honoluluadvertiser.com

Sponsored by:

Comment, blog & share photos

Log in | Become a member
The Honolulu Advertiser
Posted on: Saturday, May 31, 2008

U.S. automakers hit hard by sudden consumer shift

By Dee-Ann Durbin and Tom Krisher
Associated Press

Hawaii news photo - The Honolulu Advertiser

These 2008 Ram pickup trucks sit unsold at a Dodge dealership in Littleton, Colo. The sudden falloff in big-vehicle sales has put the Big Three automakers in their worst market condition in at least 30 years.

DAVID ZALUBOWSKI | Associated Press

spacer spacer

DETROIT — Detroit's automakers have been making the shift to more fuel-efficient vehicles, but consumers have been making the move even faster — to hybrids and high-mileage models made overseas. Gas prices have buyers moving away from trucks and sport utility vehicles at a furious pace, leaving the Big Three at the most critical crossroads in 30 years.

"In the early '70s, we were caught flat-footed, without smaller, fuel-efficient cars. We had nothing to sell," said Gerald Meyers, a former chairman of American Motors Corp. "That's exactly what's happening now."

What could make this worse, says Lehman Brothers auto analyst Brian Johnson, is that the Detroit Three can no longer rely on import restrictions or on raising prices, which helped pull them out of the slump in the 1980s. And if gas prices stay high, they can't count on trucks and SUVs coming back, either.

"We believe that much of this reduction in full-size truck demand is structural, with many buyers downgrading to smaller vehicles who will likely not come back," Johnson said in a note to investors.

As of April, year-over-year sales of large pickups were down 17 percent and large SUVs down 29 percent, while sales of subcompacts jumped 33 percent and the Toyota Prius hybrid was up 23 percent, according to Autodata Corp. The shift was exacerbated by a perfect storm of gas prices — which soared 10 percent between March and April alone — coinciding with the weak economy, tightening credit and the housing market slump.

Many analysts are now expecting the auto market pain to last well into 2009 and even beyond.