Ford and Jeep find themselves taking on Mercedes-Benz and Lexus, and soon they will be battling Cadillac and BMW as well.
In the early 1990s, the upscale sport-utility segment was driven by manufacturers, not consumers. That is when Ford and Jeep began outfitting the Explorer and Grand Cherokee with high-end equipment such as 10-way power seats, top-notch sound systems and other goodies.
Who could blame them for loading on the content when consumers gobbled up sport-utilities no matter the price?
However, as automakers drove upmarket with their sport-utilities - and expanded their profit margins along the way - they ventured onto the turf of the luxury brands.
As a consequence, Ford and Jeep must now justify to consumers why they should pay about $35,000 for the Limited models of the Explorer and Grand Cherokee when the same money will fetch a Mercedes-Benz ML320.
It costs even less to buy a Lexus RX 300.
The irony is that Ford and Jeep created their own marketing dilemmas when they raised the prices of their top-of-the-line models above $30,000.
In doing so, they unwittingly showed Mercedes-Benz and Lexus that their owners will pay top dollar for a sport-utility.
Before Mercedes-Benz broke ground on its Alabama assembly plant for the M class, an executive said more than half of Mercedes owners had a sport-utility as a second vehicle.
'If that's what they want,' he said, 'it might as well be a Mercedes.'
And although it is dramatic to believe that Lexus developed the RX 300 to compete with the M class, 22 percent of Lexus owners say they will consider a sport-utility as their next vehicle purchase.
Lexus had no choice but to give its customers what they wanted, or risk losing them to Ford or Jeep or Mercedes, or to Land Rover.
Ford and Jeep say they are up to the challenge, but they resorted to sweetheart finance rates on the Explorer and Grand Cherokee last month.
The luxury nameplates will sell more than 100,000 sport-utilities this year at full sticker, or close to it. BMW and Cadillac are preparing to enter the segment and GMC already has, which means even more competition.
So although the Explorer and Grand Cherokee will continue to duel, their fight is evolving into which one loses the least volume to the luxury brands.
Frank S. Washington welcomes comments. Call him at (313) 446-0374, or send e-mail to [email protected]