Detroit’s Midsize SUV Problem

It’s not just the mammoth SUVs that are suffering. The once-powerful midsize segment is also dwindling as gas prices rise and boomers age

In the 1990s, NASCAR dads and soccer moms ditched their minivans for hauling kids and groceries and flocked instead to mid-sized, truck-based sport utility vehicles such as the mega-selling Ford Explorer and Chevy Trailblazer. That was great for Ford and General Motors, who minted money to the tune of $6,000 to $10,000 of profit per vehicle depending on incentive.

But the cultural and financial tide has turned against these balky gas guzzlers much faster than any of the companies’ forecasts had predicted a few years ago. Both GM and Ford until recently had two assembly plants apiece churning out the SUVs. They each have gone down to one, each able to produce 300,000 per year at peak. But they’re not even bullish on that half-market.

Ford is on track to sell fewer than 200,000 Explorers and nearly identical Mercury Mountaineers this year, with sales down 28% through May. Explorer sales peaked at 446,000 as recently as 2000. GM will strain to sell 260,000 Trailblazers and near-clone GMC Envoys, Buick Rainiers, and Saab 9-7s, down from last year’s level of 380,000. How the mighty have fallen.

BAD PRECEDENT. Inside GM, there is considerable debate about whether to invest between $500 million and $1 billion on a segment losing steam so fast. There’s precedent for this, but it doesn’t have a happy ending. When GM saw the minivan market flatten, it stopped investing money in its lineup for a full redesign. The results were the execrable Chevy Venture, Pontiac Montana, and Oldsmobile Silhouette.

Business Week