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Bummer of a summer for those who sell the Hummer

June 25, 2008

HACKENSACK, N.J. - After driving a seven-passenger Ford Explorer for three years, Amy Lieberman decided three weeks ago that it was time to downshift. The Fair Lawn, N.J., resident opted for the Ford Escape, a smaller take on the traditional sport utility vehicle. It gets 10 more miles to the gallon than a 2005 Explorer.

Lieberman, 23, said she was a big fan of the Explorer; she leased it for only $200 a month, and its huge size helped her move in and out of college with relative ease.

Then came the pain at the pump.

"I was tired of paying a lot of money for gas so I moved into the Ford Escape," Lieberman said. "It's significantly lowered my gas bill - it fills up on $35 versus $50 or $60. Now that I commute (to Manhattan), I don't want to be buying a bus pass for $120 a month, and spending $300 a month on fuel."

As the price of gasoline tops $4, the summer of 2008 may mark the end of America's long love affair with SUVs and pickup trucks. Many people are choosing smaller, more fuel-efficient wheels.

At Toyota dealerships across the tri-state area, the Prius, the nation's most fuel-efficient hybrid car, is back-ordered by as much as three months, said Augie Valente, finance manager of Toyota of Hackensack.

National sales of basic, fuel-efficient compact cars such as the Honda Fit and Toyota Yaris have shot up 36 percent in the past 12 months, according to data from the automobile marketing firm J.D. Power and Associates. Conventional compact cars also are in great demand; sales of the Ford Focus, for instance, are up 29 percent.

So many people want the Prius, which has a manufacturer's suggested retail price of $21,500, that dealers such as Toyota of Little Falls are charging above the sticker price, and there is little room to negotiate.

Toyota of Hackensack expects to sell 300 vehicles this month, a record for the dealership, and has had to use space on The Record's parking lot on River Street to handle the higher sales volume, Valente said.

Meanwhile, at Hummer of Mahwah, sales of the H2 have dropped almost 60 percent since January, and sales of the newer, smaller and slightly more fuel-efficient H3 model are expected to decline 20 percent by year-end, said dealership President Gene Meyers.

It's not a good time to be selling Hummers, the vehicle synonymous with conspicuous consumption. The H2, Hummer's tank-like flagship model, gets all of 10 miles to the gallon in city and highway driving. With the national average price of regular gasoline hitting $3.975 a gallon Sunday, and rising fast, Hummer sales in the last 12 months have slid 29 percent, more than any vehicle brand, according to J.D. Power. Nationwide, SUV and pickup sales are falling fast, as much as 30 percent for some models, like the Jeep Commander.

And last week, Ford Motor Co. announced that due to a "dramatic" consumer shift away from trucks and SUVs, the company is downsizing the production of those vehicles and putting more effort into marketing the newer, more fuel-efficient Focus, Fusion, Edge and Escape models.

But is the shift to smaller cars only temporary? Tom Libby, senior director of the Power Information Network, a division of J.D. Power, said national gasoline prices will have to exceed $4 for a full year before consumers flee to hybrids and compact cars.

The automotive industry is not experiencing an upheaval similar to the one in 1980-81, when American consumers rushed to smaller imports, Libby said. Even during the fuel shortages of 1973-74 and 1980-81, Americans quickly went back to purchasing large cars and pickups when fuel prices retreated from their peaks, he said. Consumers have been conditioned that even when gas prices soar, the price eventually retreats.

"There is a shift toward smaller vehicles that's been going on for quite a while," Libby said. "It has accelerated in the past couple of months. However, we don't see a dramatic shift in the market similar to what occurred in 1980 and 1981, and we won't until prices stay high for an extended period of time. I'm very hesitant to draw large-scale conclusions."

Kevin Ormes, co-owner of Jeep 17 in Paramus, said the relationship between rising gas prices and a possible flight from larger vehicles is not a black-and-white issue. He said sales at his dealership this year are higher than during the same period in 2007. He even expects to sell 40 Jeep Liberty compact SUVs by December, more than double the number he sold last year.

"We have more fuel-efficient vehicles than we had three years ago, so people are not reluctant to come in and replace their previous model with a new Jeep," Ormes said.

Jim Appleton, president of the New Jersey Coalition of Automotive Retailers, said New Jerseyans are not leaving their SUVs in droves to drive compact cars. New Jersey consumers remain in love with their larger vehicles, mostly because of what Appleton calls "the lifestyle of the state." The median household income in Bergen County in 2006 inflation-adjusted dollars is $75,851, compared with $48,451 for the United States, according to the census.

What Appleton sees happening across New Jersey is the conscientious move to more fuel-efficient vehicles. But for many consumers, that shift may mean moving from the Hummer H2 to the Hummer H3.

Amy Lieberman is making that lifestyle change, and so are her friends.

"All my friends drive small cars,'' she said. "My generation is all for going green and fuel-efficient vehicles. I think we're more eco-friendly. We're not consumed with soccer-mom vehicles."

 

 


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