Ford, GM Get Rolling On Hybrid Debuts

Sport utility vehicles are the automotive nemeses of environmentalists, attacked as unpatriotic, gas-guzzling despoilers of nature by activists such as Arianna Huffington and conservative groups who wonder, “What would Jesus drive?”

But SUVs are still wildly popular. That, U.S. car makers believe, spells opportunity for them as they prepare to enter the high-profile hybrid-vehicle market—with SUVs and pick-up trucks.

“Everyone is entitled to play to their strengths, and ours is in trucks,” said Ken Stewart, GM’s marketing director for new ventures. “If you want to get a lot of hybrids on the road, you put them in vehicles that people are buying now. Americans like trucks more than they like small cars. So our strategy is to start with the bigger vehicles and work our way down, which also has the most benefit for society, because the bigger trucks consume the most fuel.”

Consumers may be hearing more of that marketing pitch as U.S. car makers roll into the hybrid market, said Frank Markus, technical director for Motor Trend. “GM and Ford are able to say they are more environmental than thou, because more fuel will be saved by turning a big vehicle into a hybrid than a small one, and I can see their point,” he said.

First out of the gate from Detroit: a hybrid version of Ford Motor Co.’s Escape SUV, and General Motors Corp.’s Silverado and Sierra truck hybrids, which begin hitting showrooms in the fourth quarter. They’ll go up against the three hybrids now on the market—the Toyota Prius, Honda Insight and Honda Civic Hybrid. Neither adspends nor sales are huge yet, but both are likely to rise as new competitors enter the segment and the niche continues to garner publicity from the media, as well as curiosity from consumers.

Prius, the top spender of the hybrids, was backed by more than $40 million in ad spending in 2003, while the Civic Hybrid spent about $7 million, according to Nielsen Monitor-Plus. Meanwhile, the tiny and small-selling Insight, the first hybrid to be marketed in the U.S., is about to be discontinued and has recorded no ad spending since 2002. By contrast, Ford spent $65 million on ads for the non-hybrid Escape in the first five months of 2004 alone.

The Escape’s strategy is to “target the influentials—those people who are ahead of the curve in terms of being environmentally conscious and adopting new technologies,” said Corey Holter, Ford’s marketing manager for the Escape, who added that Ford plans to build 20,000 units of the hybrid initially, but that 50,000 people have already expressed interest on the Escape Hybrid Web site. “They represent about 10 percent of the U.S. population, and they also tend to be more involved in their communities, like in the PTA or their local church. And those people often can be advocates for the product as well.”

Anthony Pratt, senior manager of global powertrain forecasting for marketing-information-services firm JD Power & Associates in Troy, Mich., estimated that the hybrid market will increase from 41,000 units last year to 91,000 this year and to 388,000 in 2008. This year to date, Toyota Prius sales are up a staggering 120 percent to more than 20,000 units, according to Ward’s Automotive.

Toyota, the largest seller in the segment, has received plenty of mileage from the Prius’ popularity in Hollywood, where the model has become a badge of environmental honor for stars such as Cameron Diaz, who gushed about the vehicle on The Tonight Show last year.

“Most of the people who buy the Escape are people who also want the sport-utility configuration and who also are interested in Ford as a brand,” contended Ernest Bastien, vp of Toyota’s vehicle operations group.

In April, Ford began an environmental print ad campaign from J. Walter Thompson in Detroit—which does all advertising for the Ford division—that features the Escape Hybrid as one of its elements. The work addresses issues such as mileage, emissions and other environmental concerns related to the auto industry. The effort will broaden to include TV “as we dial down the general environmental campaign and dial up the Escape,” said Holter.

GM has been running ads by Perich & Partners in Ann Arbor, Mich., in trade publications for the hybrid pick-ups that are already in corporate and municipal fleets. Interpublic Group’s Campbell-Ewald in Warren, Mich., is lead agency for Silverado; IPG’s Lowe in New York handles Sierra. The automaker will launch its main campaign for the Silverado and Sierra hybrids later this fall.

“This is really important for the American car makers to get into the hybrid game now,” said Jim Sanfilippo, analyst with Omnicom Group’s Automotive Marketing Consultants in Bloomfield Hills, Mich. “The internal learning curve is important, because the quicker you get into the game, the quicker you get the real-world experience at developing and marketing these vehicles.”