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Are American buyers killing the car?

Jan 6, 2018

The American car is dying.

And it took an Italian to point it out.

That’d be ol’ Sergio Marchionne. He’s the heretical CEO who shocked the industry when he said Fiat Chrysler would stop producing cars in its U.S. plants. They’d be converted to building higher-margin SUVs because that’s what Americans want in more shapes and sizes. 

Credit Daniel Howes / Detroit News

He was right, and more vindication came this week. Year-end sales show yet more demand for trucks and SUVs at the expense of traditional cars. And Ford Motor is bowing to reality by steadily transferring production of its most recognizable car models from North America to China. First, the Focus compact. It will be exported back the States. Then the next-gen Fusion, which Ford says will not be shipped home.

Bottom line: The Blue Oval is deep in the process of re-evaluating its entire North American car line-up. The trends are unmistakable: American hunger for trucks and SUVs is forcing automakers to place bets where the money is. And that’s not in mass-market car segments where Detroit has trailed Asian rivals for years.

Last month, Ford sold nearly twice as many F-Series pickups as it did cars across its entire U.S. lineup. For the year, Ford car sales dropped nearly 15 percent – and the numbers are no better at General Motors and Toyota.

Buick car sales slumped 51 percent last year.

Chevrolet cars dropped 16 percent.

Toyota car sales slid 10 percent, and its posh Lexus brand sold 23 percent fewer cars.

Altogether, trucks and SUVs accounted for more than 63 percent of the rich American market. Somewhere – possibly 40,000 feet above the Atlantic – Marchionne is smiling. The reckoning he predicted is unspooling. And his Fiat Chrysler is ahead of the curve as rivals scramble to catch up.

The good news is that every truck or SUV sale that replaces a lost car sale generally delivers fatter per-unit profits to the bottom line. The bad news is that an entire industry could be caught out should an unforeseen catastrophic global event tank consumer confidence.

Yeah, yeah, I know: what if oil spikes to $100 a barrel and pushes gas back to $4 a gallon after North Korea goes nuclear? Or the mullahs fall in Iran, and the chaos ends up blocking the Straits of Hormuz?

It’s not 1975 anymore. American energy production is undergoing a renaissance. And as much as Detroit and many of its foreign rivals are placing near-term bets on trucks and SUVs, they’re also placing enormous bets on an Auto 2.0. That future presumes to cut Middle East oil completely out of the automotive equation.

The industry’s dual-track strategy is being pursued by every global automaker. It theoretically shields them more from the market vagaries that historically have thrown the business into periodic tailspins.

A perfect defense? No. But it’s a heckuva lot better, and more flexible, than the old days — something critics mired in an industry that ceased to exist a decade or so ago would be wise to keep in mind.

Daniel Howes is a columnist at The Detroit News. Views expressed in his essays are his own and do not necessarily reflect those of Michigan Radio, its management or the station licensee, The University of Michigan.