R. I. P. for SUVs
The fallout from higher energy costs is expected to last.
Slipping gas prices are finally giving drivers a bit of relief, but even as prices fall, analysts say the shift away from gas-guzzling SUVs is likely permanent, both for consumers and for automakers.
The price for a gallon of regular unleaded averaged $4.06 per gallon last month as summer demand peaked, according to the Energy Information Administration. The average is projected to fall to $3.79 a gallon this month, and to $3.77 in September.
High fuel prices have changed the game for U. S. automakers, as consumers steer away from what were some of their most profitable models— trucks and SUVs.
Chrysler LLC and Ford Motor Co. (F) recently announced plans to retool assembly plants to make smaller vehicles. General Motors Corp. (GM) has been cutting shifts at some plants and idling truck and SUV production at others, while it is adding shifts at plants that make smaller vehicles. Four GM plants that make pickups and SUVs are set to close entirely by 2010.
Peter Morici, a business professor at the University of Maryland, said these changes should endure because gas prices won’t likely fall enough to drive consumers back to heavier models. He said it’s unlikely gas will fall below $3.50 a gallon, which should keep people focused on conserving fuel.
“And besides, [the U. S. automakers] are such dinosaurs when it comes to change,” he says. “They turn so slowly— once [production] changes, it’s going to be hard to unchange.”
Morici says the growing shift toward smaller vehicles might also provide a bonus for U. S. automakers — the ability to compete more effectively with Japanese producers like Toyota Motor Corp. (TM).
