Despite rising gas prices, big SUVs still fly off assembly line

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

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 in February, with the Chevrolet Tahoe increasing 52.4 percent over February 2010, Suburbans up 41.8 percent and GMC Yukons up 123 percent, according to Automotive News.

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 percent of people who traded full-size SUVs for smaller vehicles during the fuel-price panic of 2008 are back in SUVs.

"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."

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 a 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 percent to 20 percent of production goes to buyers in Mexico, South America and the Middle East.

If fuel prices continue to rise rapidly, they will almost certainly slow SUV sales. But Caldwell of edmunds.com said she doesn't know where that point is.

Despite rising gas prices, big SUVs still fly off assembly line 04/03/11 [Last modified: Sunday, April 3, 2011 7:12pm]

Copyright: For copyright information, please check with the distributor of this item, Dallas Morning News.

Join the discussion: Click to view comments, add yours

Loading...