Z-06

Wall Street Journal -- Ford vs. Honda Ford, Honda Cross Paths On Sales of SUVs CR-V Passes the Once-Dominant Explorer July 23, 2007 Deb Nison is a data warehouse developer in Portland, Ore., who likes to go snowboarding on nearby Mt. Hood. Once upon a time, she drove a Chevy TrailBlazer, and later a Subaru Forester. Today, she owns a 2007 Honda CR-V. "I like the way it handles," she says. She appreciates feeling "ridiculously safe" in a vehicle with standard head protecting airbags. And for an SUV, she says, it gets "decent mileage" -- about 23 miles per gallon so far around town. Ms. Nison is just one reason why the Honda CR-V is, as of June 30, America's best-selling sport-utility vehicle. The CR-V's rise, and the parallel collapse in demand for "real" SUVs like the TrailBlazer and the one-time King of SUVs, the Ford Explorer, reveal a lot about why the American auto industry is in the shape it's in right now. Just 10 years ago -- a mere two product generations in auto industry terms -- America was SUV Nation. SUV meant a tough looking box perched on a heavy steel ladder frame borrowed from a pickup truck. No vehicle did a better job capturing the appeal of this formula than the Ford Explorer. In 1997, Ford Motor Co. sold more than 383,000 Explorers. Three years later, Ford sold more than 445,000 Explorers. It's not a coincidence that Ford earned record profits during this period. The Explorer was a perfect automotive money-making machine: A high volume model that sold at premium prices. If Henry Ford or Alfred P. Sloan, the architect of General Motors Corp.'s rise to power, had been alive in 1997, they would have understood the Explorer's business model immediately -- and approved. Of course, it helped -- a lot -- that the late 1990s were an era of ultra cheap gas. Today's V-6-powered Explorer is rated at 15 miles per gallon in the city, and 20 mpg highway. Not bad for a truck that weighs more than 4,600 pounds, perhaps, but not good in any absolute way. But at $1 or so a gallon during the heady days of the dot-com boom, a lot of American families could afford to take a "What Me Worry?" attitude toward gasoline prices. The Explorer's combination of a tall-in-the-saddle ride, "go anywhere" four-wheel-drive capability and rugged looks became a suburban status symbol. But even as the Explorer was enjoying its peak years, Honda Motor Co. began offering something new. The Honda CR-V, launched in 1997, looked like an SUV that had taken a wrong turn on to the set of "Honey, I Shrunk the Kids." It had the boxy profile of an SUV, and the rear cargo space, and all wheel drive. But it was more than 1,000 pounds lighter than an Explorer, and smaller in every dimension. Underneath, the CR-V was built like a compact, front-wheel drive Honda Civic. There was no heavy duty ladder frame, which among other things meant it couldn't tow very much. The industry struggled with what to call vehicles like the CR-V -- cute utes, car-truck hybrids -- before settling on "crossover." In the late 1990s, the CR-V sold modestly compared to the mighty Explorer. In 1997, Honda sold just shy of 67,000. By 2000, sales had risen to just over 118,000. In other words, barely half of one Explorer assembly plant's annual production. Ford's Explorer has seen sales slide as Honda's CR-V crossover has become the top seller for the segment. The Explorer, and the even larger SUVs such as the Hummer H2 that built on its success, were the T-Rexes of the American road. The Honda CR-V was the furtive mammal, scurrying to stay out of harm's way. Did somebody say, asteroid? When it comes to the auto industry, dinosaur metaphors are irresistible. The Great SUV Die-off of the last three to four years is the most dramatic example of how vulnerable the auto industry and its long product design cycles are to short-term shocks since the oil embargoes of the 1970s. From the peak of more than 445,000 Explorers sold in 2000, Explorer sales have fallen by nearly 60% through the end of 2006. By the end of 2007, Ford may be lucky to sell much more than 150,000 Explorers -- the capacity of just one shift of production at one assembly plant. GM's rival mid-size, traditional SUVs are in the same downward spiral. Within a few years, it's probable that neither Ford nor GM will even sell a body-on-frame mid-sized SUV. There's more to this than just $3 a gallon gasoline. Consider how the CR-V has redefined success. It's the best-selling SUV in America, but through the first half of this year, Honda has sold only about 104,000. By the end of the year, CR-V sales might top 200,000, but probably not by much. In other words, No. 1 in the SUV segment today means selling fewer than half as many vehicles as Ford did when the Explorer was No. 1 a decade ago. That market fragmentation is one reason why Detroit auto makers, including Ford, are having such trouble. It's harder and harder to sell a full assembly plant's worth of one type of vehicle just in the U.S. Honda's strategy for realizing economies of scale with the CR-V doesn't depend on that. The company sells the CR-V around the world, builds it using some of the engineering and manufacturing tools used for the higher volume Honda Civic. Beyond that, the CR-V represents a better solution to the challenge from customers such as Ms. Nison. As is often the case when Japanese auto makers attack a segment invented by Detroit, it has taken Honda three generations to really get it right. The first generation CR-V was too small for many. The second generation model was too drab -- by Honda's own admission. Generation III, launched in 2007, combines an efficient interior package, five-star front and side crash-test ratings, AND styling that is sportier on the outside, and clever and uncluttered on the inside. One other wise choice Honda made was to keep the CR-V a four-cylinder model, with highway fuel economy rated at 30 mpg for two-wheel-drive models, 28 for the all-wheel drive. On the road, the CR-V is quiet, and at just over 3,500 pounds, it is less ponderous and easier to maneuver than a standard SUV. It also does better on the government rollover test, scoring four stars to an Explorer's three. What's the lesson for Detroit? The Detroit auto makers already know. . The demise of the Explorer doesn't mean Americans don't want to drive vehicles with all wheel drive, lots of cargo space and a tall driver's seating position. A large segment of the car buying public wants all that -- just with better handling, more safety technology and better fuel economy. That's why even as the Explorer fades away, Ford (and GM and Chrysler) are rushing out more vehicles to compete with the CR-V and its larger brother, the Honda Pilot, and enjoying success. Ford's total "crossover" sales are up 83% in June, even as overall Ford sales fell 8%. An internal Ford tally finds that Ford -- including its European luxury brands -- is now the leading seller of crossover vehicles in the U.S., with GM close behind. Ford, in fact, has a shot at wrestling back the No. 1 SUV in America title from the CR-V if it can continue to boost demand for its recently redesigned Escape (See related article). • Send comments about Eyes on the Road to [email protected].

