News Column

Everybody Plays the Fuel

November 2006, HISPANIC BUSINESS Magazine

Ralph Gray

2007 Lexus ES 350
2007 Lexus ES 350

The future of the automobile may not be as dark as it appears. OK, gas prices led drivers to downsize. The dreaded butt-busting small cars loom. Smelly diesels start looking better. Gas-electric hybrid vehicles seem less shocking.

It won't be like the 1970s oil shock, which forced the first round of downsizing. Cars shrunk drastically. Automakers took desperate steps. They cut big V-8 engines into four-cylinder ones. Gas engines were converted, badly, to diesel. The Ford Pinto and Chevrolet Vega arrived.

Today it's different. There are plenty of fuel-sipping vehicles out there. Some luxury types are even easy on fuel. Small cars have improved in ride and handling. And summer's relentless rise in gas prices has cooled for the fall.

Is the high cost of energy going away? Not any time soon, if ever, say the experts. But some say gas prices could level off at a national average of $2.50 or less per gallon.

This is the future that pits expensive fuel against the American preference to buy the most metal it can. That was the assessment of a veteran Detroit marketer back in the dark days of dwindling vehicle size. He meant that Americans prefer to buy the biggest, most powerful vehicles available.

That view is shared by many in the Hispanic market, says one expert, Alvaro Cabal, assistant regional manager for public affairs at Ford Motor Co.'s Southeast region.

"People don't want to buy small cars. What they want is fuel economy. Families look for space-efficient vehicles. Hispanics in the United States are used to a size of vehicle that will bring them crash protection as well as carry stuff and the family," he says.

Ford is aiming at more niche markets. For instance, the Expedition sport utility vehicle is big with fewer miles per gallon. Yet when some buyers wanted it bigger for more cargo space, the Expedition grew. "It's niche marketing to targeted customers," Mr. Cabal says.

Economists at Ford forecast gas prices to stay at current levels. "It's not going to go down much," Mr. Cabal adds. "If prices continue at $3 a gallon, then people will get used to it. They may react if it goes to $4."

Right now, the trends are for continued truck sales for work (and in places such as Texas for personal-work use as well). Crossover SUVs (built on car platforms) are gaining. Hybrids are one solution but not the only one, Mr. Cabal says.

General Motors CEO Rick Wagoner has said even if gas hits $4 a gallon, vehicle sales will hold up. One survey says Americans will maintain their lifestyles even in a down economy.

Four-cylinder power and midsize cars are coming back, says Paul Ballew, executive director of global market and industry analysis at GM. Small SUVs are doing well along with crossovers. Owners of midsize SUVs who aspire to other vehicles are behind this move.

It's not just gas prices that are affecting all buyers. "There is a heightened sensitivity to the economics of buying a vehicle from higher interest rates and gas prices. Cars are doing better than trucks, but commercial trucks are holding up well," Mr. Ballew says.

This translates into an economy growing at 2.5 or 3 percent in the final quarter of 2006. Total vehicle sales are likely to come in at $17.2 million, down 4.5 percent from last year, predicts GM's chief economist. There's also "downward pressure on pricing," he adds.

Ford has cut list prices for the 2007 F-150 pickup by up to $1,400. It also increased towing capacity, which is important to truck buyers. Ford acknowledged in September that the company is losing market share in U.S. sales, and it plans to eliminate 25,000 to 30,000 hourly jobs by 2008.

Toyota Motor Sales USA is benefiting from the emphasis on fuel economy, says Dick Kelley, Southeast public affairs manager. "Toyota has 13 vehicles getting in excess of 30 miles per gallon. Four-cylinder-equipped vehicles are where the growth is coming from. There are no regional differences. We've seen sales rise in small fuel-efficient vehicles across the U.S."
What about U.S. customers wanting to buy the most metal they can? That translates into looking for value and room, he says. "Couple that with our being a large nation with lots of very straight roads and it's a perfect combination that encourages folks to look for the most vehicle they can get. Tempering that is that the vehicle needs to be fuel efficient," he adds.

The view from the trenches the showroom floor is similar. Irma Elder, CEO of Elder Automotive Group in Troy, Michigan, says, "Americans love their cars. The Ford Mustang is hot. GM is bringing back the Chevrolet Camaro." Both are powerful, sporty cars.

"The average person is buying the cars that are the best for them; that are more sensible for gas economy. But they still like the sport utility vehicles. All the cars are better on fuel," Ms. Elder says.
Expensive vehicles such as Jaguar and Aston Martin are still selling, she notes. And that's in the depressed Detroit-area market. Elder Automotive has Ford, Jaguar, Aston Martin, and Saab dealerships. It is listed as the 10th-largest Hispanic-owned company on the Hispanic Business 500.

With small cars gaining market share at the expense of trucks let's get behind the somewhat smaller steering wheels. Hispanic Business drives vehicles on real-life roads, not test tracks. In addition to the fuel economy, we look at what readers prefer.

There are seven new entry-level small cars that merit attention: the Honda Fit, Nissan Versa, Toyota Yaris, the bit bigger Hyundai Accent and Kia Rio siblings, the Dodge Caliber, which springs from the old Neon, and the Chevrolet HHR (a Cobalt
in disguise).

Of the three Japanese brands, the Fit is on the sportier side, the Yaris is more comfortable, and the Versa in between. For the Korean brands, Kia leans toward sporty while the Accent appeals to comfort. The Dodge Caliber has sporty inclinations and the Chevy HHR is a wagon.

The Honda Fit Sport demonstrates the wisdom of stepping up a model or two in the lineup. At $15,970 (base is $13,850) the interior is nicely finished. There are paddle shifters for the five-speed automatic transmission. The rear seats fold cunningly into the floor.

