Big SUVs rumble along as GM shows new models

Defying predictions of demise, giant SUVs rumble along; GM unveils updated models

Associated Press
Big SUVs rumble along as GM shows new models
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This undated photo provided by General Motors shows the 2015 GMC Yukon XL SLT. General Motors, which sells more SUVs than any other company, is unveiling a redesigned SUV lineup on Wednesday, Sept. 11, 2013. (AP Photo/General Motors)

STERLING HEIGHTS, Mich. (AP) -- The big SUV rolls on.

Five years ago, when gas hit $4 per gallon, auto industry analysts boldly predicted that enormous SUVs would vanish like the automobile tail fin.

On Thursday, General Motors is unveiling a completely redesigned lineup of its truck-based SUVs, three-ton behemoths that are still popular with drivers hauling around boats, campers and large families, or who like to sit high or feel safer in a heavy vehicle. The 2015 Chevrolet Tahoe and Suburban, GMC Yukon and Cadillac Escalade will hit showrooms in either late winter or early spring.

"There are some people, especially in our market, who want a product in that segment," says Ed Williamson, part-owner of two GMC and Cadillac dealerships near Miami, where people often use the V8-powered SUVs to tow boats to the ocean.

In recent years, buyers have flocked to crossovers, which are car-based sport utilities that are easier to drive, carry just as many people and get better gas mileage. Yet there's still a lucrative U.S. market for the truck-based SUVs, and GM controls more than 70 percent of it.

Americans bought more than 132,000 big SUVs from GM from January through August, compared with around 114,000 in the same period a year ago, even though the sticker price can top $50,000 and a fill-up can cost close to $100. With gas mileage around 17 mpg in city and highway driving, those fill-ups come more often than with many other vehicles.

GM executives aren't sure if this generation of SUVs will be its last. Government pollution limits and stricter fuel-economy requirements in the future could force the company's hand.

ENTHRALLED WITH TRUCKS

The giant SUVs became the rage in the late 1990s. Gas mileage was of little concern with fuel at just over $1 per gallon.

Nissan and Toyota joined the market with the Armada and Sequoia SUVs, trying to take a piece of Detroit's action. By 2001, big SUV sales hit a record of just over 917,000, according to Ward's Automotive. The SUVs accounted for about 5 percent of all car sales that year, driven mostly by people who weren't going off-road or towing something.

"We were really in sort of a truck craze at that time," said Bill Visnic, senior analyst with the Edmunds.com auto website.

Sales were fairly stable until 2005, when gas spiked over $3 per gallon as hurricanes pounded Gulf Coast refineries. About the same time, companies figured out ways to put big people-haulers on car underpinnings. The new vehicles became quick hits.

As the Great Recession arrived, the truck-based vehicles also drew scorn from environmentalists who viewed them as icons of excess. Gas topped $4 nationwide in the summer of 2008. Hummer, the poster child for gas-guzzling waste, went out of business. By 2009, large SUV sales had plummeted to 228,000.

A COMEBACK, OF SORTS

Sales of big SUVs hit 237,000 last year, up 4.5 percent from the 2009 trough but still only a quarter of what they were in the boom years. Experts suspect drivers have become accustomed to high gas prices, which have averaged around $3.50 nationwide since 2011. Because they carry up to eight people, Suburbans and Yukons are more efficient than driving two cars, said Chris Hemmersmeier, CEO of a 10-franchise dealership chain in Salt Lake City, where there's an abundance of big families and people who travel into nearby mountains.

"When you look at it in miles per passenger, it's pretty good," Hemmersmeier said.

There are still buyers who just want something big. GM's own data show that more than half of Tahoe buyers never tow anything, and only 1.3 percent go off the road at least monthly. Only 35 percent have children in their homes.

THE NEXT STEP

For GM, the business case for updating the SUVs makes perfect sense. They sell to high-income households for an average of $47,000 each, about $20,000 above last year's average price of a new vehicle in the U.S. Analysts say GM makes at least $10,000 per SUV.

GM had already designed new engines, transmissions and suspensions for its full-size pickup trucks. Those will be used in the SUVs. All it took was a minimal amount of engineering to make the SUV bodies a little sleeker, update the interiors and add third-row seats that fold into the floor.

GM says the new models will be more efficient than the current ones. Actual mileage won't be announced until a later date. The company unveiled the Chevy and GMC models Thursday, with the Cadillac to follow. No prices were announced.

IN THIS THE END?

With government greenhouse gas limits and rising fuel economy requirements, it's possible that this will be the last generation of big SUVs. Toyota, Nissan and Ford haven't updated their models in years.

Dealers hope GM can sells enough small cars and electric vehicles to offset the SUV's low mileage. John Schwegman, GM's executive director of truck product and pricing, said the company will see if it can meet government targets and still make money.

Visnic, the Edmunds analyst, said GM may make enough money on them to pay government fines for not meeting fuel economy requirements, similar to what luxury and sports car makers already do, he said.

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