Hybrid Escalade: So crazy an idea, it just might work

By Warren Brown

June 18, 2008

Dear Diary:

I am sitting in a hotel conference room waiting for General Motors to unveil an oddity: a gas-electric hybrid version of its rambunctious Cadillac Escalade sport-utility vehicle.

It is 8 a.m. in the middle of a week in Washington, where gasoline is selling for $4.15 a gallon. That’s $1 a gallon more than we were paying at this time last year. By July, we’re likely to be spending $4.25 a gallon, maybe $4.50. Bets are that we could be shelling out $5 a gallon by summer’s end.

The GM showing me the latest, most splendiferous version of its Escalade is the same GM that several weeks ago announced the planned shuttering of four truck and SUV plants in North America, an action that will eliminate 10,000 jobs. It is a necessary move occasioned by a consumer shift from gas-thirsty trucks to less-thirsty cars in a market desperate for more miles per gallon.

More than a fad

Richard Wagoner, GM’s chairman and chief executive, says that the trend is more than a fad. High gasoline prices are here to stay, Wagoner says. GM, which has long relied on trucks to haul in U.S. profits, will be making and selling more cars.

So it seems odd to be sitting here at the Mandarin Oriental Hotel, chosen for the presentation expressly because it is a high-end venue, waiting for Cadillac executives to give the details about a big SUV that can cost as much as $79,000. I am questioning their sanity — and mine.

But it occurs to me that there is little that is sane about the business I have been covering for 28 years. Emotion often trumps logic. The luxury full-size SUV segment, which provided nearly 150,000 sales in 2007, is proof.

Consider: No one needs a big plush SUV. Drivers who must transport seven passengers could do so in more mundane conveyances — station wagons, minivans, vans or buses. But those rides suffer from a distinct lack of personal appeal.

Big tricked-out SUVs, on the other hand, retain considerable market pull, even in a market where monthly fuel bills are beginning to rival monthly amounts due on vehicle finance notes. There appears to be a cadre of hard-core fans, influenced by needs real and imagined and guided by a passion for motorized might and luxury, who are keeping the big rides on the road and in the showrooms.

GM isn’t the only company going after those people. They also are being targeted by Lexus, Toyota’s luxury division; BMW; Chrysler; Mercedes-Benz; and Audi.

Viewed from that perspective, GM’s unveiling of its hybrid Escalade and super-plush Platinum Escalade is a defensive move, an attempt to protect its share of the luxury SUV pie.

The segment is shrinking, falling to about 85,000 sales this year from the 150,000 vehicles sold in 2007. “But it’s still viable,” Cadillac spokesman David Caldwell said. “It’s still a market.”

With 60,000 Escalade sales last year, Cadillac was the undisputed leader of the luxury SUV market. But even with its new Platinum and hybrid models, Cadillac will be lucky to sell 40,000 this year, GM officials conceded.

Good business

But 40,000 is still good business. And to make sure that the Escalade will do at least that well, GM is touting the new gas-electric hybrid model, which gets 50 percent better fuel economy in the city compared with previous Escalades. That works out to 20 mpg in the city for a vehicle that weighs 5,665 pounds and carries eight people, which are pretty good numbers in truck circles.

“We want to still be number one, even if it’s in a smaller segment,” Caldwell said. “We think the hybrid will help. There is a status symbol to hybrid ... and this one gets better fuel economy than any SUV in its class,” he said.

GM hopes to sell 8,000 to 12,000 big hybrid SUVs, including Chevrolet Tahoe and GMC Yukon models, annually. But the “hybrid” tag comes with a hefty price premium — $5,000 to $8,000 more, depending on the model. Will hard-core SUV buyers go for that?

Maybe they will.