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The Oil factor Wanes

Big Autos' Big Profits Make a Shift Unlikely

June 27, 2004|John O'Dell | Times Staff Writer

Regular gasoline is hovering around $2 a gallon in most of the nation -- $2.25 in Southern California -- and there's probably little hope of long-term relief. But looking at the latest offerings from automakers, you'd hardly know there was a gas price crunch.

Lots of fuel-swigging sport utility vehicles, pickup trucks and hot performance cars are in the pipeline, and very few gas misers. Industry executives say that's because most people don't really want more fuel economy, especially if it would raise sticker prices.

Even if buyers changed their tune, there might not be an immediate surge in fuel-efficient models. Automakers say production schedules are so locked in that if pump prices soared to $4 or $5 next week, they couldn't respond for several years.

"We can't turn on a dime," said Elizabeth Lowery, vice president for energy and environment at General Motors Corp.

Critics say that's a load of hooey. They point to, among other things, a recent National Academy of Sciences study that says fuel economy could be improved 10% to 15% through the use of existing technologies.

The catch: Installing those technologies would cost about $1,500 a vehicle. As it is, the industry can make big profits from big vehicles, which, the critics complain, is why the major automakers have flooded the market with trucks and powerful sedans and spent millions on ad campaigns to promote them.

"It's the auto industry that's been telling us that these are the vehicles we should be buying," said Michael Flynn, director of the University of Michigan's Office for the Study of Automotive Transportation. "They do an awfully lot to shape the demand they say they are catering to. They push trucks because that's where they make their money."

Indeed, the truck market -- sport utility vehicles, pickups and minivans -- accounts for about half of all new passenger vehicles sold in the United States. Big, luxury-laden SUVs such as the Cadillac Escalade and Lexus GX 470 fetch profits of as much as $9,000 apiece for their manufacturers, analysts say.

And heft robs vehicles of fuel economy. The average weight of a passenger vehicle in the 2004 model year is 4,066 pounds, up 26% from 3,220 pounds in 1987, according to Environmental Protection Agency data.

"It's a shame, because the auto industry can and should be doing more," Flynn said.

There is no question that some technologies, notably hydrogen-powered fuel cells, are decades from entering the retail market.

Others, including V-8 engines that can run on only four cylinders when cruising, are already here. And many fuel-efficient vehicles are, in fact, on the road: The U.S. market has three models of gasoline-electric hybrids, which use electric motors in combination with gas engines to deliver power without gulping a lot of fuel. More are on the way.

In all, there are 43 models with conventional internal-combustion engines that are rated at 35 miles per gallon or more on the highway.

Small Slice of Market

The numbers, however, are relatively small and are not expected to grow appreciably in the next few years. J.D. Power & Associates, the Westlake Village automotive market research firm, projects the total hybrid market at 440,000 vehicles a year by 2008, a small percentage of the 16 million to 17 million new cars and trucks sold each year in the United States.

Ford Motor Co., which will launch the world's first hybrid SUV this summer, is planning to build 20,000 a year. By comparison, the company sold almost 700,000 conventional gasoline-powered SUVs last year.

Toyota Motor Corp., which offers one hybrid model -- the Prius -- and has two in the wings, is the only company that claims to be able to sell them at a profit. Its Japanese archrival Honda Motor Co. sells the other hybrids in the market today -- the Insight and a gas-electric version of the Civic -- though other automakers are developing them and more than two dozen new models are expected to hit showrooms in the next four years.

When it comes to the non- hybrid fleet, moving automakers beyond incremental improvements in fuel economy won't be easy, said Jeff Schuster, senior director of global forecasting at J.D. Power.

"It will take a push from the consumer," he said, "or else government regulation."

The companies are hesitant to take the lead, saying they are not convinced that Americans really want fuel-efficient autos.

"We monitor this very closely, and we have not seen any change in market so far" to indicate a growing demand for such vehicles, said Lowery of GM, which has the best fuel-economy rating of the Detroit automakers but trails Honda, Toyota and Volkswagen of Germany.

But even import brands that boast relatively high fuel economy aren't racing to step up production of the most efficient models.

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