The 109 horsepower four-cylinder engine manages 0-60 miles per hour in 12.6 seconds, proving you can't have 33 miles per gallon on city streets and 38 on highways for free.

The Toyota Yaris produces 34/39 mpg from its 1.5-liter, four-cylinder engine that propels it to 60 mph in 12.5 seconds, similar to the Honda Fit. The ride is fairly comfortable and Yaris holds its own on curves, although the semibolstered seats permit lateral movement, unlike the Fit.

The Yaris Liftback starts at $11,050 with an S-series base price of $13,425. The base five-speed manual transmission puts the manual back in shifting. It's notchy and balky. Step up in the model lineup.

The 2007 Nissan Versa is the most powerful of the trio 122 horsepower from a 1.8-liter, four-cylinder engine. It offers an optional continuously variable transmission (CVT). A four-speed automatic is available along with a six-speed manual. Versa has recorded 0-60 times of 10.5 seconds and gets 30/36 mpg. Base price is $12,450 and the CVT version goes for $15,450.

The Korean twins the Hyundai Accent and Kia Rio share the same basic specifications. They start around $13,000 and nicely equipped come to $14,000-plus. The Accent gets 28/36 mpg and the nearly identical Rio gets 29/38. Both get power from a 1.4-liter, four-cylinder engine with a four-speed automatic transmission. They get to 60 mph in the standard 12 seconds or so.

Dodge Caliber and Chevrolet HHR are bigger than the Asian-brand vehicles. Caliber rests on a 107.7-inch wheelbase and stretches 173 inches. HHR is on a 103.5-inch wheelbase and measures 176 inches long. This produces a fairly smooth ride for both.

Caliber comes with a base 2-liter, four-cylinder engine with 158 horsepower starting at $13,985 for mileage of 26/30. There's a 2.4L version with 172 horsepower driven through a CVT and all-wheel drive that cuts mileage to 23/26. In exchange 0-60 mph is 11.3 seconds, right in the group of smaller cars.

Forget about the SRT4 Caliber and its 300-horsepower turbo 2.4L and its 0-60 of some 6 seconds. When you light up the tires, there's no such thing as fuel efficiency.

The Chevy HHR has a retro look that GM says harks back to a 1949 Suburban. Well, sort of. The windshield is less slanted than usual and there's a brightly chromed grille, luggage rack, and door handles. The 2.4-liter version with 175 horsepower detracts only slightly from the 2.2L with 158 horsepower for fuel economy. The 2.4-liter gets 23/30 mpg and reaches 60 mph in 9.7 seconds. Base price is $13,985.

All the new smalls are a nice bang for the buck. There's plenty of value in what are honest vehicles. They are fuel-efficient, downsized cars and nothing more. Most are nice and handy in suburban parking lots, but you don't want to take all of them home to mother unless she lives in the next block.

Hybrids are still out there amid conflicting reports of consumer acceptance, but the Lexus GS450h looks a lot like the future for hybrids. It's really a GS sedan with a 3.5L V-6 engine abetted by two electric motors that gives it the punch of as 4.5L V-8, hence the 450. That propels the GS to 60 mph in 5.2 seconds. At the same time, the GS450h gets 25 miles per gallon in the city and 28 on the highway. The $54,900 price tag falls below that of the $59,700 GS430.

Upscale marques are in the fuel-efficiency game, too. The Lincoln Zephyr (aka the MKZ) is a midsize sedan that still gets 20 city and 28 highway. It comes in leather, 10-way power front seats that are heated and cooled, leather and wood steering wheels, and a navigation system. All are priced north of $33,000. It gets to 60 mph in a respectable 7.9 seconds and its base price is $29,660.

The 2007 Lexus ES 350 ($33,170) generates 272 horsepower from its V-6 and boasts a six-speed transmission. It reaches 60 mph in 6.8 seconds and get 21/30 mpg.

There are also luxury cars that provide a superior motoring experience. The Cadillac STS is at the $50,000 range and the Jaguar XJ Vanden Plas a bit higher at $75,000 or so.

The STS is on the cutting edge of the edgier Cadillac styling with lots of sharp angles. What it has is even more important a V-8 engine driving the rear wheels for maximum handling. The V-8 at a base of $51,440 can get to 60 mph in a rapid 6 seconds.

From the Ford family, at least for now, the Jaguar Vanden Plas's 300 horsepower 4.2L V-8 propels the long-wheelbase alloy body to 60 mph in 6.5 seconds without upsetting the tea. As you grasp its heated steering wheel, it swoops and slashes through curves like a Toledo blade. Base is $75,550.
Pickup trucks aren't bought for fuel economy. They're purchased to do a job. Thus diesels are popular, despite their price premium, because of higher mileage, long life, and towing capabilities. Yet GM, Chrysler, and others are rushing to hybrid big pickups as well. Coming in model year 2008, GM's "dual hybrid" uses two electric engines and a V-8 that runs on fewer cylinders for a 25 percent increase in fuel economy.

For 2007, the all-new Chevrolet Silverado shows fuel economy of 17/21 with the 4.3L V-6; 16/20 with the 4.8L V-8 and 16/22 with the 5.3L V-8. An "active fuel management system," which turns off four of the eight cylinders at cruising speed or at idle, is responsible for the 5.3L's improved fuel economy. It gets better by some 2 mpg when the 5.3L is teamed with the electric motor of a hybrid. That model starts at $29,740 while the base Silverado goes for $16,740.

Pickups are among new GM vehicles that stack headlights vertically. That provides extra room for bigger grilles and a more massive look for the car or truck.

If it isn't bigger, it can be made to look bigger. So that old-time marketer is on target with buyers still seeking the most metal they can.

Source: HISPANIC BUSINESS Magazine and, Copyright (c) 2006 All Rights Reserved.

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