Commentary: The Sun Is Setting on "Truckish" Sport-Utes

By David Welch

Brad Carroll is as true-blue American as they come. He manages a metal-distribution plant in western Michigan, likes to go camping, and has always bought big, brawny Detroit-made sport-utes. Until now. He and his wife recently replaced their GMC Yukon XL with the smaller, soft-riding Nissan Murano. "We considered getting another Yukon, but it's too truckish," says Carroll, 51. "The Murano handles so well, we took it."

Too truckish? A couple of years ago, that wouldn't have seemed possible. Consumers couldn't get enough of Detroit's hulking pickups and truck-based derivatives. The Big Three auto makers seemed brilliant a decade ago when they enclosed rough-and-tumble pickups, gave them another row of seats, and dubbed them sport-utility vehicles. They rode that SUV wave through the industry's renaissance of the 1990s and beyond. Last year, General Motors Corp.'s pickups and SUVs generated 90% of its profits.

But suddenly, America's love affair with big, gas-guzzling SUVs is on the wane. SUV sales, which have been mostly stagnant for two years, have actually turned down in recent months. Rising gasoline prices, safety and environmental concerns, and a shift in consumer tastes are taking their toll. The sooner Detroit recognizes that the Truck Age has passed -- and that big SUVs no longer can prop up performance -- the sooner it can catch up with European and Japanese rivals.

As they did earlier with small cars and luxury sedans, foreign carmakers have jumped to a quick lead with more car-like SUVs. Built on a car platform rather than that of a pickup, "crossovers" such as the Murano typically offer a smoother ride, better mileage, and more sophisticated styling -- while preserving just enough of the SUV's high ride and sense of fun. Consumers are responding. So far this year, sales of truck-based sport-utes have slid 13% -- in a market that's down only 3% overall. Almost a third of truck-based-SUV owners who bought a new vehicle this year traded for a crossover or a luxury car, nearly double the rate of two years ago, according to CNW Marketing Research Inc.

Demand for big SUVs, such as the Ford Expedition and Chevy Tahoe, won't disappear. More likely, such vehicles will settle into a sizable but stagnant business. For precedent, look at another once-hot segment, the minivan. In the late 1980s, minivan sales soared to about 1.5 million units per year. But when minivans became tagged as the unstylish choice of soccer moms, sales eroded to about 1.1 million a year. Last year, minivan sales fell 4%. The same fate is probably in store for once-sizzling truck-based sport-utes, which have stabilized at about 2.9 million units per year. Predicts Chris Theodore, Ford's vice-president for advanced vehicle development: "SUVs will be a stable business, but not a strong growth segment."

Detroit is adjusting to this seismic shift in its usual cautious way. Ford Motor Co. is converting the Taurus sedan plant in Chicago to build its Freestyle, which teams an Explorer's space with a car's ride. That will arrive next year. Likewise, DaimlerChrysler has just launched its Pacifica six-passenger crossover SUV. GM has its Cadillac SRX crossover coming later this year. But Detroit's big push into crossovers remains in the future.

The imports show no such hesitation. They're plowing ahead with ever-more-clever designs. Asian and European auto makers offer 16 different crossover SUVs, vs. eight for the domestics. There are waiting lists for car-based SUVs such as the Honda Pilot and its luxury sibling, the Acura MDX. "There will always be SUVs," says Lexus Group Vice-President Denny Clements, "but they may all be crossovers at some point."

Sure he's exaggerating. Otherwise, why would Toyota be building a truck plant in Texas? Still, as auto makers like Toyota lure SUV buyers with crossovers, the race is on to offer SUVs of every stripe. And Detroit needs to get with the program fast.

Welch covers the auto industry in Detroit.

    Before it's here, it's on the Bloomberg Terminal.