Utilitarian, sporty vehicles big in '03

By August Cole, CBS.MarketWatch.com

DETROIT (CBS.MW) Oct. 2, 2002 -- Utility is in. So is sporty.

But it's not SUVs that are going to make the biggest splash in 2003.

As the first of the '03 vehicles trickle in, it's clear that next year is going to be one of the first times in a while that consumers will have a real alternative to the bigger-is-beautiful school of SUV design.

And they won't have to sacrifice anything.

"The key word is versatility," said David Champion, director of automobile testing at Consumer Reports. "Everybody is looking for more space, more useable cars in many ways." Listen to the interview with Champion.

In the past, this meant buying a large truck with a backseat or an SUV like a Ford Explorer.

But that's all changed with the advent of the "crossover" class, a blurred rendition of a SUVs and a car's best attributes. The concept isn't as new as the industry would let on. Remember the jacked-up AMC Eagle in the 1980s? Crossovers are the same thing, only with a stronger marketing message.

Although the crossover concept fizzed back in the Eagle's day, Champion and other industry watchers say the new generation is sure to win over consumers this time around. Critics are also upbeat about the new crop of everyman sports cars like the Nissan Z and the Pontiac GTO.

Crossovers: If looks could kill

One of the biggest challenges in the crossover market is making the vehicles appealing: guarding the brawny posture of the SUV while visually acceding the title of king of the road. Not an easy task and one that means taking risks stylistically. That means some are going to be considered ugly.

Yet the division heads are going to do everything they can to keep that from happening, and not just in this segment.

"We want to ... rekindle that American love affair with the car, the American car," said Tom Marinelli, a Chrysler (DCX: news, chart, profile) vice president, at a press event last week for the Crossfire and Pacifica models.

Wall Street is watching closely. Over the summer, General Motors declared that it would focus on making its sedans better. Analyst David Andrews takes issue with that approach, saying the company would be blowing an opportunity to focus on a higher-margin, faster-growing market.

"I think they need to forget about sedans and think about crossover vehicles," said Andrews, who covers the credit market for UBS Warburg.

For its part, Chrysler is making a big bet with its Pacifica, a large station wagon-like vehicle that remains loyal to the high-riding driver's position and physical safety that is so popular in SUVs.

Also, Nissan's Murano will be a sly entrant that offers aggressive sci-fi styling but a reasonable amount of utility. Stealing the corporate limelight from the Nissan Z coupe, however, will be difficult.

When it comes to novel trends, don't discount the growing number of hybrid vehicles coming on the market. The Escape by Ford could be a sleeper success when it debuts next fall because it will offer hybrid technology, which twins a conventional and an electric engine, in an SUV -- albeit a small one.

"Hybrids are a really interesting new potential growth category," said Chris Orndorff, strategist at Payden & Rygel, a Los Angeles-based investment firm. "[It's] possibly an area that could surprise people on the upside for growth," he said.

To be sure, the minivan, the ultimate utility vehicle without an inkling of California lifestyle cool, isn't going away any time soon. "For most people, a minivan is the best choice if you can get over the negative persona," Champion said.

From Champion's perspective, the SUVs that are going to be worth looking at include the Honda Pilot, which is already out; the Volvo XC-90; and Chrysler's Pacifica, which falls into the crossover category.

"They don't quite have the clunky 'behemothness' of the conventional SUVs," said Champion. Nor are they as small as sedans.

Battle for the mean

For such a docile car, the Honda Accord has probably given more execs nightmares than any other in a long time. A near-perennial member on Car and Driver's annual top 10 lest, the Accord has been redesigned for 2003 as part of Honda's usual model turnover.

This could be critical for Honda, which by far sells more Accords than any of its other models. So how it plays with the general public will be a key battleground as Toyota and Honda vie for the title of best-selling sedan in America.

Mindful that this is a segment of the market where you can draw a family into a brand, Mazda will introduce a new sedan called simply the "6" to replace its 626. Nissan, with the last rendition of the Maxima before a late-2003 redesign, is targeting the same crowd.

As popular as this category will remain, there are still many people who aren't ready to abandon trucks and SUVs.

Big, bad and bold

Sports cars once defined a brand. That was before the truck fetish. That was before state troopers with radar and laser speed guns. That was before the Ford Explorer dampened the sport but drew out the utility in so many of us in the early 1990s.

Now, the battle is for the big trucks, many with sticker prices well in excess of $30,000 and heavy-duty profit margins to match them. Ford is planning to roll out its F-150 replacement, one of the best-selling trucks ever, next summer. In its strongest month last October, Ford sold 100,000 F-150s.

Pictures of the model are as scarce as a Sierra Club endorsement of Ford's even larger Excursion. This comes as GM is ready to introduce two new entrants in the midsize and compact segment, known as the GMC Canyon and the Chevy Colorado. Attesting to the competitive nature of this class, the manufacturers are keeping the designs close to the vest.

The new Dodge Dakota will also be a key entrant in the new model year because it's gotten Dodge firmly into the truck game with the larger Ram covering its back.

Overall, the light truck segment should garner more than half of sales in 2003, Champion said, if only because they are less like trucks. "The relationship between cars and trucks is getting so faint now so that it's getting difficult to categorize one or the other."

Among SUVs creating buzz, Porsche's Cayenne stands apart. Purists aren't so sure this is as safe of a bet as Porsche would like to think it is.

Style still counts too as much as speed. Honda's Element is going to entice younger buyers with a utilitarian SUV design that's aimed at the surf-bike-and-boat set.

Much larger is the GMC Envoy "XUV," a conventional-looking SUV that has a convertible rear cargo area that is designed to offer truck-like utility.

Furiously fast

Sports cars still matter, both in the minds of industry executives and in the hearts of die-hard enthusiasts. Measured by that standard, 2003 promises to be a banner year.

Nissan's latest Z car is going to win some hearts with its clean lines, crisp handling and affordable sticker - under $30,000.

More raw will be the Mitsubishi Lancer Evolution VII, a car that will carry on the rally-racing momentum brought on by Subaru's WRX. The formula is successful: take a small sedan, pack it with a turbocharged engine and all-wheel drive technology and a pair of racing seats, and suddenly you've got a youthful car that makes you want to do nothing but drive all day.

GM's Pontiac unit will bring back a famous name, the GTO, to make a new start. With a coupe from Australia, the GTO will be a contender in a competitive category, where image is as important as performance.

Totaling the tab

Trace the lines on a car with your finger, and soon enough you'll be sketching out a big dollar sign. Setting aside the bravura of ripping exhaust and rabid grins, the auto industry is still a business that requires an uncommon, numbers-savvy lead foot.

"Products always are the main draw and incentives, of course, are the factors driving traffic and sales on the margins," said Paul Ballew, executive director of marketing and industry analysis at General Motors.

But for all the importance of numbers, it's also about image. And auto executives say that's an issue that drivers are often slow to realize.

"The perception of our quality isn't as good as reality," Chrysler's Marinelli said. Closing that gap will boost sales.

How the new models are received in 2003 will be a good way to see if automakers can put their motors where their mouths are.

August Cole is spot news editor at CBS.MarketWatch.com in Chicago