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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Suv Fever Rising But Automakers Fear Market May Be Glutted

Brian S. Akre Associated Press

From Honda’s cute CR-V to road monsters like the Lincoln Navigator, the number of sport utility vehicles keeps growing with the public’s appetite for the versatile, go-anywhere trucks.

But as the market gets increasingly crowded, some in the auto industry wonder: When will this profitable party end? Chrysler Vice Chairman Bob Lutz says he worries the market is becoming glutted.

Chrysler sells the highest percentage of light trucks among the Big Three, which is largely responsible for its record profits.

But Lutz and other executives say they expect demand for sport utilities to remain strong for at least the next few years.

“It’s very rare that you live in an environment of so much excess demand that everybody can sell everything they can produce,” Lutz said in an interview Tuesday at the North American International Auto Show’s media preview.

In 1995, the U.S. market for SUVs totaled more than 1.75 million units, up from 929,000 in 1990. Ford Motor Co. predicted Tuesday the market would grow to 2 million by 1998.

“I don’t mean to sound complacent or arrogant, but it’s not obvious what would cause it to suddenly drop off,” said Bernard Robertson, vice president of Jeep truck engineering at Chrysler. “It will get more competitive. The segment clearly is going to have more and more choices.”

Chrysler is among the automakers introducing new sport utilities at this year’s show in Detroit. On Tuesday, the No. 3 domestic automaker unveiled the 1998 Dodge Durango, which will compete in the crowded midsize segment.

Earlier in the day, Ford introduced the hulking Navigator, based on the full-size Ford Expedition but with more luxury features and upscale styling. On Monday, Japan’s Subaru announced it would build a midsize SUV.

Automakers continue to rush more SUVs onto the market because they are their most profitable vehicles and are big showroom draws. Researchers say many customers who buy cars would go with an SUV if they could afford one - and plan to do so eventually.

And as the market becomes more crowded, automakers are keeping sales up by offering more discounts - rebates, cheap leases and lowinterest rate loans, said Art Spinella of CNW Marketing Research in Bandon, Ore.

Last year, discounts on midsize SUVs averaged about 7 percent of the suggested retail price, compared with about 4 percent two years ago. The discount rate on full-size SUVs was around 5 percent, up from 2 percent, Spinella said.

Midsize SUVs are the core subsegment of the market and include the Ford Explorer, Jeep Grand Cherokee and Chevrolet Blazer.

There is some sign that those who were initially attracted to SUVs as the boom began several years ago are returning to cars.

Spinella, who surveys car buyers and dealers, said his research showed that 21.7 percent of those who defected from SUVs last year went to something else - mainly midsize or luxury cars. That percentage is up from 11 percent 2 years ago.

The defection rate has not had a noticeable effect on sales yet because the number of people coming into the SUV market has been significantly higher.