WP: Smaller Cars Enjoy New Chic: Dealers Notice SUV Demand Dropping Off [View All]

[DeepModem Mom]

Smaller Cars Enjoy New Chic
Dealers Notice SUV Demand Dropping Off
By Sholnn Freeman
Washington Post Staff Writer
Wednesday, September 28, 2005; Page D01


John Mathews of Universal Toyota in San Antonio has witnessed the day that auto industry executives in Detroit said would never come.

"We are seeing people who are driving $40,000 Suburbans trading them in on $15,000 Corollas," said Mathews, who manages a dealership in a state where big trucks and sport-utility vehicles rule the roads. "The last 30 days have been unlike anything I've ever seen in the automotive industry."...

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While small car sales are helping to lift the Japanese automakers, Detroit's General Motors Corp. and Ford Motor Co. are sinking under the weight of large sport-utility vehicles, once the industry's cash cows. The two automakers have reported substantial slides in profits in their North American operations this year, and their bonds have junk status on Wall Street. The interest in small cars has caught the two automakers unprepared, said Dave Healy, an auto industry analyst at Burnham Securities Inc. in New York.

For the Big Three, Healy said, investment followed profit margins. "As long as the SUV segment was doing well, they poured money into that and neglected small cars," Healy said. "At that time you could have made a very good case that it was giving the public what it wants."

Healy and other analysts are predicting bleak results for Detroit automakers when they report sales results for September on Monday. Healy said large sport-utility vehicles will be especially hard-hit after climbing in the summer due to "employee pricing for everyone" discount pricing sales. "We're looking at 20, 30, 40 percent yearly declines," Healy said. The spike in gasoline prices and the summer incentives have crushed SUV sales now....


http://www.washingtonpost.com/wp-dyn/content/article/2005/09/27/AR2005092701812.html