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Small is Beautiful

Will American motorists end their love affair with large and embrace downsized luxe? A number of carmakers are betting that they will.
Paul A. Eisenstein
From the Print Edition:
David Caruso, Jan/Feb 2007

Small is big. No, that's not an opening line of haiku nor the mantra from some modern-day incarnation of est therapy. It's simply the reality of today's fast-changing automotive market.

For decades, automakers balanced their books by relying on a basic operating assumption: big is beautiful. American motorists loved large cars and trucks. Remember the classic Cadillac Eldorado, all 21 feet of it? Or today's alternative, Caddy's Escalade ESV, only slightly more modest as it stretches 18.5 feet from bumper to bumper? Who cares if you can't park them in the typical garage? Big says you've got status; it's rolling bling. You've gotten the most for your money. Automakers have loved 'em big as well, because, traditionally, the bigger the product, the bigger the profits.

Or so it seemed—until recently. Then a confluence of factors suddenly set American motorists to rethinking what they're really spending their automotive dollars on. Fuel rates spiking over three dollars a gallon certainly played a role. If you're commuting 50 miles a day, you're likely to grind the enamel off your teeth pumping 25 gallons into an SUV that gets only 14 miles a gallon. (We'll let you do the math.) The politics of imported oil has become a factor as well. Then there's the issue of the environment. "Everybody," concedes Carlos Ghosn, the chief executive officer of both Nissan and Renault, "has to feel a duty to reduce their emissions" of CO2, a gas commonly linked to global warming.

A fundamental shift is also under way in cultural perceptions, according to Mark Fields, an executive vice president at Ford Motor Co. and president of the automaker's Americas division. He points out that the new generation of motorists is accustomed to premiums associated with downsizing, such as a higher price for an iPod Nano than for a comparable MP3 player twice its size. And a variety of industry studies show that young buyers are increasingly attracted to nano-sized transportation, rather than the behemoths their parents favored.

So does that mean Ford is ready to abandon its full-size Crown Victoria sedan and massive F-Series pickup to shift its focus to the Focus, the smallest model in its North American lineup? Might buyers be willing to start forking out more for a compact SUV like the Escape, instead of the massive Lincoln Navigator? Not necessarily. Although they're all but certain to lose market share to more diminutive offerings, big cars and trucks aren't about to go away, predicts automotive industry analyst Dan Gorrell. He explains that "the challenge for manufacturers," whether Ford or Mercedes-Benz, "is to convince buyers that they're getting their money's worth when they spend more for something small."

That's the dilemma that BMW faced when it got ready to relaunch the Mini a few years back. Small enough to fit into the cargo bed of an F-150 pickup, the British-made hatchback definitely didn't comply with the classic rules for success in the U.S. market. Indeed, American motorists reacted to the original downsized version with a big yawn, purchasing barely 10,000 from 1960 to 1967 before Mini, tail between its wheels, packed up and went back to the United Kingdom.

Despite enjoying plenty of demand in the home market and much of the rest of Europe when BMW acquired the brand a decade ago, the company knew that Mini would also have to make a splash in the United States in order to turn a profit. That meant rethinking the car's fundamentals. The first-generation micro-car, designed by the legendary Sir Alec Issigonis, was meant to be the ultimate in basic transportation. With its 10-inch wheels and a spartan interior, the model that debuted in 1959 had a base price of less than $800.

Today you'll spend about that much on some of the Mini's many new accessories, such as the Union Jack roof decal. A base Mini Cooper now goes for $18,000, and a fully equipped version of the supercharged Cooper S GT pushes well into mid-$30,000 territory. According to traditional industry standards, that would qualify it as a so-called "near luxury" vehicle.

The British make's little three-door goes through a complete redesign for 2007, though you'd probably not notice without a close inspection. Mini stylists have wisely chosen to make only minor tweaks to the basic appearance, while focusing on improving the car's ergonomics by offering an expanded range of power trains—a fuel- sipping, 1.6-liter gasoline engine and a super-high-mileage diesel are in the works—and adding still more features and high-end options.

Success has its price. Demand has repeatedly outstripped supply, and with Mini struggling to keep its U.S. dealers stocked, BMW has been less inclined to rush out a planned assortment of spin-offs. But several are finally on the way. The convertible was the first into showrooms, and the next-generation ragtop will reportedly come along in less than a year, while the all-new, wagon-like Mini Traveller is expected in late 2007. That stretched five-door will offer enough room for five, a big improvement over the original, with its less-than-comfortable back seat. And you'll also find room for plenty of cargo, with easy access through an unusual, split barn-door hatchback. Rear-seat passengers in the new model will reportedly climb in through a pair of reverse-opening doors, much like those on Mazda's RX-8.

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