Four years ago, when Detroit’s designers and engineers were working on new vehicles for the middle of the decade, they had only to look out their windows to see what was selling: sport utility vehicles and big pickup trucks.
And little wonder, given gasoline prices of $1.36 a gallon on average. It seemed an easy choice for Detroit to stick with these vehicles — which, with their big profit margins, had become its economic underpinning.
But in Japan, where engineers and designers were pulling up to gas stations that sometimes charged four times as much for fuel, the answer was to focus on fuel-efficient vehicles.
Now, those choices are playing out in the automakers’ lineups and on their bottom lines. With the United States experiencing its own high gasoline prices, consumers are starting to react like their counterparts elsewhere, choosing fuel-efficient cars as the sales of S.U.V.’s and other big vehicles lag. And General Motors, Ford and Chrysler, which still produce far more of these light trucks than they do automobiles, are now seeing the repercussions.
“The cost is not only in lost sales, but more broadly, in reputation,” said John Paul MacDuffie, a co-director of the International Motor Vehicle Program, a research group studying the auto industry, and a professor of marketing at the Wharton School of the University of Pennsylvania.
The second quarter made that abundantly clear. With gasoline selling for $3 and more across the country, all three Detroit companies reported losses or sharp declines in their profits in North America. At the same time, consumers’ interest in fuel economy was nearly three times as great as it was in 2002, when the decisions about the vehicles Detroit would sell this year were essentially made.
Back then, only 22 percent of likely car buyers said they were “extremely interested” in fuel economy, according to a survey by CNW Marketing Research of Bandon, Ore. Now, 60 percent of buyers say it is a priority, and that is showing up in the marketplace.
Car sales are up 2.5 percent this year, while light truck sales have fallen 6.3 percent. S.U.V. sales alone are down 12 percent.
The shift from big vehicles toward cars is a particular problem for Chrysler, where almost 75 percent of its sales are light trucks (essentially the same percentage as in 2002). That is the highest among the Detroit companies, according to the industry statistics firm Autodata.
On Thursday, Chrysler said it earned just $65 million in the second quarter and warned that it might lose more than $600 million next quarter. “The increase in fuel prices has had a significant impact,” said Dieter Zetsche, the chief executive at Chrysler’s parent, DaimlerChrysler.
By contrast, Japanese companies are rolling up billion-dollar profits for the quarter, buoyed by their gains in the United States.
To be sure, Japanese companies added plenty of S.U.V.’s and pickups to their lineups this decade, but they still sell far more cars than light trucks, as they have since their vehicles went on sale in the United States three and four decades ago .
“We’re a global company that has a large amount of our sales volume coming out of Asia as well as Europe,” both of which are dominated by cars, said James Lentz, executive vice president of Toyota Motor Sales, the company’s American marketing arm. Toyota’s sales are up nearly 10 percent this year from 2005. “In our case, we basically build what consumer demand is.”
To follow suit, the solution for Detroit’s automakers may be simple: cut back on S.U.V.’s and pickups and put their resources into developing the cars that American drivers increasingly want.
Indeed, Detroit companies are emphasizing their car lineups in advertisements and news briefings, promising that many more fuel-efficient models are on the way. They are pledging, for instance, to sell far more flexible-fuel vehicles, which can operate on gasoline or a gasoline-ethanol mixture.
But just as significant, Detroit companies are not abandoning big vehicles. For one thing, they simply cannot afford to.
While profits are down from the glory days of the big vehicles, Detroit companies still had a gross profit of $12,250 on each big S.U.V. and $11,449 on each big pickup truck they sold in the first half of the year, according to an estimate by CNW Research. The figure does not include incentives or other payments to dealers.
By contrast, the companies made only $1,100 on every compact car they sold and $800 on every subcompact, CNW’s estimates showed.
Given that it takes 10 compact cars to provide the profits of a single pickup truck, “that’s the reason why no one is giving up on the full-sized S.U.V. market,” said Art Spinella, CNW’s president.
It also explains why it seems that the American auto companies were caught short when gasoline prices rose.
William Clay Ford Jr., the chief executive at Ford, who is known for his environmental bent, said his company, whose sales are down 4 percent this year, recognized what was happening with gas prices last summer. It is developing more-fuel efficient vehicles, like a crossover vehicle called the Edge, which is due late this year.
“But as you know, our product plans take several years to unfold,” Mr. Ford said in a conference call with reporters and analysts last week. “Do I wish we had them all out this year in response” to high gas prices? he asked rhetorically. “ Heck yes, I do.” Still, he said, the company’s future product plan now takes $3 gas into account.
In the meantime, Ford must sell a lineup of vehicles developed when prices were lower. While it offers family cars like the Ford Fusion, Ford will soon begin selling new versions of its big Ford Expedition and Lincoln Navigator S.U.V.’s, which officials must be hoping will not experience the fate of the most recent version of the Ford Explorer.
Introduced last fall just after Hurricane Katrina sent gasoline prices soaring, that Explorer never caught on. Sales plummeted 36 percent in June, even as sales of the Toyota Corolla rose 38.7 percent.
Detroit’s mixed message can only hurt it, Mr. MacDuffie said. “If there’s not a show of responsiveness that really is persuasive and picks up some of the higher demand for smaller, more fuel-efficient vehicles, I think they’re in trouble,” he said.
For their part, Detroit executives argue that their new S.U.V.’s and pickups are more fuel-efficient than earlier versions, and that they will be smart choices for drivers made wary by high gas prices.
G.M., whose sales are down 12 percent this year, is already using that argument as it prepares to introduce new versions of its Chevrolet Silverado and GMC Sierra pickups in Detroit next week.
“We’ll launch a great product and see what happens,” the chief financial officer, Frederick Henderson, said.
But even Mr. Zetsche, DaimlerChrysler’s chief, is wary about what lies ahead at Chrysler. Its second-half volley of new vehicles includes several more Jeep models — which probably seemed like a great idea in 2002, when Chrysler faced criticism because it was not selling enough different varieties of Jeeps.
Now, however, lots full of unsold Jeeps have become as common a sight in metropolitan Detroit this summer as the construction cones dotting its highways.
As Mr. Zetsche remarked, “There’s no doubt that we are living in a volatile environment.”