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Buyers Go After Big Cars Again
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Written by Erik F. Hart   
Tuesday, 14 July 2009
Gyrating gas prices are playing havoc on auto industry planners, who've been adding small cars to their lineups, even as customers are showing more interest again in bigger vehicles.

New Chrysler small cars expected from a deal with Italy's Fiat hatched last week won't arrive for up to two years, says Chrysler President Jim Press, but even if they were showing up now, it wouldn't matter much.

Press says the company's full size Dodge Durango SUV is in the shortest supply among all the vehicles sold by Chrysler. Yet the automaker decided last year when gas prices were high to phase out the product out of fear buyers would shun it.

The turnabout "shows the fickleness of the market," says Press, speaking after a J.D. Power and Associates conference here for auto dealers.

Guessing what people want has been just as hard for dealers. AutoNation, the country's largest dealer chain, struggled last summer to stock enough hot selling fuel misers on its sales lots.

Back then, CEO Mike Jackson says, buyers were trading their Cadillac Escalade SUVs for Toyota Prius hybrids. Now Jackson says he's canceling orders for such smaller vehicles and ordering more trucks instead.

The change shows how fuel prices rule the car business. In May, 56% of the vehicles sold were cars, not trucks. By last month, the share of cars had fallen to 47%, according to Autodata.

Gas prices averaged $1.845 a gallon by Sunday, less than half their summer peak of $4.114.

The market is becoming "almost schizophrenic" for big or small car demand, says Tom Libby, analyst for Power Information Network. He cautions against writing off small vehicles.

"People are making comments like 'Prius is dead,' " he says, which isn't true.

Ford Motor is adding a slew of small cars, including several derived from vehicles made by its European unit. General Motors has major small car plans, too.

Longer term, "The price of gas is going to go up," Ford Vice President Mark Fields says. Figuring out what buyers want amid wild gas price swings "is like trying to time the stock market."

Chrysler hopes its tentative deal with Fiat will give it extra ammo with Congress to get a second installment on its $7 billion federal bailout loan at the end of March. Press says the deal will help fill Chrysler's long-term need for stylish small cars.

He says Chrysler should be viable by spring investing in new products and working toward repaying government loans.
Last Updated ( Tuesday, 14 July 2009 )