Caution: Lower Truck Sales Ahead

Caution: Lower Truck Sales Ahead
DETROIT, June 8 — For most of their history, pickups have been to auto
companies what they were to their customers: reliable workhorses, with Detroit counting on them for big sales and profits even as flashier cars came and went.
When paired with sport utility vehicles, pickups provided auto makers with a one-two punch of profits and a measure of insulation from foreign competitors, which have struggled to make headway in a market dominated by General Motors, the Ford Motor Company and the Chrysler Group.
By the late 1990s, pickups became more than just work trucks. Loaded with the same expensive features found on cars, like leather seats, booming stereos and big passenger compartments, pickups shared the same cachet as S.U.V.’s, bought by consumers who parked them in suburban driveways, not at construction sites.
But as with sport utilities, the popularity of pickups is in decline. Sales have dropped, rebates and other incentives are climbing, even for companies like G.M. and Toyota that have the newest models on the market.
In March, Bucky Hacker traded his 2002 Dodge Ram Quad Cab pickup for a subcompact car, the Mazda 3. Mr. Hacker, a student from Oak Ridge, Tenn., originally bought the Ram to tow a boat, and also thought its macho appearance would help him attract girls.
But there were drawbacks. “Gas was ridiculous,” Mr. Hacker, 24, said. “The thing got 13 miles per gallon.” His Mazda averages twice that, or 26 miles per gallon in city and highway driving, and it will be easier to fit into tight parking spaces at the University of Tennessee, where he plans to study political science this fall.
Mr. Hacker touches on a reason sales have dropped: a growing sense of environmental responsibility that has flared along with gas prices. That, and an uncertain housing market, which is prompting many contractors to delay buying new trucks, have combined to cut into pickup truck sales, which are down 5 percent so far this year from a weak market last year. That is more than double the overall decline in industry sales, which are down 2 percent this year.
Because of the decline, automakers expect pickups to post their lowest sales this year since the beginning of the decade, even with incentives.
The average discount on a Dodge Ram is $6,000, up $500 since January, according to the Power Information Network, which tracks industry trends. Chevrolet is paying an average of $2,343 in incentives on each Silverado pickup, double its discounts at the beginning of the year, when the truck was new.
Even Toyota is discounting the Tundra, which it introduced in February, by an average of $2,000, the Power data showed.
“We used to have a lot of people getting out of an S.U.V. and into a truck,” said Scott Satiritz, general sales manager at Massey-Yardley Chrysler Dodge in Hobe Sound, Fla. Now, he said, “the average customer is not buying a pickup.”
“They’re into economy cars because of the mileage. Gas prices have really hurt.”
In fact, Ford’s trade-in data shows a number of customers have exchanged F-series pickups for cars like the smaller Ford Focus or the Fusion sedan, said the company’s chief sales analyst, George Pipas. That suggests customers who do not need pickups are not returning for them.
“The people who are buying trucks are buying them because they have to, not because they want to,” said Steve Magers, general manager of Elmhurst Ford in Elmhurst, Ill., about 20 miles west of Chicago.
His F-series sales have dropped 10 to 12 percent since the beginning of the year, with commercial users, like owners of construction companies and landscaping firms, making up the bulk of his truck business.
Gone are the customers who purchased big trucks because they were “a status symbol thing,” Mr. Magers said.
Six years ago, 28 percent of consumers nationwide who bought pickups did so because they liked the way they looked, according to data from CNW Marketing Research, which follows industry trends. This year, only 16 percent of customers purchased big trucks primarily for their appearance.
As for the buyers who have defected, Art Spinella, the president of CNW, said: “They won’t come back. They’re finding other vehicles that make fashion statements.”
Mr. Spinella said contractors, farmers or ranchers who need pickups for their businesses will continue to buy them, but not so often as in the past.
