Best cars for the money and miles

By Dan Lienert

updated 8:16 a.m. ET May 20, 2005

NEW YORK - Automobile manufacturers — and consumers — have woken up to find that the emperor has no clothes.

Despite years of warnings that the car industry was becoming too reliant on sport utility vehicles and pickup sales; that Detroit in particular was ignoring its passenger car divisions at its peril while chasing easy profits; that Japanese carmakers were continuing to build more fuel-efficient attractive cars and light trucks, the recent implosion of demand for these SUVs and pickups still comes as a shock. But it should not. It has been coming for a long time and, like war, a change of season or a lunar eclipse, it now has an aura of inevitability about it.

"The SUV boom is long over," writes Merrill Lynch in a recent report. "While a debate is raging among automakers about the health of the light truck market, and in particular, the SUV market, the data are clear that the SUV business peaked in 2000."

SUVs may have peaked five years ago, but they have recently commenced what may be an unrecoverable nosedive. Just look at Ford Motor as an example. The company makes, year after year, the best-selling pickup (F-Series) and SUV (Explorer) in this country, but in the first four months of this year, its SUV sales went in the tank. In comparison to the first four months of 2004, Explorer sales declined by 23 percent, Expedition by 25 percent and Excursion by 29 percent.

The auto industry has no one to blame but itself. While Ford Motor's CEO William Clay Ford Jr. says he will forego compensation until the company gets it together and General Motors' chief G. Richard Wagoner Jr. paints a target on his head by assuming complete control of the company's North American operations, these gestures seem too little, too late.

The reason is that Ford and GM continued to milk the SUV cow until it was exhausted. Did they honestly think the U.S., their major market, could sustain endless iterations of gas-guzzling SUVs? Don't they remember the gas shortages of the 1970s? Don't they know that fossil fuels are finite and subject to dramatic price fluctuations? Clearly, they didn't care as long as their factories were humming along and the dealerships were moving inventory.

Like the naked emperor, Detroit has been caught with its collective trousers down. For the most part, the emphasis on SUVs and light trucks siphoned away money and talent from the passenger car divisions, effectively ceding that market to the increasingly dominant Japanese. By how much? According to JD Power, in 2000 domestic passenger car share was 53 percent and the Asian (Japanese and Korean) share was 36 percent. Fast forward to the first four months of this year: Domestic share has slipped to 44 percent, while that of Asian makers has surged to 45 percent.

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