Fleets prop up minivan sales

Detroit 3 retail numbers crumble as segment shrinks

Rick Kranz | | Automotive News / January 1, 2007 - 1:00 am

DETROIT -- Simply put, Detroit 3 minivan sales are even worse than you thought. The Detroit 3 are relying on fleet customers -- both corporate customers and daily rental companies, such as Hertz -- to prevent a minivan sales debacle. In the first 10 months of 2006, fleet sales accounted for about 65 percent of Ford Freestar sales, about 62 percent of Chevrolet Uplander sales and about 42 percent of Dodge Caravan and Grand Caravan sales. By comparison, fleets accounted for 1 percent of Honda Odyssey sales in the same period. Overall, fleets accounted for about 27 percent of all minivan sales. The estimates were generated by the Automotive News Data Center, which compared its own overall sales data to retail vehicle registrations provided by R.L. Polk. Fleet sales involve the purchase of 10 or more vehicles. The data explain why Ford Motor Co. and General Motors are bailing out of traditional minivans. The Chrysler group, on the other hand, is defending its turf. The company has restyled and re-engineered the 2008 Dodge Caravan and Grand Caravan and Chrysler Town & County, which will debut at the Detroit auto show next week. Meanwhile, the import brands generally have avoided a meltdown. Retail sales of the Odyssey and Toyota Sienna remain steady, although the Nissan Quest continues to struggle. Among the imports, only the Mazda5 and Kia Sedona generate significant fleet sales. Through October, fleet customers purchased 28 percent of all Mazda5s and 17 percent of all Sedonas.

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Slump Consumers are bailing out of minivans. Here are annual retail registrations. 2001: 969,342 2002: 906,036 2003: 807,059 2004: 836,868 2005: 818,823 2006: 611,191* * First 10 months Source: R.L. Polk

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OK isn't good enough

The minivan segment is getting tougher because many retail customers are switching to crossovers to haul families and their gear. Through October, retail buyers purchased 621,594 minivans, down 12.7 percent compared with the year-ago period.

As retail demand declines, overall minivan sales could fail to top 1 million units in 2006, their worst result in 13 years.

"We are basically looking at roughly 700,000 in retail registrations this year," says Ford sales analyst George Pipas. "As the sales volume trails off, the first thing that happens is that the domestics turn to the daily rental business."

The Ford Freestar and Aerostar were "OK" vehicles, Pipas says, despite a significant Freestar re-engineering for the 2004 model year.

GM did not invest heavily to upgrade its minivans, and sales suffered.

"You just can't be OK when you are competing against Honda and Toyota," Pipas says. "The segment is getting too small to try to be an Odyssey wannabe. It will take you years to get a reputation to get up to that level. That accounted for our kind of just taking a whole different tack on this people-mover category."

Chrysler thinks the sales slide is temporary. Ann Fandozzi, director of global product markets for the Chrysler group, blames the tightening economy and the spike in gasoline price in 2006 for the minivan sales slide.

Chrysler sees overall minivan sales increasing "and stabilizing at about the 1.2 million-unit mark," she said at a press event in December.

No mommymobiles

The Detroit 3 are at an interesting crossroads for the segment.

Chrysler invested heavily in the 2008 Dodge Caravan and Grand Caravan and Chrysler Town & Country, with a conventional exterior and an innovative interior.

But sources say General Motors will phase out its traditional minivans -- the Chevrolet Uplander, Buick Terraza and Saturn Relay -- by 2010 and replace them with mid-sized crossovers. The first of these crossovers are the 2007 Saturn Outlook and GMC Acadia.

Meanwhile, Ford is producing an eight-passenger crossover for the 2009 model year. The vehicle, inspired by a recent concept called the Fairlane, will try to provide the minivan's family-hauling functions in a more stylish package. It lacks, for instance, the traditional minivan's sliding doors.

The Fairlane-inspired vehicle will be pitched to post-baby boom adults, generations X and Y, who likely spent a good portion of their childhoods scooting around in minivans and now don't want a mommymobile.

These younger adults simply aren't buying traditional minivans, says Jim Hall, vice president of AutoPacific, a consulting firm in Southfield, Mich.

He adds: "The minivan market is collapsing."