GM and Ford's new cross to bear
Auto industry's hot 'crossover' vehicle segment poses new challenges for embattled GM and Ford.
DETROIT (CNNMoney.com) - Crossover vehicles, essentially SUVs with car-like engineering, are getting all the buzz at this year's North American International Auto Show in Detroit.
They are not designed for anything beyond very light off-road use, if that, but their design attempts to eliminate the somewhat rougher ride that can occur in a traditional light truck-based SUV.
The segment which didn't even have a name a few years ago is the fastest growing segment of the market by far, posting a nearly 11 percent gain in 2005, and more than a 30 percent increase between 2003 and 2005. This year it's total U.S. sales are expected to surpass traditional truck-based SUVs.
Meanwhile the mid-size SUVs saw sales fall 9.5 percent in 2005, while large SUV sales fell nearly 19 percent. Ford stopped making the Excursion, the longest SUV on the market. Only a gain in sales of small SUVs and imported luxury SUVs kept the bottom from falling out completely.
There's a lot of attention, about the crossovers as the industry gathers here this week.
"Crossovers are all anybody is talking about here," said Mark McCready, director of market analysis for CarsDirect.
Another challenge for GM, Ford
The crossover also poses the latest problem for the nation's two largest automakers, General Motors Corp. and Ford Motor Co. Both have far more large SUVs and pickups than crossovers in their current lineups.
The majority of crossovers come from Asian and European automakers, although GM and Ford are also among the leaders in crossover sales, it is one of the few segments of the light truck market where imports lead domestic brands.
Many of what the overseas automakers call SUVs, such as the Toyota Highlander and Honda CR-V are actually crossovers. Toyota's U.S. crossover sales last year exceeded its traditional SUV sales by 60 percent. By comparison, GM and Ford's light truck sales are heavily tilted towards the traditional SUV and pickup offerings.
Beyond the numbers, it's clear the overseas brands, along with DaimlerChrysler's Chrysler Group, have done a better job with crossover designs that are more stylish than the traditional SUV.
Ford actually has the top-selling vehicle in the segment, the Escape, but it is not often thought of as a crossover due to its SUV-like design. And unlike other fast-growing crossover products it saw sales fall 10 percent last year.
New crossover push at GM, Ford
But GM and Ford are making some changes. The Ford Freestyle, a more wagon-like vehicle than the Escape, in its first full year of production reached a little less than half of Escape's sales total. The Chevrolet Equinox was the No. 5 best seller in the segment with sales up 10 percent.
Each automaker also unveiled bolder crossover designs Sunday and Monday, with Ford showing the Ford Edge and Lincoln MKX, both set to go on sale in late 2006. GM unveiled the Buick Enclave concept vehicle which hints at something the company plans to sell in mid-2007.
"We put an inordinate amount of our time and resources into crossovers," said J Mays, Ford's group vice president, design. "The crossover market hasn't matured yet... But we've got our bets placed on the three-row seat Freestyle and the two-row seat Edge and MKX. We think that pretty much bookends where we need to be."
But with growing softness in traditional SUV and pickup markets, it's clear both GM and Ford are more wedded to them than their Asian competitors.
Ford just came out with a new version of the Explorer, the nation's best-selling SUV model, and GM is pegging much of its hopes for a turnaround on its newly designed large SUVs, such as the Chevy Tahoe, which officially hits showrooms this week.
George Pipas, Ford's director of sales analysis and reporting, said even though the best days of the traditional truck-based SUV are behind it, the segment is still too big and too important for Ford and other automakers to ignore.
"Your product has got to stay up to date, otherwise, you'll die," he said.
GM Chairman and CEO Rick Wagoner, defended GM's commitment to both the large SUV and the crossover segment when talking to reporters Sunday.
"I have a hard time feeling bad about bringing out an all new line of (large SUV) products in a 750,000-unit segment that is the most profitable segment of the industry," he said, although he conceded that there was some uncertainty in that market in the future due in part to gasoline prices.
"I think it's good to have new SUVs and I think it's good that we've got a lot of crossovers today and we've got more coming this year and beyond," Wagoner added.
Another one bites the dust?
The weakness in the traditional SUV segment has already claimed one victim, as GM recently closed its Oklahoma City plant that built mid-size SUVs.
"Oklahoma City, is a very good plant but a classic example of ... just having too much capacity in that segment," said Wagoner when he announced plans to close that plant in November. "That's why that plant is on the list today.
More SUV plants could be at risk from crossover competition in the future. It's tougher to have a plant that can build both the car-based crossover and the truck-based SUV.
It appears from sales numbers and gasoline prices that the crossover segment is drawing buyers from the SUV segment, as many buyers question if they need their traditional gas guzzlers.
"The recent gas price scare really woke up a lot of people up," said David Lucas, vice president of auto sales tracker Autodata. "That's not to say the (SUV) segment won't perform. But this is a tough market to be rolling out a new large SUVs, there's no question about it."
Pipas said the higher gas prices only accelerated a trend away from the truck based SUV that was bound to take place, particularly as baby boomers grew older and no longer needed the space of the traditional SUV.
"As they age, the baby boomers increasingly desire a vehicle with more car like ride and handling. You don't drive the same vehicle when you're 65 as when you're 55 or 45." He said.
CarsDirect's Mark McCready says his firm's data suggests that it's actually the traditional car buyers, reluctant to buy a traditional SUV but are attracted by the higher ride and more room available in a crossover who are driving the sector's fast growth.
"A lot of newbie SUV buyers are finding that the crossover is a better fit for them than a traditional SUV," he said.
For a closer look at the Ford Edge, click here.
For more news and photos from the Detroit auto show, click here.