By Mike Colias and Christina Rogers
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (April 5, 2018).
DETROIT -- American auto makers are embarking on a historic
shift away from passenger cars, as more-profitable sport-utility
vehicles and pickup trucks continue to expand their share of the
market.
Long thought to be necessary for combating Japanese rivals and
catering to budget-minded or young customers, small cars have
fallen out of favor amid low gasoline prices and efficiency
improvements in SUVs. Now, large sedans also are on the chopping
block.
General Motors Co. will end production of the Chevrolet Sonic
subcompact as early as this year, according to people familiar with
the matter. GM is also considering discontinuing the Chevy Impala
big sedan in the next few years, these people said, a decision that
would kill a 61-year-old car model.
Ford Motor Co., meanwhile, plans to stop building the Fiesta
small car for the U.S. market within the next year, and will
discontinue the large Taurus sedan, said people briefed on the
plans.
Ford executives are still considering the future of the Ford
Fusion, a midsize sedan once billed as an answer to the Honda
Accord and Toyota Camry, these people said.
Sedans, coupes and other car categories accounted for 37% of
U.S. sales last year, down from 51% in 2012. With the Trump
administration planning to roll back fuel-economy standards for
auto makers' fleets, the shift to SUVs and trucks is only likely to
continue.
The U.S. industry's strategic shift is potentially lucrative,
but risky.
While American vehicle makers have long earned the bulk of their
profits from pickup trucks and SUVs, GM, Ford and Chrysler have
suffered when gasoline prices rise and dealers are left with a
stale or limited selection of fuel-efficient offerings. Toyota
Motor Corp., Nissan Motor Co. and Honda Motor Co. have laid out
investments to keep sedans and coupes such as the Civic and Altima
fresh even as demand wanes.
GM will continue to sell several small cars, including the
compact Chevy Cruze built in Ohio and the electric Chevy Bolt
produced in the Michigan factory that also assembles the Sonic. The
company also will offer its Chevy Malibu and Buick and Cadillac
sedans.
But Fiat Chrysler Automobiles NV and Ford are considering far
more aggressive pullbacks from passenger cars because of the
respective success of Jeeps and the F-150 pickup truck.
Fiat Chrysler took the first step in killing off small cars
several years ago when it discontinued the Chrysler 200 sedan and
Dodge Dart compact to free up money and assembly lines for pickup
and SUV production. The company is now reporting record profits and
has indicated to its suppliers it might be considering an end to
larger cars, including the Chrysler 300 and Dodge Charger sedans,
within a few years.
The death of the Sonic is as symbolic as it is strategic. The
car, which went on sale in 2011, was heralded as a hit because of
features not typically seen on inexpensive small cars, such as
heated seats. Chevy sold nearly 100,000 Sonics in 2014, far more
than its previous subcompact models, but deliveries dwindled to
about 30,000 last year.
The Sonic is built at the Orion Assembly plant in suburban
Detroit, which was saved from closure during GM's 2009 bankruptcy
through a $1 billion lifeline of grants and tax incentives from the
state of Michigan, local municipalities and the federal
government.
Seen as a small-car plant preserved largely by the Obama
administration, it was refurbished to represent the Motor City's
renewed commitment to small and efficient automobiles.
The plant, however, produces about one-quarter the number of
vehicles that one of the company's busy truck factories turns out.
GM laid off thousands of factory workers last year as the auto
maker sought to adjust car production with lower-than-expected
demand.
The company views consumer preference for SUVs over cars as
"largely permanent" and is assessing "how we best deploy assets in
critical passenger-car segments to ensure we're getting a return,"
GM finance chief Chuck Stevens told analysts last year.
Ford is also shifting. It recently put on sale the EcoSport
small crossover SUV in the U.S. at a starting price of $20,000 --
almost $6,000 more than the Fiesta, with which it shares an
underbody.
"The EcoSport is basically the same vehicle and they can charge
several thousand dollars more for it," said George Waikem II, who
manages Nissan, Kia and Ford dealerships in northeastern Ohio.
Small cars, such as the Fiesta, he said, are "definitely on an
island that is sinking."
Jim Farley, Ford's president of global markets, said the company
will offer fewer models over time. "We are looking at a more
rationalized, more thoughtful passenger car lineup, because we want
to play where we can win," he said in a recent interview.
The move away from sedans, coupes and hatchbacks has executives
even outside Detroit considering how to respond.
It is a consumer shift "we really haven't seen before," Toyota
U.S. sales chief Bill Fay said at an industry conference in New
York last week. Another Toyota executive forecast the sale of cars
shrinking to 30% of the American market in the near future, and
said the Japanese auto maker might need to expand its SUV
lineup.
--Chester Dawson contributed to this article.
Write to Mike Colias at Mike.Colias@wsj.com and Christina Rogers
at christina.rogers@wsj.com
(END) Dow Jones Newswires
April 05, 2018 02:47 ET (06:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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