Is The King Of Minivans Moving Out Of The Fast Lane?

DaimlerChrysler's share of the minivan market is shrinking

DaimlerChrysler insists it still is firmly in command of the lucrative U.S. minivan market, despite a flood of new competition from Honda, Toyota, and Ford. But the latest sales figures suggest a surprising vulnerability for the company that made the minivan the staple of suburban life. In June, sales of Chrysler, Dodge, and Plymouth brand minivans fell 19% from a year ago, leaving DaimlerChrysler with just 35% of the market vs. 42% in 1998 and 48% in 1992. For the first six months, sales are off 2%, leaving Chrysler's year-to-date share at 40%.

What makes Chrysler's decline particularly alarming now is that minivan sales are rising for the first time in several years. Analysts figure sales could reach 1.3 million units, beating 1994's record of 1.27 million.

Unfortunately for DaimlerChrysler, what's propelling that growth is demand for rival models, such as the Honda Odyssey, Toyota Sienna, and an improved Ford Windstar. These offer better safety ratings and nifty features, such as powered sliding doors and fold-away rear seats, that DaimlerChrysler's four-year-old models don't have. Toyota Motor Corp. and Honda Motor Co., which together held just 3.2% of the market in 1997, are expected to grab about 12% this year, according to Lincoln Merrihew, an automotive analyst at Standard & Poor's DRI.

Who's buying the imports? In Wilmington, Del., Honda dealer Frank Ursomarso says it's often onetime Honda owners who might have opted for a Dodge Caravan in the past because Honda didn't have a minivan. Now, they can stick with their preferred brand, says Ursomarso, president of Union Park Automotive Group, which is sold out of Odysseys through October.

"NOT ALARMED." But the import buyers aren't the only customers that Chrysler is losing in the minivan market. Ford is also making inroads with its improved Windstar, which boasts a top safety rating and high-tech features such as sensors to prevent the van from backing up into something or someone. Before the '99s came out, the Windstar was an also-ran lacking a critical fourth door. Now, Ford--with first-half sales up 15%--has more than one-fifth of the market.

So is the German-American giant worried? "We're not alarmed," says Stuart Jeffares, manager of business strategy for minivan operations. He attributes much of what the company calls a sales blip to the timing of incentive deals. In January, DaimlerChrysler announced $1,000 rebates on its minivan models. This propelled Dodge Caravan sales to a record 82,000 in the first three months. Sales have slowed since then, however, even though the rebate doesn't expire until Aug. 2. David Bostwick, the company's director of market research, predicts it will all even out by yearend. "We're looking at a very steady year again," he says. But at last year's level of about 523,000--still double its nearest rivals--Chrysler's share would be off 2%.

Even so, DaimlerChrysler is predicting strong results for 1999. And the strong U.S. economy and expected record demand should keep prices fairly healthy, says Scott Merlis, auto analyst at Wasserstein Perella Securities. "The market's still hot enough that they don't have to go wild in discounting."

The longtime leader has a chance to pull ahead again in a year or so. "Chrysler knows this market better than anyone else," says Merlis. "So the odds favor that when the new models come out, they'll be back on top." Until then, however, the auto maker should keep an eye on the rear-view mirror.

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