I will disagree with you here Fly. Given a right publicity and keeping them (at least one) on the lot and asking the customer to drive one, will improve the chances of selling them. If that was a reasonable justification why did GM offer 6-speed in the G-6 GT and why did they discontinue it? It just sends the signal that they want to be sporty and yet they do not want to be. I am not trying to be sassy, but most does not mean all, which means there is at least some market. Now when it comes to R&D of manual transmissions and spending extra dollars I would have understood, but Epsilons in Europe offer DECENT manual, how much R&D is it to offer in Malibu or Aura or G-6? The truth is financially GM does not want manual transmissions because they do not make money as the automatics do. If I want a manual, I know what I want, then why can't you put me on a waiting list and then get the car that I need, rather than offering me the dough from the parking lot. Chances are I will make more money for GM than a customer who comes for an automatic and haggles one off the lot. That is because when I go to GM for the car I want not what GM wants to sell, I will have less power in haggling a better deal, since the car will be specifically made for me. But if I go and browse the lot, I will certainly haggle and GM will end up having less money from me. If the market did not like manuals in the mid-sizers why did Honda give up its 19-year hiatus and offer a 6-speed in their V-6 and plan to keep it for the 2008? If the market is not there why are Nissan X-Terra, Frontier offered in their 4th model year with manual transmissions? Despite of how everybody knows how Toy is why are they still offering 6-speed Tacoma with V-6? If I am a GM fan and I want a 6-speed 3.7l Colorado, guess what? F*** You customer, because we at GM do not think there is a market for it.

