $25.34, Research, Estimates), is also facing a possible investigation by the National Highway Transportation Safety Administration, after tiremaker Bridgestone/Firestone Inc. charged that Ford was expanding a recall of Firestone brand tires in order to divert attention away from problems with the design of the Explorer, the best-selling SUV.
A video of the Consumer Reports test of the Mitsubishi Montero Limited that it said shows the vehicle to be "unsafe." Mitsubishi defends the vehicle's safety record.|
Ford executives insist that the Explorer is safe and the accidents that have been linked to more than 200 U.S. deaths are a result of a tire problem, not a vehicle problem.
Still, despite this week's headlines and other bad news for the SUVs, such as gas prices and new federal ratings showing all SUVs are more likely to roll over in a single-vehicle accident than any sedan, America's love affair with the SUV does not appear to be going away. But it may be cooling to some degree. A number of industry experts describe the segment as having reached a plateau, rather than being in decline.
"They're not going away, but they've had their day as far as being a hot vehicle," said Mike Flynn, director of the office for study of automotive transportation at the University of Michigan.
Flynn and a number of auto analysts believe the report on the Montero will damage Mitsubishi's SUV sales, but have little if any overall impact on the segment.
"I think people decide on the segment, then as far as they're concerned about safety, they use safety information to decide upon a choice within the segment," said Flynn. "The Montero could be in serious trouble without it dragging down overall sales in the segment."
Couple returns to SUVs after rollover crash
Neil Brady and Nancy Lembo are a good example of Flynn's view of the market. The Massachusetts couple didn't need Consumer Reports to tell them of the rollover risk of a Mitsubishi Montero. The two survived an accident in which Lembo's Montero rolled over three times, but it hasn't soured them on other SUVs.
Lembo lost control of her 1998 Montero when the sport/utility vehicle hit a patch of ice on Interstate 89 on Dec. 30, 2000, outside of Concord, N.H. While the cars around it skidded but stayed on the road, the Montero flipped over and rolled over, according to the Massachusetts couple.
"I figured this was it," said Lembo. "I remember Neil saying, 'We're going to die.'"
The Montero ended up skidding across the oncoming lanes of the highway before hitting a tree. But because the roof did not cave in, and both Brady and Lembo were buckled in, the couple walked away with only minor injuries.
Mitsubishi Motors couldn't comment on the accident, except to say that the earlier model Montero is a totally different design than the 2001 model used in the Consumer Reports test, and that it did not have any record of a rollover involving the 2001 model. Brady said the couple contacted Mitsubishi to warn of a possible problem and were simply referred to an attorney.
Still, Brady said they weren't planning on suing Mitsubishi, and while they do blame the vehicle for the accident, they're pleased at how well the vehicle held up.
"I guess the positive spin is it held up well to an insane accident," said Brady, who emerged with only a dislocated shoulder caused by the seatbelt holding him in place. "If I was in a sedan that flipped over three times, I think I would have suffered a lot more injuries."
Still driving SUVs despite rollover risk
The accident also wasn't enough to make either Brady or Lembo swear off SUVs in the future. Brady still drives a 1993 Jeep Grand Cherokee with almost 100,000 miles on it, while Lembo replaced the totaled Montero with a Toyota 4Runner.
"[With] my lifestyle, between mountain biking and skiing, I need an SUV," said Lembo, who said she did much more investigation into vehicle safety this time than she had done in the past.
"We both like to haul things around. I think the benefits outweigh the negatives," said Brady. "Maybe we're just stubborn."
If it is stubbornness that is keeping the couple in SUVs, it's a stubbornness that's common to Americans. And the continued demand is the reason manufacturers are flooding the segment with new models.
More SUV models to choose from
Flynn and others say a strength of the segment is also a problem for the manufacturers trying to sell SUVs – new models as well as new designs that blur the lines between SUV and cars or minivans.
Small SUVs introduced in the last year like the Ford Escape, or vehicles that might not even be recognized as an SUV, such as Chrysler's PT Cruiser or the Buick Rendezvous, might attract some traditional car or minivan buyers into the SUV segment. But they also may be wooing away traditional SUV buyers.
Vehicle sales tracker Autodata has created a new category it calls sport wagons to track the new quasi-SUVs, and that is the part of the sport vehicle market showing the greatest growth.
In fact, for the first five months of this year, Autodata's stats found the sport wagon segment more than doubled its sales to 392,925 from 148,888 a year ago, while sales of traditional SUVs slipped 9.5 percent to 1.1 million from 1.3 million.
But most of vehicles in Autodata's sports wagon category are considered SUV by their manufacturers. Thus using the industry classification of modes gives the broader definition of SUVs an 8.8 percent increase in year-to-date sales, at a time when total U.S. vehicle sales fell to 7.1 million, off 5.6 percent from a record-setting pace at the beginning of last year.
"There's just too much product coming into the segment to slow the train down," said George Pipas, Ford's spokesman for sales analysis.
He said in May there were 57 models that their manufacturers called SUVs, compared with only 45 a year ago. And Pipas said the new vehicles pose a greater threat to traditional passenger cars than to traditional SUV models. For example, he said 60 percent of people trading in a vehicle to buy a Ford Escape are trading in a car, not an SUV.
"The new SUVs have features which kind of break down one of the last barriers to entry into the segment," he said. "I think that sport/utility vehicles will outperform all other classes of vehicles for several years to come, despite reports that seem to want to put them to sleep."
And Pipas said that even safety-conscious buyers are looking at SUVs, realizing that its occupants are safer in the more common front or side-impact accident, even if there is a greater risk of rolling over than in a sedan.
New competition lowers profits
The new competition has meant new pricing pressures, and there are incentives today on SUVs that did not have to carry incentives a year ago. That competition for market share in the increasingly competitive segment will reduce the margins for the segment that has produced far more than its share of profits for the industry, according to analysts.
"It's still a very profitable segment," said David Healy, analyst with Burnham Securities. "That's why everyone is getting into it. But you will definitely see more incentives."
Officials with Mitsubishi Motors would not give any sales forecast for the Montero in the wake of the Consumer Reports rating.
The Ford Escape, one of the new, smaller SUVs in the market.|
Pipas said he's sure Explorer sales have been affected by the news reports of the dispute with Bridgestone/Firestone, which have included recent accusations by the tiremaker's executives that Ford is not addressing a design flaw in the Explorer that causes rollover.
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But while Explorer has seen sales decline, Pipas said it still is the only product in its part of the SUV market to set a sales record last year.
"It certainly couldn't be positive, the publicity surrounding tire recall one and tire recall two," he said. "I know people find this hard to believe, but even since last August, the Explorer has actually performed better than the competition."