Dec. 20--Domestic automakers are rolling out a slew of new passenger cars in 2005 in a bid to halt a steady slide in market share, but cars are a tough sell with consumers.
Americans prefer trucks, and sport-utilities remain the vehicle of choice despite criticisms that they guzzle gas and are dangerous.

Sales of light trucks -- SUVs, pickups and vans--are up 3 percent this year and account for 54 percent of the market. Car sales are off 2 percent in 2004.

Analysts predict that trucks will outsell cars again in 2005, when they see industry sales growing slightly, to around 16.9 million vehicles.

They also see the domestic manufacturers continuing to lose market share to their Japanese and Korean rivals, which are expanding their truck offerings and stealing sales from domestic brands.


However, Gary Cowger, president of General Motors Corp.’s North American operations, sees gains by the major Japanese brands slowing.

"It’s easy to get incremental sales when you’re new to a segment, but it’s not as easy when you’re no longer new," Cowger said. "And now the Japanese are in all segments."

New-vehicle sales are up nearly 1 percent this year through November, putting the industry on track to match or top last year’s 16.7 million depending on how December shakes out.

CSM Worldwide, a Detroit forecaster, expects sales of 16.95 million cars and light trucks in 2005 and steady growth the next few years, so sales eventually would top the record of 17.4 million vehicles set in 2000.

CSM expects the economy to continue to gain momentum, employment to grow and interest rates to remain low by historical standards.

In addition, most Baby Boomers are still in their prime spending years, and more of Generation Y, the 170 million or so born between 1977 and 1994, will come of car-buying age.

J.D. Power and Associates sees sales inching up to 16.9 million next year, reaching 17.1 million in 2006 and climbing to 17.7 million by 2010.

But fresh vehicles, not incentives on old ones, will fuel that, Power analyst Jeff Brodoski said.

Automakers plan to roll out 52 new or redesigned models in 2005, four more than this year, and the number jumps to 71 in 2006.

"Getting the window-shopper to sign on the dotted line is always difficult, but with the quantity of vehicles coming, it may get more window-shoppers into showrooms," Brodoski said.

The domestic brands of General Motors, Ford Motor Co. and the Chrysler Group (the U.S. unit of DaimlerChrysler AG) have lost 1.4 points of market share this year, to 58.6 percent, and 4.7 points the last three years.

Power predicts a flood of new car models will help slow the Big Three’s decline to 1 point in 2005.

"There are a lot of new products from the Big Three, and they should have an effect in 2005, when they are on the market for a full year," Brodoski said.

Among the new models are the Ford Five Hundred and Mustang, Chevrolet Cobalt, Pontiac G6, Buick LaCrosse and Chrysler 300, passenger cars that are on sale or will be soon.

The 300 is a hot-selling big sedan, capped with a massive chrome grille, that has energized the Chrysler division. Its sales are up 26 percent this year, and the 300 demonstrates that domestic brands can lure car buyers with the right product.

But Joe Barker, manager of North American analysis for CSM, said the 300 may be an exception.

Cars face stiff competition from the new breed of SUVs, the "crossover" models that are basically cars in disguise.

Crossovers such as the new Ford Freestyle, Toyota Highlander and Honda Pilot are driving the growth in SUV sales.

They sport the rugged looks of a truck but use car components under the skin. Crossovers are counted as trucks for sales purposes.

"Crossover utilities are very solid alternatives to passenger cars. They ride like passenger cars but give you the utility of trucks," Barker said. "It’s going to be tough for passenger cars to compete."

As buyers shift to crossovers, traditional truck-based SUVs such as the Ford Expedition and Chevrolet Tahoe are losing popularity. Tahoe sales are down 5 percent this year, and the Expedition is off nearly 11 percent.

But analysts say gas prices aren’t to blame.

Consumers simply didn’t have much choice before. If they wanted an SUV -- and millions did -- it had to be a hulking, truck-based model such as the Expedition or Ford Explorer.

Today, the same Ford showroom also offers the Freestyle or the smaller Escape, another crossover.

Gas prices generated more headlines than havoc with auto sales in 2004, Barker said.

"In the grand scheme of things, it really didn’t impact most purchase decisions. Most people don’t let temporary spikes in gas prices deter them," Barker said. "They make buying decisions based on their lifestyle, not the price of gasoline."

Paul Ballew, General Motors’ market analyst, added, "It’s not so much gas prices that people pay at the pump as it is high energy prices that impact people who are more economically fragile.

"High energy prices hurt low-income people more, and low-income people are traditionally small-car buyers," he said. "It takes them out of the market."

Car sales have been declining for years, as buyers migrated first to mini-vans in the 1980s and then SUVs and pickups starting in the 1990s.

But midsize cars continue to make up 20 percent of new-vehicle sales, about 3.3 million units, and are second only to SUVs in popularity. Ballew said that market is too big to ignore.

"You have to invest money in the segment and offer new products, but there’s a lot of pressure on that segment," he said.

Besides crossovers, Ballew said, such incentives as rebates and discount financing on entry luxury models, including the Cadillac CTS and Lexus ES330, are enticing shoppers away from midsize cars.

Dismal sales in November left GM with a glut of vehicles, and the No. 1 automaker responded by trimming its first-quarter production plans by 7 percent. Cowger said the cuts are strategic, not wholesale.

"We need to trim our inventory of full-size SUVs. We don’t need as many of them," he said, adding that GM’s new car models may pick up some of the slack later in the year.

Ford is trimming its production by 8 percent in the first quarter.

Barker said the cuts indicate both want a breather from the costly incentives that have become a way of life for Detroit automakers. GM averaged $3,747 per vehicle and Ford $3,206 in November, according to Merrill Lynch.

"I don’t know if this is just a temporary strategy, but we’re seeing recently that the Big Three is attempting to manage inventory with production instead of incentives," Barker said.

"The question is how long it will last. The threat is always there that you’ll lose market share, and then they’ll say, ’We need to get back on the incentives track.’"

By Rick Popely and Jim Mateja


-Matt-