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SUV Demand Drops Due to Gas Prices, Consumer Tastes

RENEE MONTAGNE, host:

There's also bad news from America's automakers. For the 12th straight month, Ford's sales in the US declined, dropping 11 percent in May. The news from General Motors was only slightly better. Its sales were off 5 percent compared to a year ago. One reason for the trouble, demand for large SUVs has fallen dramatically this year. NPR's Wendy Kaufman reports that high gas prices aren't the only reason sales of SUVs have slumped.

WENDY KAUFMAN reporting:

At the Robinswood ball fields in Bellevue, Washington, about every third vehicle parked is an SUV.

(Soundbite of ball game noises)

KAUFMAN: And while there are some sport utility enthusiasts here, many SUV owners say they wouldn't buy another one, or if they did, it wouldn't be too big. Bob Kaplan(ph), who's keeping score at his son's Little League game, points to his glistening dark green Ford Expedition. He says it has nearly a hundred thousand miles, and he's looking to get rid of it.

Mr. BOB KAPLAN (SUV Owner): I like the idea of the SUV, but I'm looking at something that's smaller, that's going to be much more gas-efficient. But I still have the same requirements. I mean, I'd still like to get five or six people in a car. I still need to be able to pull my boat. So what I'm looking at right now is a hybrid. Toyota's releasing their hybrid Highlander next month.

(Soundbite of ball game noises)

KAUFMAN: Sales of traditional large SUVs, which once totaled more than 3.1 million annually, are down more than 13 percent so far this year. But SUV sales at Ford and GM are off more than 20 percent. Ford, which is promoting its own SUV hybrid, cites high gas prices. GM, which is introducing newly designed big SUVs next year, downplays their impact. Company officials say people who spend $35,000 or more on an SUV aren't all that concerned about paying a few dollars more at the gas pump.

Mr. KAPLAN: I don't buy that at all.

KAUFMAN: Again, Bob Kaplan.

Mr. KAPLAN: I mean, I think that my kids are learning a lot about recycling, and when we're in the kitchen they're like, `Well, aren't you going to recycle that, Dad?' And then we get in the truck and I'm getting 12 miles a gallon when I could get 25 miles a gallon and do the same thing. And it gets you thinking.

(Soundbite of ball game noises)

KAUFMAN: High gas prices aren't the only factor hurting sales of big SUVs like the one Kaplan drives. Four of GM's models haven't changed that much in years and it's only natural that sales of these models would taper off. There are demographic changes as well. The SUV-buying baby boomers are aging. George Pipas is Ford's US sales analysis manager.

Mr. GEORGE PIPAS (Ford Motor Company): The boomers, regrettably, are getting older and as they get older, they become empty-nesters. That means that they don't need the size or capability of the vehicle that they once did, and as they get older, they're somewhat less nimble and so the idea of using a stepladder to get into a sport utility vehicle is something that they're increasingly unwilling to do.

KAUFMAN: But they are willing to buy so-called crossover vehicles, smaller, less expensive sport utilities. Built on car platforms, they have a softer ride and get better mileage. Last year, crossover sales doubled to 1.9 million.

Tom Libby of J.D. Power, a market research firm, says the shift to the smaller crossovers has hurt the automakers' bottom line.

Mr. TOM LIBBY (J.D. Power & Associates): The profit margins on those full-sized SUVs are substantial and they are smaller on the crossovers. In general, if you're selling a 25,000 to $30,000 vehicle, your margins are going to be lower than if you're selling a $40,000 vehicle.

KAUFMAN: Both Ford and GM spent a decade focusing their engineering and marketing on the big, highly profitable SUV. Now that the SUV market has changed, Ford and GM are pursuing somewhat different strategies. Ford is making a major move to the crossovers, but GM, which plans 14 crossovers by 2009, is still putting a lot of emphasis on the big sport utility vehicle. Company spokesman Brian Akre notes that GM will bring its redesigned traditional SUVs to market early next year, sooner than originally planned.

Mr. BRIAN AKRE (GM Spokesman): There has been some criticism within the media and among some analysts about why we're pulling those ahead, but we have 60 percent of that market and that still is going to be a big addition to our bottom line.

KAUFMAN: There is yet another challenge for Ford and GM. For years, Japanese vehicles have scored higher than Detroit's in quality. But now, says Tom Libby of J.D. Power, the American automakers have nearly closed the gap. Nonetheless, he says, the perception remains that Ford and GM are not in the same league as the Japanese when it comes to quality.

Wendy Kaufman, NPR News, Seattle.

MONTAGNE: This is MORNING EDITION from NPR News. I'm Renee Montagne. Transcript provided by NPR, Copyright NPR.

Wendy Kaufman