AJC CAR NEWS
Race is on to dump trucks
Big automakers gear down fuel guzzlers, rev up subcompacts
For The Atlanta Journal-Constitution
Saturday, September 13, 2008
General Motors Corp. is leading a rush of automakers that are dumping slow-selling trucks and adding more fuel-efficient cars in the wake of a drastic rise in oil prices over the past several months.
GM Chief Executive Officer Rick Wagoner announced a “significant” investment last month to build a new generation of small cars called the Chevrolet Cruze. Ford Motor Co., Toyota Motor Corp. and Nissan Motor Co. are making similar moves.
The race to replace trucks with cars echoes the push in the 1990s to add sport-utility vehicle factories as gasoline below $1.25 a gallon made those trucks cheap to drive. The automakers are now planning to shut or reconfigure their truck plants as $4-a-gallon fuel scares buyers away.
“Some of this might be overreacting to the recent dramatic increase in gasoline prices,” said Rebecca Lindland, a forecaster for Global Insight Inc. in Lexington, Mass. “Consumers are still going to buy the biggest SUV or car they can afford with the best mileage they can get.”
Automakers will be reducing the number of pickups, minivans and truck-based SUVs they can make in North America by about 2 million units annually from 2007 through 2011, according to Global Insight. At the same time, they are either converting to or adding 1.1 million units in car and car-based SUV production.
The shift over the next four years will be most dramatic for the smallest cars and for SUVs based on trucks, Lindland said. Annual output of the bigger truck-based SUVs will fall 57 percent to 804,296, and subcompact car output will increase 39 percent to 396,214, Global Insight said.
On June 3, GM said it would cut about 700,000 units from its North American truck production by shuttering four pickup and SUV plants by the end of 2010. The company also will bolster car output this year by 200,000 with the addition of a shift building Chevrolet Malibu sedans and another making the Chevy Cobalt.
“I think we’re doing this in a responsible way,” GM spokesman Tom Pyden said. “We’re utilizing existing car capacity to get these increases.”
The Cruze is a replacement for the Cobalt coming in 2010. It shares its design with the Opel Astra and Saab 9-3 and is part of a GM plan to use common parts and engineering for models sold around the world. Production in the Cruze compact-car segment will increase 17 percent to 2.1 million by 2011, Global Insight said.
The shift toward fuel-saving models has been swifter this year than during previous oil shocks because consumers see the price increase as more permanent, said Alan Baum, an auto analyst at the Planning Edge in Birmingham, Mich.
An analysis of remaining North American truck-making capacity in 2011 indicates that companies should have enough flexibility to handle a 30 percent increase in pickup demand, said Diane Elnick, an analyst at Ward’s AutoForecast in Southfield, Mich.
“On the SUV side, if there was a significant rebound, they would be maxed out,” she said. Still, production cuts are necessary because demand won’t return to the peak, Elnick said.
Ford will begin converting Michigan and Kentucky SUV plants to build compact cars starting in 2010. A third plant, in Mexico, will stop building pickups and assemble Fiesta subcompacts that same year.
Toyota is reconfiguring one plant to make Highlander SUVs instead of Tundra large pickups and another will produce Prius gasoline-electric hybrids rather than Highlanders starting in 2010.
Nissan plans to halt production of Titan pickups and Armada SUVs in 2010 at a Mississippi plant and contract with Chrysler LLC to build the pickups in Mexico. The automaker also cut second-shift output of pickups and SUVs at a Tennessee plant this month and will add a third shift at its Altima sedan factory.
“It’s dangerous to look at the data the last couple months and assume it will continue,” said Erich Merkle, a Grand Rapids, Mich.-based analyst with consulting firm Crowe Chizek & Co. “Once they get used to fuel prices and the situation stabilizes, people will probably move back toward the middle.”
