Cost of gas, soccer-mom image doom minivans

Perhaps the biggest gamble in the shrinking market was made by Chrysler LLC, which spent $1.4 billion on the redesign of its two industry-leading minivans, the Chrysler Town & Country and Dodge Grand Caravan. Despite the investment and new features such as swiveling seats, Caravan sales fell 35 percent through May. Town & Country sales were down 13 percent.

Chrysler remains bullish on minivans and says sales have dropped for several reasons. First, the company discontinued the cheaper, short wheelbase version of the Caravan because it couldn't accommodate the new features, a decision that priced some buyers out of the market. The 2007 Dodge Caravan had a suggested retail price of $19,055; the 2008 Grand Caravan starts at $21,930.

Chrysler also says it significantly cut the low-profit sales it used to make to rental, corporate and other fleets. Non-fleet sales were up 23 percent this spring, the company says, and many buyers are choosing options like backseat televisions that improve Chrysler's margins.

"What is left is good quality consumer business and we are right-sized for the market," Chrysler spokesman Stuart Schorr said.

But Chrysler needs to watch its back, as rivals Toyota Motor Corp. and Honda Motor Co. are gaining on it. Chrysler continues to control 30 percent of the minivan market, but that's down from 32 percent in the first five months of 2007, and both the Honda Odyssey and Toyota Sienna have made larger market share gains than Chrysler's minivans this year.

Lindland said it turned out to be an awkward time to discontinue the lower-priced option, but Chrysler couldn't have predicted the rapid run-up in gas prices. The Dodge Grand Caravan gets an average of 18 miles per gallon, according to government statistics. The 2009 Dodge Journey crossover, which is meant to replace the short wheelbase minivan, gets 21 miles per gallon.

Still, Lindland is also bullish about minivans. Global Insight predicts U.S. minivan sales will settle in at around 650,000 through 2012, when they could jump back up to 700,000 as the market improves. She said demographics are working in the vehicles' favor, as Generation Y starts having families and Baby Boomers circle back to minivans to transport their grandchildren.

"I don't think the segment is going away entirely. It's reorganizing itself," she said.

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