That is a reason a Lehman Brothers analyst, Brian Johnson, predicts that the truck market may continue to decline. If so, it will mean more problems for Detroit auto companies, all trying to rebound from billion-dollar losses in 2006.
At Ford, which relies heavily on trucks, pickups accounted for 24 percent of its sales and 41 percent of the company’s gross North American profits during the last five years, Mr. Johnson calculated in a research report.
That compares with 32 percent of gross profits at G.M., which relies on pickups for 20 percent of its sales. Pickups contributed 25 percent of profits at Chrysler, where 18 percent of vehicle sales were pickups the last five years.
In 2005, the latest year for which he had data available, pickups generated about $10,000 apiece in gross profits for the auto companies, Mr. Johnson said. That compares with about $8,000 for the typical S.U.V., and just $400 on each subcompact car.
The decline in pickup truck sales last year was a big contributor to Ford’s $12.6 billion loss, a figure that included charges for its restructuring plan.
If gas prices were to climb toward $5, helping to send the economy into a tailspin, Mr. Johnson said that in the worst case, truck sales could fall by half, to just 7 percent of the American market. That was the share they held in the late 1980s before automakers enticed customers by loading up trucks with options and introducing big extended-cab versions.
A 7 percent market share would translate into annual sales of only 1.1 million pickups, or nearly what Ford sold by itself just a few years ago.
Despite economic fears, some dealers say their pickup truck business has remained steady. While the total number of shoppers has fallen off at Wade Ford in Smyrna, Ga., the dealership is selling the same number of pickups that it did a year ago, said Chris Greeson, the new-vehicle general sales manager. “When they come in to buy an F-150, they know it isn’t a 30-mile-per-gallon vehicle,” Mr. Greeson said.
Still, Mr. Johnson said, in the long term, automakers must address the fuel economy of pickup trucks. At G.M., where Silverado sales rose 10 percent in May, thanks in part to the big discounts, fuel economy is a main focus in marketing the new versions of its pickup trucks, which are about 10 percent more efficient than the previous models.
“We do have some pluses in our arsenal that are helping us to weather that storm,” said Paul Ballew, the chief sales analyst at G.M.
Along with better performance for gasoline-powered engines, Mr. Johnson sees diesel-powered pickup trucks gaining in popularity.
Here, Toyota is at a disadvantage: it does not offer its big Tundra with a diesel engine, unlike G.M., Ford, Chrysler and even Nissan, which expects to make a diesel engine available on its big Titan pickup in 2009. That also is when Honda expects to sell diesel engines, although they will be available first on cars rather than its Ridgeline pickup.
At Toyota, Mr. Johnson said, “with so much focus on hybrids, there is an inertia when it comes to diesels.”
Company officials insist they are studying diesel engines. Beyond that, they are satisfied with the early performance of the Tundra, which they say will meet the company’s goal of selling 200,000 this year
While Toyota is not falling short of its sales goals, Tundra’s reputation was bruised when it failed to receive a five-star rating in front-end crash tests performed by the federal government, a standard achieved by all of Detroit’s big pickups.
Likewise, the company’s decision to stress its more expensive models equipped with its biggest V-8 engine seemed at odds with Toyota’s reputation for selling green cars like the fuel-sipping Prius.
Mr. Spinella said he would not be surprised to see Toyota quickly develop a more basic version of the Tundra, aimed at the same buyers who purchase cheaper, simpler work trucks from Chevrolet and Ford. Without them, Toyota may not be able to fully use its new plant in San Antonio, which it has dedicated to producing pickups, Mr. Spinella said.
At least Toyota put its plant in one state where pickups remain the vehicle of choice, no matter how high gasoline prices rise. As Mr. Pipas at Ford said, “You wouldn’t want to park your Escape hybrid in front of Mickey Gilley’s bar.”

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Jim Higgins wrote:

The funny thing is that this year (through May), total car sales are down 2.4% compared to last year, but total truck sales are down 1.6% compared with last year.
So car sales are down more than truck sales.

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