Full exposure: big three's flanks laid bare

They're nimble, small and cute, and they could represent the U.S. Big Three's most exposed flank since Japanese econoboxes of the 1970s redefined what Americans wanted in a car.

They're a new niche in the burgeoning U.S. sport/utility vehicle (SUV) market, with Toyota Motor Corp.'s RAV4 in the pole position. And if Big Three product planners think RAV and other small SUVs coming soon are meant for Generation Xers in search of the latest trend, they could be in for a surprise.

A delightful woman from my church--to be polite, she's old enough to be my mother--came up to me the other day. Nudging me gently, she asked, "Have you driven that little Toyota truck, the RAV4? I'm thinking about getting one. It's a little pricey."

Jerome Mayer, a 64-year-old playwright from Pacific Palisades, CA, talks about his RAV4 like an 18-year-old with his first Harley.

"Too many of these other SUVs look too much like a truck. Even the 4Runner looks like a WWII Japanese Army ambulance," Mr. Mayer says. "This is cute and huggable."

I'm no marketing genius, but when 60-somethings rhapsodize about a vehicle aimed at their I grandchildren, it's time to | pay attention. RAV4 U.S. sales have been running about 4,000 a month since its February introduction. No one's paying L more than sticker, dealers maintain, but Toyota has boosted its initial 40,000 production plan for the U.S. up to 50,000.

Starting late this year and running through 1998, the following small SUV entries will hit the market:

* Honda CR-V, powered by a 2L, 16-valve, 4-cyl. engine that supposedly will be priced below $20,000, a point that RAV4 exceeds with most of its 4-wheel-drive packages.

* Land Rover CB40 will debut in mid-1997 and eventually could be built at BMW's Spartanburg, SC, plant.

* Subaru will do an outback version of its Impreza subcompact for the '98 model year to complement its Legacy outback edition.

* Mitsubishi plans a Montero Jr., also early next year.

* Isuzu will introduce a new Amigo for 1998.

* Ford is working on two new small SUVs it hopes to introduce around the turn of the century. one is based on the Mondeo/Contour/Mystique platform. The other will be derived from the same plat form as the 1999 Ford Escort.

* Don't get me wrong. Not even a 20% to 30% jump in gas prices would seriously slow sales of SUV giants such as General Motors Corp.'s Suburbans, Tahoes and Yukons. Ford's new Expedition will not flop. The "mine's bigger than yours" strategy is quite rational. If you can sell a condominium on wheels and make $10,000 to $12,000 on every sale, you do it.

Despite early enthusiasm for the RAV4, competitors are quick to point out that a fully equipped V-6 package with 4-wheel drive runs into the $22,000 to $25,000 range. And they carp about the lack of storage space.

But the testosterone-driven SUV boom may confront the same problem plaguing the Republican Party: a gender gap.

"RAV4 buyers are primarily female, 35 and younger," says Robert Page, a Toyota dealer in Southfield, MI. "Part of the problem is husbands seem to be holding them off if it's a joint decision, because the men prefer the 4Runner. But if price is an issue or the woman is the primary driver, these small SUVs could take off, because some women are intimidated by anything larger."

Deborah Corriveau, a 40-year-old mother of two teenagers in Southbridge, MA, is an example. She's happy enough with her husband's Ford Explorer, but she recently traded in her '86 Camry for a RAV4.

"It's easier to park, easier to steer and the gas mileage is so much better. I'm getting about 24 miles a gallon (9.8L/00 km)," Mrs. Corriveau says. "My 14- and 19-year old sons play soccer and baseball and we can fit three teenagers comfortably in the back seat."

The U.S. Big Three aren't ignoring this segment. Products such as Jeep Wrangler, Geo Tracker and Suzuki Sidekick pioneered it, but they aren't on the cutting edge of the trend toward car-based SUVs.

Ford apparently is the most serious, say suppliers, but it's not clear how much money there is to make in this niche for anyone arriving after 2000.

"I question whether they're just sending up a trial balloon. I don't think it's a funded program," says one Ford supplier who is familiar with the preliminary design work. "How many trucks can you really fit in your lineup?"

Despite Chrysler Corp. Chairman Robert J. Eaton's assurances that Jeep Wrangler and Cherokee meet Chrysler's needs at the entry-level, Chrysler contacted Toyota officials in early February asking to buy 25 RAV4s for teardown analysis.

"I told them they would have to buy them at retail," says Bryan Bergsteinsson, Toyota Motor Corp. USA vice president.

Ironically, Chrysler explored a mini-sport-use with Renault in the late 1980s, but later abandoned the project.

General Motors Corp., of course, can argue it is well-established in the niche with the Geo Tracker, produced on the same CAMI Automotive line in Ingersoll, Ont., with the Suzuki Sidekick. But anyone who has driven either of those vehicles back-to-back with a RAV4 understands there's a huge difference. If you want the bouncy, noisy and mildly raucous sensation of a small truck, Tracker/ Sidekick will certainly suffice. But RAV4 is built on the Celica All-trac chassis that combines both agility and acceleration in a much smoother-riding package.

GM has looked at various possibilities derived from the Pontiac Salsa concept car that it showed a couple years ago, say insiders. But under GM's new vehicle line executive system, product planners aren't sure the potential volume would justify the investment.

"There's a real question about how big the market is be low the size of our (Chevrolet) Blazer and (GMC) Jimmy," says Thomas J. Davis, group executive for GM's North American Truck Group. "We're looking at a number of niches where you can integrate both car and truck features."

In other words, don't look for anything that could distract customers from higher-margin compact, midsize and large SUVs.

A new Ward's special report, SUVs: Reshaping the Automotive Market, sees the RAV4 leading a sizable jump in the small SUV segment, which is expected to double its share of the overall SUV market by 2001--from 1% of last year's 1.75 million units to at least 2% of about 2.2 million units.

Small SUVs are more likely to draw customers from the passenger car segment than lure other SUV owners, who likely would find them too small.

Mr. Mayer concedes he must remove the front tires from his mountain bikes to fit them into the rear storage compartment, but otherwise the size fits him just fine.

"I really like that getting into it, there is no grunting factor from crouching down or stepping up," he says. "And I'm getting about 27 miles to the gallon (8.7L/100 km). It's like having a sports car, but sitting up higher gives you a floating feeling. It's like trying something entirely new."

In the next two years Geo Tracker, Suzuki Sidekick, Jeep Wrangler and Toyota RAV4 will face a new wave of competition including:

* Honda CR-V

* Land Rover CB40

* Subaru Impreza Outback

* Mitsubishi "Montero Jr."

* Isuzu Amigo