Auto companies cut, shelve new model programs as sales slow

6/4/2001

DETROIT - In response to slowing sales and a weakening U.S. economy, Michigan automakers are cutting back on car and truck development programs to help cut costs.

Auto-parts suppliers and industry consultants say General Motors Corp., Ford Motor Co., and DaimlerChrysler AG's Chrysler Group are delaying or paring back a wide range of future vehicles.

At GM, the Buick Signia and Pontiac Banner - sport wagons originally expected to debut in 2004 - have been delayed indefinitely, The Detroit News reported yesterday.

Ford has pushed back the planned 2003 introduction of the next-generation Ford Ranger pickup for up to three more years.

And at Chrysler, the Chrysler CS, a crossover vehicle based on its 1999 Citadel concept car, likely will debut in early 2003, six months later than expected.

While the postponements will save the automakers millions of dollars in the short term, the moves could put Detroit's manufacturers at a competitive disadvantage to foreign brands, the News said.

New product development is the lifeblood of today's increasingly crowded market. There is growing pressure to bring new models to market quickly and frequently because consumers increasingly want the latest, most distinctive designs.

"I think the risk is huge," said Jeff Schuster, an automotive forecaster at J.D. Power and Associates in Troy. "The market is much different than it was five years ago. It's ultra-competitive. There are shorter life cycles. There are more players. Your products get longer in the tooth, and your core buyer starts looking elsewhere."

John Casea, an analyst with Merrill Lynch in New York, questioned whether pulling back on new vehicle development to meet short-term financial objections will work.

"I think it's typical battening down the hatches in advance of a downturn," he said. "Earnings are shot for this year. I don't think there's anything they can do from a planning perspective to go from a bad year to a good year."

GM, Ford, and Chrysler, which rarely talk about future vehicles, said that if there are program delays, its not just for financial reasons but strategic ones.

They said any postponements are designed to ensure a new vehicle is absolutely right for the market and can hold its own against competitors such as Honda and Toyota.

Concern is mounting among auto executives that the U.S. vehicle market is poised for a shift.

The growth of traditional truck-based sport-utility vehicles and pickups may be slowing as consumers seek more car-like SUVs and crossover vehicles. The changes could be quickened by higher gas prices and demand for more fuel-efficient vehicles.