Hey Bob, Thanks for your insight. Like I said I am already in consulting (though Civil Engineering) and have lived in my suitcase in the remotest parts of Mississippi and Louisiana in a hunkered down bed. I understand this challenge of working at a place where you will be a stranger. But, like I said I enjoy doing that, at least for a while. How many years I do not know, but I can say about 5 years till my fiance is done with her residency. The reason why I was looking at those firms is because, almost all of them accept candidates with a Masters degree, good school is preferred and reasonable experience in industry to be an Associate. I have a Masters in Civil and have four years of experience in Civil consulting, which I think is more than enough. Besides that I have some hands on experience in Economics, Finance and Management. That said I think I am capable enough to get in these firms. I will be honest that of all of these firms, I find McKinsey interesting. I am trying to establish some contacts with some folks there and I will prefer their Charlotte office. Ask me questions like these, that will help me clear my thoughts and get a better understanding of who I am and where I wanna go.

Stoogie

Which means that if regularly I load 10 grocery bags in my trunk, with hybrids I will load 7.5. Which means I have to make four trips for every three trips I made in for the similar N/A car. Do the fuel economy numbers offset that?? I mean do these cars give 150% more fuel efficiency than the N/A? Probably not to at least match my value for the trip to the grocery stores and I am not even talking about the offset in price I have to pay to get these so called gas-sippers.

Umm, that is what Porsche is doing with their 911 and they are going to be in Bonnie Rubble. :AH-HA_wink: 68 of yore. Absolutely right my friend. GM should not tell me what to buy. If anybody has read Peter Drucker, one of the pioneers of modern management, he clearly says, a corporation should cater its customers, not the other way around. I hate it when GM says, ohh manuals account for "only" 5% sales, ohh bluetooth accounts for only 0.1% of sales, ohhh 17" wheels apply for only 0.001% sales, etc..... But when you start adding these numbers they will account for about 10% of your sales and now you see GM, where are you loosing part of your sales? One of my ire was no manual on GMT 900's. WTF? Look on autotrader and you will see how many used manual GMT 800's are for sale. It means there is a small market if so ever for them. Another thing I did not understand was that GM did not offer manual transmissions for top line trims. What is it? Does that mean if I drive manual transmission, then I am a blue-collared redneck who should not get these luxuries? While $h!-sans, Toys offer SIX speed manual transmissions for their V-6 little trucks, GM goes two step back (one was offering 5-speed Manual on the 3.5l, second was removing the 5-speed manual from the 3.7l). These may sound trifling, but they are enough to justify losing the sales. The reason why I bought my CPO 6-speed TSX was that I wanted luxury, fuel economy, thrilling car to drive, all in one. None of GM offers six speed in 20-30k Range, which even a hardcore GM fanatic will go to. The mistake they did was not offering 6-speed manual as well as automatics even in the GXP or RL versions of the Kappas. That is just lack of imaginations. Every time I feel GM is getting there, there is one or two small things which look like lack of total imaginations which stop the cars from being great. Good one DF Again I am totally with 68 here. If someone wants those cars in automatics, then those people need not buy machines like Z06 or CTS-v. I liked the fact that EVO and STI did not offer automatics, but it seems like they will be drifting in that zone too. Go and buy the slushboxes from MB-AMG if you want that. That is one reason why I will always feel MB will not be able to compete 3-er, because they just will not bring the manual transmissions in their competition oriented vehicles. Then they should not get those cars.

British

Thanks for the info sir. Yup you was right.

As far as I remember EDS and Kearney were not part of them. Kearney was associated with one of the Accounting firms, whose name I cannot recollect and that they split in 2005. PCS, I need help and advice, LOL.

