Tuesday, October 11, 2005

Detroit's SUV Profit Party is over

Detroit's SUV profit party is over, and it is not just because of high gas prices. Even if gas prices were to fall to $1.20 the profit party is still coming to an end.

The profit party has attracted competition and Detroit's SUVs are not going to stay on top for long. Almost all import car companies have a medium to "huge" sized SUV in the offering. Honda has the Pilot and the Acura MDX. Toyota has the 4Runner, Highlander , Land Cruiser, and Sequoia; not to mention the 3 Lexus SUVs. Not to be left out BMW, Mercedes, VW, and even Porsche have SUV models. As a result the days of easy profits and only domestic competition in the SUV market are over.

Ford and GM are facing many problems with new ones cropping up every day. Like this past weekends Delphi bankruptcy. This change might force GM to do something different with their profit making division, GMAC. GM has made more money selling auto and home loans than building cars and trucks since 2002.

Its not smooth sailing at Ford either, with two top execs leaving. I'd like to know more details around that news with one of them being former head of product planning at Mazda (which in my opinion sales the most interesting "Ford" cars in the U.S. consumer market). I can only hope that the results of the management shake up mean that the company will do something more aggressive to regain passenger car market share. That there are rumors of a Lincoln coupe based on the new Mustang shows hope.

In dealing with their other problems, GM and Ford need to focus back on passenger cars. They will not be able to count on fat SUV profits to keep them going, regardless of the price of gas.
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