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An Embarrassment Of Minivans

News: Analysis & Commentary: AUTOS


New models keep rolling into a market that's nearly saturated

General Motors Corp. has barely been a player in minivans, one of Detroit's hottest markets. Of the 1.2 million minivans sold annually, Chrysler Corp. has been ringing up the lion's share while turning its boxy Cub Scout-haulers into increasingly sophisticated vehicles. Ford Motor Co. joined the fray in earnest a few years back with the aerodynamic Ford Windstar and the sleek Mercury Villager. But GM has lagged, reaping a measly 16% market share with its needle-nosed APV minivans, often derided as "dustbusters" or "anteaters."

That's about to change. On Mar. 5, GM will unveil the first of its new minivans at the Geneva Motor Show. The new vans are GM's bid to become a contender in the $28 billion minivan market for the first time. The new Chevrolet Venture, Pontiac Trans Sport, and Oldsmobile Silhouette will offer lots of amenities and more conventional styling.

TOOTH AND CLAW. "It will be a much better vehicle than the old anteater," says Chrysler President Robert A. Lutz. "I have no doubt the new GM minivan will be much more competitive." DRI/McGraw-Hill analyst Lincoln Merrihew sees General Motors gaining about six points of market share by 1997.

Such tooth-and-claw market-share battling is a sign of a new development: The minivan market is hitting the saturation point. Along with GM, the Japanese will be jumping in with new models. And as the fighting gets fearsome, any company without a key new feature--such as sliding doors on both sides of the van--is in jeopardy. Witness Ford, which must spend a punishing $560 million to retrofit a second door on its Windstar model. Merrihew figures nearly all of GM's gains will come at the expense of Ford. Lehman Brothers analyst Joseph S. Phillippi estimates that Ford turns a profit of about $2,500 on each Windstar it sells--and he expects the new GM entries to cut into that.

The pressure on weak players will only intensify with time. Chrysler, the undisputed minivan leader, pioneered double sliding doors on its latest models, which are a smash hit. It enjoys gross margins averaging $7,000 per minivan, well above the industry average of $3,000, says Phillippi. Sales of fully loaded top-of-the-line Town & Country vans, which sell for upwards of $30,000 and boast margins approaching $10,000, are suddenly spurting. Analysts also expect GM to make money on minivans when its new models arrive.

COSTLY MISCUE. Meanwhile, Japanese carmakers will start turning out made-in-America models next year. They'll have double doors, too, and are widely expected to be more price-competitive than current Japanese minivans, which start at about $24,000. Toyota Motor Corp. will make a minivan, based on its Camry sedan, at its Georgetown (Ky.) plant for sale in 1997. Honda Motor Corp. will follow in 1998 with a minivan from its Alliston (Ont.) factory.

In such a competitive environment, Ford is showing how costly a minivan miscue can be these days. Despite its $560 million investment, it will not have a second sliding door ready for two and a half more years. The reason: it must reengineer the entire side of its van, reinforcing the body structure, moving the fuel system, and rerouting the air conditioning, then recertifying it with federal crash tests. Ross H. Roberts, Ford Div. general manager, maintains that the company can't slight other future models to rush the Windstar redo any sooner. "We have so much product in the pipeline that is so important to the Ford Motor Co. that to just drop everything and go and do this is not in our best interest," says Roberts.

For the next few years, Ford will limp along with a three-door Windstar sporting a $100 million interim fix--an enlarged driver's door. Meanwhile, analyst Christopher W. Cedergren of AutoPacific Inc. in Santa Ana, Calif., predicts that to stay in the game, Ford will have to increase the $1,000 rebate it offers on Windstars. Though Roberts denies the vans are losing out because of the door wars, Windstar has already lost 2.5 points of market share, or roughly half its peak total, reached last spring just before the new Chryslers arrived. "Chrysler really caught them flat-footed on that," marvels a competitor. "They're letting Chrysler eat their lunch."

NO THREAT. Ford's woes could give GM its big chance. "Ford is handicapped," says Schroder Wertheim & Co. analyst John Casesa. "That leaves a pretty big hole in the market for GM." The auto giant isn't talking about its new minivans yet. However, analysts describe them as solid, fairly generic minivans--no threat to Chrysler's market dominance but a huge improvement over GM's current crop of plastic-bodied APV offerings. They'll offer the only motorized sliding rear door on the passenger side--an option already popular on its existing minivans. GM will be cranking out minivans in its Doraville (Ga.) factory by this summer, but they won't be widely available until early next year.

General Motors has avoided Ford's fate mostly by sheer luck. Because it was planning a right-hand-drive version of its new van to sell in Britain, it already had dual sliding doors on the drawing boards when U.S. consumers started clamoring for the feature. So it still is feeling pretty good about its minivan offerings for a change. "I predict that it will be a sell-out," says Jerry Seiner, a Salt Lake City Chevrolet dealer who thinks GM has finally got it right. "Every dog has its day," says Seiner. For GM, that day could be shortened by intensifying competition--but at least it's here.By Kathleen Kerwin, with Keith Naughton, in DetroitReturn to top

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