Big SUVs Still Flying Off GM Assembly Line Despite Rising Gas Prices

April 5, 2011
Filed under Trailer News

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Editor’s Note: This story by Terry Box appeared in The Dallas Morning News on March 26.

A
transporter truck loaded with big, gleaming SUVs growled past a station
in East Arlington, Texas, selling gas for $3.65 per gallon.

Workers
at the nearby General Motors Assembly Plant, where 3-ton Chevrolet
Tahoes, GMC Yukons and Cadillac Escalades are built, appreciate the
apparent contradiction.

Despite gas prices that guarantee $95
fill-ups on the SUVs, the plant — GM’s only manufacturer of full-size
sport utility vehicles — works overtime every week and expects extra
hours for at least the next two months.

“February was a very strong month,” said plant manager Paul Graham. “We just haven’t seen any drop (in sales) at this point.”

During
the last rapid run-up in fuel prices in 2008, sales of pickups and
full-size SUVs plummeted — even in highflying, truck-crazy Texas.

But
that price crisis also reshaped the SUV market, forcing casual buyers
to flee the once-fashionable segment for more economical vehicles.

The
core buyers who remain in the segment, which is about half the size it
once was, believe that a large SUV is the only vehicle with the space
and towing capability they need.

“In the U.S., we still see size
as a value proposition,” said Jessica Caldwell, senior analyst at
Edmunds.com, an online source of automotive information. “We just
haven’t seen any real drop in people considering full-size SUVs.”

Consumers
also view the current rise in fuel prices — prompted mostly by unrest
in North Africa and the Middle East — as short-term pain, analysts say.

Most recall how quickly gas prices dropped in 2008 after they helped push the economy into a deep recession.

Spurred
by $2,000 incentives, GM’s SUV sales shot up last month, with the
Chevrolet Tahoe increasing 52.4% over February 2010, Suburbans up 41.8 %
and GMC Yukons up 123%, according to Automotive News.

Arlington’s main SUV, the Tahoe, is rated at 15 miles per gallon in city driving and 21 on the highway.

But that modest economy apparently hasn’t soured consumers on the vehicles.

LeaseTrader.com
found in a recent survey that 58% of people who traded full-size SUVs
for smaller vehicles during the fuel-price panic of 2008 are back in
SUVs.

The online business facilitates the transfer of auto leases
from people who want out of a vehicle to someone looking for a similar
car or truck.

“We like our big vehicles,” said John Sternal, vice
president of marketing communications at LeaseTrader.com. “The more I
study the data, the more I honestly believe that you can make all the
small cars you want, but you won’t affect consumer behavior until you
have $4-a-gallon gas for two years.”

Dallas contractor John Finken says he never thinks about trading his Tahoe for a more economical vehicle.

Finken,
a demolition contractor, uses the SUV as his personal vehicle,
occasionally pressing it into service to tow an 8,000-pound boat.

“I
just prefer them,” said Finken, who owns JF Services Inc. “Even if I
didn’t tow a boat, I would drive one. What else has the capability and I
still average 17 mpg?”

Last year, the GM Arlington plant —
running close to flat-out — built 282,000 full-size SUVs, one of its
most productive years. The plant’s 2,300 workers have been on overtime
since the fourth quarter of 2009.

“It’s too early to comment on
whether production will be that high this year,” Graham said of the
plant, which is supposed to work 10-hour shifts Monday through Thursday
but often runs five and even six days per week.

“We’re not working any Saturdays now,” he said, “but we are scheduled to work a majority of Fridays” for the next two months.

Most
of the plant’s SUVs — and they include the giant Suburban and Yukon XL —
are sold in the U.S. and Canada. But 10% to 20% of production goes to
buyers in Mexico, South America and the Middle East.

Full-size
SUVs have long been viewed as the most vulnerable of vehicles when gas
prices get pushed up. Caldwell of Edmunds.com isn’t so sure. She said
midsize SUVs like the Toyota 4Runner, Honda Pilot and new Ford Explorer
might suffer more defection because buyers in that segment have far more
alternatives.

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