2002 Explorer could get lost in a crowd

The lease on Steve Schiff's Volkswagen New Beetle is about to expire, and he is starting to feel the pressure.

The Orlando, Fla., electronics salesman placed the Ford Explorer near the top of his list and made it one of the first vehicles he tested. In years past, he might have stopped right there and driven home in the Ford. But Schiff kept on going.

Forget the Firestone tire cloud hanging over the Explorer. Bigger reasons explain why the longtime king of sport-utilities is struggling to match last year's sales, even though it was redesigned in the spring.

Unlike just a few years ago, a crowd of highly regarded import and domestic models is vying for the attention of consumers considering compact sport-utilities. The flood of sport-utilities and hefty incentives has made it a buyer's market.

Even General Motors, a minor threat to the Explorer's dominance in the past, has fielded a trio of sharply styled, well-engineered mid-sized sport-utilities this year. And Schiff can't decide which one he wants.

'I haven't ridden in any junk. Some had stronger points than others. But mostly everything is put together pretty snugly,' he said last week after spending nearly three straight days at central Florida dealerships test driving sport-utilities.

This year, 30 brands are offering 56 sport-utility or sport wagon nameplates, up from 24 brands and 45 nameplates in 2000.

Plus, the very profitable, high-volume, mid-sized sport-utility segment is being invaded by rugged station wagons such as the Subaru Legacy Outback and Audi allroad quattro; as well as car-based crossovers such as the Hyundai Sante Fe, Honda CR-V, Toyota RAV4 and Ford Escape. More sport-utilities, crossovers and wagons are on the way.

Luxury sport-utilities such as the Acura MDX, BMW X5 and Mercedes-Benz M class also are eating into the market share of mid-sized sport-utilities. These mid-priced luxury vehicles have gained 1.9 percent market share since 1991, according to a recent report by J.D. Power and Associates.

Before the market became saturated, buyers usually drove home in a Ford Explorer, Jeep Cherokee, Grand Cherokee or Chevrolet Blazer, the top-selling mid-sized sport-utilities for most of the 1990s. Early versions of the Nissan Pathfinder, Toyota 4Runner and other imports didn't offer the size or power Americans wanted, and they didn't make a big dent in the market.

With sales last year of 445,157, the Explorer - one of Ford's top profit producers - still dominates the sport-utility segment as it has since its 1989 debut. Even with a $2,000 rebate, one of the highest in the segment, Explorer sales are off about 16 percent this year.

Through July, the Explorer nameplate still led the segment with 233,295 units sold, down from 276,747 sold through July of 2000. But the 2001 total doesn't give a true picture of the sales performance of the redesigned 2002 model. Ford includes the SportTrak and the Sport, both versions of the previous-generation Explorer, in its sales figures.

The Jeep Grand Cherokee was a distant second with 126,158 sold through July.

The Explorer is being attacked these days from all angles.

* There's a strong and growing array of import-brand utility vehicles that are more attuned to the needs of American drivers. Toyota, Hyundai, Nissan and others no longer are pecking away at the crumbs of the market. Speaking at the recent Management Briefing Seminars in Traverse City, Mich., Morgan Stanley auto industry analyst Stephen Girsky said the Big 3 will see their market share plummet to an all-time low of just above 60 percent this year.

* Numerous production and quality problems - tires that were sliced on a too-narrow assembly line and rear windows that could shatter - as well as the Firestsone tire mess have tarnished the Explorer's nameplate.

* General Motors has regrouped. Its redesigned Chevrolet TrailBlazer, GMC Envoy and Oldsmobile Bravada are highly regarded.

For its part, Ford says it doesn't expect the Explorer to continue to sell nearly 450,000 units a year. Rather than boost sales, Ford's primary goal now is to retain the Explorer's No. 1 ranking in its class. For now, there's no danger of the Explorer being toppled by a single nameplate.

GM fights back

GM's trio of revamped mid-sized sport-utilities, the TrailBlazer, Envoy and Bravada, could cut deepest into Explorer sales. Introduced this spring, the trucks are off to a good start and are winning rave reviews from auto writers and consumers.

But the Ford-GM showdown won't really get underway until early 2002, when GM finally will level the field with extended versions of its mid-sized sport-utilities that offer an optional third seat, a feature available now on the Explorer.

It's the lack of a third row of seats that took the TrailBlazer off Schiff's shopping list, even though he feels it is one of the best sport-utilities.

For the trio, GM invested in a stiff hydroformed steel frame, a better suspension and a new 4.2-liter inline six-cylinder engine. The straight-six is rated at 270 hp, higher than all other six-cylinder and V-8 engines offered in mid-sized sport-utilities.

GM may have found another weakness in the Explorer's armor: Ride and handling. The Explorer has been criticized for its truck-like ride. The 2002 model has an independent rear suspension designed to improve the ride. But GM engineers tuned the five-link rear and double A-arm front suspension in their new sport-utilities to deliver a sedan-like ride.

Schiff tested both the Explorer and the TrailBlazer, and said: 'Quite frankly, I think the TrailBlazer is a smoother riding vehicle. It doesn't feel as truckish.'

Too conservative?

Jeff Schuster, an analyst with J.D. Power and Associates in Troy, Mich., believes the Explorer will lose market share, not only because of increased competition, but because Ford was too conservative with the 2002 redesign.

'It's our opinion that with the redesigned product, Ford didn't go as far as GM did. I think Ford came up short on pushing the envelope on styling. And right now, that's where products are differentiated by consumers,' Schuster said.

Automotive journalists around the country have heaped praise on the GM vehicles.

Joe Wiesenfelder, auto reviewer for the Web site cars.com, also says GM did a better job than Ford. 'I love the new powertrain. The level of refinement is good,' he said.

Wiesenfelder views Ford's redesign as an incremental improvement to an already sound vehicle. He sees GM's new sport-utilities as a big leap to parity. Of the TrailBlazer, he said: 'I personally feel that the way it handles and rides it's actually more refined than the Explorer.'

Tough road ahead

With the economy sputtering, sales of cars and lights trucks are down 4.8 percent through July. Most automakers have turned to profit-draining incentives to keep the iron moving.

Regardless of what the economy does, incentives for sport-utilities may be here to stay. Now that the genie is out of the bottle, consumers will expect automakers to pay rebates or offer low-cost financing on sport-utilities from now on, Schuster said.

The plethora of incentives has forced Schiff to ditch brand loyalty and pay almost as much attention to the deal as he does to the vehicle.

Schiff, who has owned several Toyotas, feels the new Highlander sport wagon may be the best utility vehicle he's tested so far. But there won't be one in his driveway because Toyota is offering no deals to reduce the monthly payment. Instead, he's leaning toward the Buick Rendezvous. Buick is offering a lease deal that lowers the monthly payment closer to the $399 Schiff has budgeted.

'If I had the money, that's what I would buy,' Schiff said of the Highlander. 'That was the most impressive in the batch. It's the most peppy, and it's more stable. It looks like a Toyota and has good quality all around. But I couldn't lease it. I can't spend $480 a month. Unfortunately, I need to find someone with cheap money to loan on a lease.'

You can reach Richard Truett at rtruett@crain.com

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