The New York Times


August 10, 2006

Detroit’s Answer to $3-$4 Gas: New Muscle Cars

TRAVERSE CITY, Mich., Aug. 9 — As gasoline prices surge past $3 a gallon in most of the country and closer to $4 in some cities, sales figures show Americans are snapping up small cars that go easier on fuel and on their wallets.

But none of the smallest cars are designed or developed by Detroit companies, which in the face of high gas prices are now highlighting another kind of automobile not usually thought of as energy efficient: the muscle car.

Ford Motor said Wednesday that it planned to build a 325-horsepower version of the Ford Shelby GT. It also plans a big luxury car, the Lincoln MKS, which will become the struggling brand’s flagship sedan. The announcement came at an industry conference here sponsored by the Center for Automotive Research.

On Thursday, General Motors is expected to confirm that it will resurrect one of its most famous muscle cars, the Chevrolet Camaro, which was a hit at the Detroit auto show in January.

To be sure, automotive executives, who have watched cars take four market share points away from light trucks this year, are emphasizing their commitment to building more fuel-efficient vehicles, and talking up the ones they already sell.

On Wednesday, G.M. told analysts in Detroit that its market share gains in the last three months reflected the popularity of its car models. “We do have great car products; we do have great fuel performance,” said Mark R. LaNeve, a vice president for North American sales, service and marketing.

Though 60 percent of the models G.M. sells are light trucks, including pickups and sport utility vehicles, it offers the only subcompact car sold by a Detroit company: the Chevrolet Aveo, which is built for G.M. by its Korean partner, Daewoo.

Ford or Chrysler sell no subcompacts in the United States, even though they or their corporate parents sell them in other global markets.

By contrast, Toyota, Honda and Nissan have all introduced small cars in the last few months, all of them sold overseas.

“It is a mistake and it’s very disappointing,” said John Casesa, managing partner of Casesa Strategic Advisers in New York. “I just think it shows that Detroit still has a business model predicated on low energy prices.”

Eric Ridenour, chief operating officer of DaimlerChrysler’s Chrysler division, said he expected Chrysler to announce its plans for a subcompact before the end of the year. But officials at Chrysler, which has the industry’s heaviest dependence on light trucks, at nearly 75 percent, are still not sure that a small car can be as successful in the United States as in Europe, Canada and Mexico, he said. Chrysler recently introduced a compact, the Dodge Caliber, built in Illinois.

“It’s a very tough segment to make money in,” Mr. Ridenour said of subcompacts, which earn roughly one-tenth the gross profit of a pickup. “Obviously we’d like to have the product now and be selling it today, but we won’t do it to lose money.”

Mark Fields, president of Ford’s Americas division, said Ford, which sells subcompacts in every other global region, realizes the importance of the subcompact segment and intends to compete in it soon.

Mr. Fields, whose company depends on light trucks for about two-thirds of its sales, said he expected annual sales of these small cars to reach 600,000 in the United States by the end of the decade. But Ford will not rush a product to market simply in the hopes of keeping up with competitors, he said.

“I want to make sure that we come in with a product that’s distinctly Ford,” Mr. Fields told reporters, adding that he did not want the company to “just get in there with an econobox.”

Mr. Fields admitted that the company underestimated how quickly rising gas prices would cause the market to shift. Sales of pickup trucks and sport utility vehicles, which have accounted for the bulk of American makers’ profits in recent years, have plummeted as cars grow more popular. In July, Ford’s sales of F-series pickup trucks dropped over 40 percent while the Ford Explorer S.U.V. fell over 50 percent.

Ford, in fact, blames higher gas prices for the slow start to its turnaround plan, announced in January. Mr. Fields said Ford, which lost $254 million in the second quarter, will disclose details of its expedited plan in September. They could include more job cuts, plant closings or other drastic cost-cutting measures.

“We may have to go further and deeper than we ever imagined,” he said.

Ford already sells several subcompacts, including the Fiesta and the EcoSport, in other countries, but its smallest car available in the United States is the Focus hatchback, which has been overshadowed in recent years by the company’s emphasis on big pickups and S.U.V.’s.

Although models designed for Europe or Asia require some changes to meet American regulations and the tastes of consumers, “it’s not that complicated” for a carmaker to make such changes, Mr. Casesa said, noting that both Honda and Toyota did so quickly. Toyota Motor has sold over 32,000 Yaris cars in the United States since the small model went on sale in March, including 10,000 in June alone, according to Autodata.

Honda Motor, meanwhile, has sold over 15,000 Fits in the United States since April. Nissan Motor dealers have sold about 3,000 Versas since the car went on sale in late June.

“The Japanese companies grew up in a high-gas-price environment,” Mr. Casesa said. “They simply have more experience with products that are right for these times. One can only think that Detroit never believed that gas prices would go up.”

Micheline Maynard contributed reporting from Detroit for this article.