Guys, Although I love Civil Engineering, I cannot see myself doing it for the rest of my life. Not that I do not like it, it just makes me feel I am being too specific. I am planning to move into Management Consulting. My current firm is a Civil Consulting firm, so the rigors of Consulting are not unfamiliar to me. The reasons for going into Management Consulting are: 1. I want to get experience in a variety of fields and management consultants "advice" people in different industries. 2. I love to travel and do not mind the hectic life of moving from one tent to another while working in the process. 3. One thing that really drove me to it was McKinsey's foray into consulting Non-Profits. Ever since a kid I was involved in some ways or other in Non-Profit Organizations and other than management and financial benchmarks, these firms also provide one more thing, that is satisfaction and happiness to its "customers". 4. On a selfish level, I want money for the new Z06, LOL Right now I am looking at a few firms. McKinsey is top of my list with AT Kearney, BCG, Bain Consulting etc. What do you think about it, guys? Am I thinking the right way? Does any one here work/ have worked for a consulting firm? I remember someone saying that their sister works for a management consulting firm. It would be very helpful if I can establish contacts with people in the field and get to know management consulting better. I will appreciate all comments.

Yup. No matter how much hoopla is made about V-6 getting stronger and going to replace the V-8, there is something it cannot, that is the "attitude" of a V-8 grunt.

Hypocritic Bitches! I prefer not to read crapmunds. None of their editors have any sort of driving or racing experience. They are just graduates from fine arts who would have been unemployed for their lack of knowledge.

I had driven an Escort Diesel 1.8l in Nepal and India. It had 52 bhp and was FAST!!! Ignore the last word.

Lemme guess. 1. CRAPRY 2. $h!IMA 3. AURA How much did I win?

It is a disappointment. I am in love with the 1-series, and this is not only redundant, but ugly.

What purposes do they serve? Or letters from A through Z?

+1. But driving instead to wherever it is in FL. Fly, where did you find it at?

Ocn, I saw it with my fiance on Friday. And I loved it, she thought it was hilarious. I think it is good movie to keep your head out and laugh. The movie is well done, with solid acting from both Kevin and Adam.

+1. I think it is dumb.

Anything and everything non-GM should GO. If they bitch about fair competition may be keep Ford and Chrysler, may be BMW and MB as foreign competitors. Although I do have soft corner for the S2000, TSX and the TL for their spectacular manual transmissions. That is it.

I am right now in Mount Clemens, MI helping my fiance get situated in her new condo. Today while driving around we noticed a maroon colored 65 Mustang with double barrel 289 V-8 and looked in a decently good condition. The vehicle did not have any noticable physical damage and the interior with beige leather which the owner said is reworked looked pretty decent. The owner is asking about $6500. My fiance always liked owning old cars and she feels like wanting it. Since I am poor in judging old cars other than Corvettes, it will be greatful for all of you guys put your two cents or dollar or $6500 in it.

True. All the comparison will be made against the 3-er not the 5-er, despite having similar dimensions to the 5-er. That is what is worrying me of all the good GM cars lately. That weight may act as their enemy. If they did an excellent job of keeping the weight of the Silverado within 100-200 lb of its predecessors, GM should have done the same with the CTS. That is one thing which will bring the CTS down, just like the VUE. Even the sheepling wife of my peer who knows nothing about cars and is in the market for the cute-UTES said VUE was heavy. GM please stop having loose cannons in people's "PERCEPTIONS".

This car is the perfect example of how people accept Toy and Lex bull crap. V-8 economy for a V-8 performance. ----> Mercedes S600 slaughters it with glory. Even the almost similar rated Bimmer V-12 is faster. Fuel Economy that is astoundingly pathetic. And yet this vehicle is good becuase it is a hybrid and a Lex and hence worthy of buying. (Yawn)

The Monster called DURAMAX DIESEL baby!!! Among the best diesels in the industry.