Jon's Soapbox
Hard Times for US AutoMakers -- SUV Fever Over?
(Posted 6/24/2005) - It's starting to look like the american love affair with inefficient, high powered SUV's has ended, based on recent GM and Ford sales figures.
It never ceases to amaze me how big corporations fool themselves into believing their market growth predictions are givens instead of possible outcomes -- and then get blindsided when a market evaporates.
In a September Jon's Soapbox I commented on the insupportability of the current SUV fever, predicting it would self-implode within the next 2 years. Looks like it is starting now, only 9-months after that article. Here's an excerpt from a column by Jeremy Peters, of the New York Times, dated June 22.
Ford's chief financial officer, Don Leclair, said higher-than-expected costs from auto parts suppliers combined with slower sales of large and midsize sport utility vehicles had squeezed Ford harder than anticipated.
"The sales rate has been lower than we thought," Mr. Leclair said in a telephone interview on Tuesday evening. "We think that is a continuation of a trend of changing consumer preferences away from traditional, truck-based S.U.V.'s toward more fuel-efficient models."
Sales of large and midsize S.U.V.'s, which have been a major profit source for both Ford and General Motors, have fallen sharply. For the first five months of the year, sales of Ford's Explorer and Expedition were down by more than 20 percent compared with last year. Sales of the Excursion, its largest S.U.V., were down more than 30 percent.
While the challenges facing Ford are severe, it is still in a better position than General Motors, which has stopped giving earnings guidance for the year. This month, G.M. said it would eliminate more than 20 percent of its blue-collar work force over the next three years.
Though Ford is better off than G.M., the news Tuesday that it expects weaker earnings this year underscores the two largest automakers' struggles to remain profitable.
"The same thing has hit G.M., but a lot harder," said David Healy, an analyst with Burnham Securities. "But they're essentially in the same situation as G.M. They're producing a lot less gas-thirsty S.U.V.'s than they used to."