Forbes.Com:Keeping The Coals Hot

General Motors ' Hummer H2 is coming out this summer, but there is a second H2 model in the works, the Hummer SUT, meaning sports utility truck. Instead of a fully enclosed cargo compartment, the SUT has a small pickup box in the rear. Personally, I think the SUT is the more attractive model but it won't be out until a year or two after the H2.

I asked Bob Lutz, General Motors vice chairman and product boss, if it wouldn't be a good idea to push the SUT out faster. The H2 is going to be hot. A second model on top of that would keep the enthusiasm roaring. This is a $50,000 vehicle, after all. Why let demand cool before bringing out the second offering?

Bob answered like this:

"We can build 40,000 H2s and we'll have two orders for every one we can build. If we pushed out the SUT now, all that would happen is that we would have three orders for every one that we could build."

It's a good answer, but I still think it is better to push out such line extensions as soon as possible. I also believe that holding such offshoots back until demand starts to slow is not good business.

Let me give you some examples from today's sales figures.

Start with the Lincoln LS, which was Ford Motor 's effort to crack into the "entry luxury" market. The LS is considered a good car, but the competition from Mercedes, BMW and Lexus is fierce. The LS comes in one model, a four-door sedan. In 2000, the first full year of sales, 51,000 were sold, a most impressive number. But last year this fell to 40,000; in January this year, 2,065 were sold, down 30% from the same month a year before.

And there's still just one LS model, a four-door sedan with two different engines--a six- or eight-cylinder.

In the LS' second year Lincoln should have come out with a line extension, such as a "sport wagon" (that's the entry-luxury name for a station wagon). This would have kept sales moving forward. A line extension is relatively easy to do, and cheap compared to the cost and effort of developing a brand-new platform. If Ford had done this for the LS, it would be building a winner instead of having a one-year sensation.

Another example: Chrysler 's PT Cruiser, which the company loves to call "a segment buster." When launched as a 2001 model (in 2000) the PT was hot, so Chrysler didn't advertise it and didn't rush to broaden the line. Sales were good last year--145,000--but they are falling off. In January 8,642 PTs were sold, down 36% from the year before. Now Chrysler is offering $1,000 rebates on the PT.

It would have been easy to broaden the line, first with an all-wheel-drive version, then with a turbo to increase engine power. A PT convertible and a panel truck are other derivatives that would have made sense. But Chrysler didn't want to spend money when the car was hot.

A turbo version is coming, but the bloom is off the PT rose. It still is a success, but the momentum is gone. And other competitors are zoning in on the edgy youth crowd.

A third example is the Volkswagen New Beetle. Sales dropped to 65,000 last year from 81,000 the year before. In January they fell to 3,691, down 16% from January 2001.

The New Beetle is a tough case because it is a two-door model only. VW has offered some upgraded engines but the convertible has been held back--too long in my opinion--and probably won't be ready until early next year. And I also think there could have been a small sport utility version of the new bug that would have kept the fires burning.

Now what I refer to as line extensions doesn't mean building different models off one platform. Here's an example:

The Toyota Camry is a four-door sedan, and is broadened by the Solara coupe and convertible models. I consider the Solara--which is currently built off the previous-generation Camry--a line extension. But that Camry platform is also used for a variety of other models, such as the Toyota Avalon, the Highlander "crossover" and the minivan. I consider those vehicles different models, not line extensions.

Why do I have to tell companies like Ford and Chrysler that they are turning victory into defeat by letting their hot stuff cool before thinking of expanding the line? They should know this.

I still say that GM should push out that Hummer H2 SUT as soon as possible. Keep the fires roaring. By Jerry Flint