- The Washington Times - Friday, May 18, 2001

It may be time to put the midsize car market once the heart and soul of the U.S. auto industry on the endangered species list.

It wasn't that long ago 15 years to be exact that midsize sedan, coupe and station wagon sales topped 5 million units annually. And only 20 years ago, cars the size of the Ford Taurus made up nearly half of all vehicles sold in the United States.

Midsize cars were so dominant in the late 1980s that General Motors put in motion a $7 billion plan at the time considered the biggest industrial program in U.S. history to have no less than five North American assembly plants building its intermediate Pontiac, Oldsmobile, Buick and Chevrolet models.

Although still the largest single segment, midsize cars account for just 24.7 percent of the new-vehicle market today.

What happened? Minivans, sport utilities and crossovers vehicles that combine the look of a truck with the ride and comfort of a car. Minivans, which were sprung on the market in 1983, now account for 1.2 million sales annually. Sport utility deliveries have blossomed to 16.2 percent of industry sales, from 12.9 percent annually five years ago. And crossovers, nearly nonexistent a few short years ago, are the hottest growing segment, with sales up 177 percent so far this year and climbing.

U.S. Big Three automakers have been more than happy to convert car buyers into minivan, sport utility and crossover drivers, because sales of those vehicles translate into higher profits.

But the market's movement away from midsize cars isn't without its problems for GM, Ford and DaimlerChrysler, which together account for 58 percent of segment sales. The reason? Big Three minivan and sport utility sales are under increasing pressure from import competition. And the traditional domestic automakers have been latecomers to the crossover market, a segment so far dominated by foreign nameplates. That means as buyers migrate out of midsize cars, they're nearly as apt to buy an import as a Big Three model maybe more so.

The problem is particularly acute for GM, which draws 29 percent of its sales from the midsize car market and remains the biggest player in the segment. Its midsize sales are off 11 percent from a year ago, and that's a trend the company concedes may not reverse itself.

"The problem we face is that the industry segment is receding pretty quickly," said Paul Ballew, GM's director of market and industry analysis. "We are the No. 1 midsize car manufacturer, and therefore when we see consumers change [direction], it's still a challenge of how we're going to manage that."

The key to survival for the Big Three will be in luring sport utility and crossover buyers away from imports, as midsize demand winds down. "We won't walk away from the midsize car business," Mr. Ballew said. "But it will be important to be as effective as we can in sport utilities." Otherwise, it may be more than the midsize car that is endangered.

WARD'S AUTOMOTIVE REPORTS


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