Wednesday, January 16, 2008

Pickups face test: Ford F-150, Dodge Ram reborn into sales slump

Product development engineer Jon Barns checks out the box side step on the Ford F-150 on Sunday. The redesign has generated buzz. (Robin Buckson / The Detroit News)

Sharon Terlep / The Detroit News

American pickup buyers are bound to be some of the most eagerly courted consumers in 2008 as automakers gear up to do battle in the shrinking -- but still hugely profitable -- full-size truck segment.

The pickup sales war promises to be even more brutal than last year, when automakers took drastic steps to sell big trucks as demand for the vehicles sank.

All the factors that drove sales down in 2007 -- a slumping housing market, softening consumer confidence and volatile gas prices -- are still pressuring the market. Now, two brand-new models -- redesigned versions of the Ford F-150 and Dodge Ram -- are about to enter the equation.

"I'm concerned about the competition, I'm always concerned," GM sales Chief Mark LaNeve said about the new trucks in an interview Tuesday. "I'm more worried about what they're going to do on incentives than on the actual product side."

Pickup sales were down 3.2 percent last year, and many analysts believe the drop would have been much bigger if not for aggressive incentive programs rolled out to move more trucks.

Toyota Motor Corp. shocked many in the industry when it offered generous discounting on its newly launched full-size Tundra, an unheard-of move by the Japanese automaker. GM said Toyota's move forced it to step up discounts on the Chevrolet Silverado and GMC Sierra less than a year after rolling out redesigned models. Ford Motor Co. and Chrysler LLC also offered deep incentives on their aging models.

The pickup market is almost unrecognizable from the start of this decade, when incentives were virtually unheard of and the trucks comprised 12.5 percent of the U.S. car and truck market.

Last year, while big pickup sales amounted to about 13.3 percent of U.S. sales, the segment carried the industry's deepest incentives, with large truck buyers getting discounts on average of $3,870, according to car shopping site.

The changes have hit Detroit's Big Three especially hard since the automakers rely heavily on trucks. And it's dampened the success of vehicles that have been critical hits. The Silverado and Sierra were widely praised, as was the Tundra, Toyota's first true entry in the full-size-truck segment.

The new versions of the F-150 and the Ram generated some positive buzz at the Detroit auto show. Mike Jackson, CEO of the AutoNation dealer chain, on Tuesday called the Ford truck the "best in show," but said he doubts either incentives or new products will give automakers enough steam to overcome the housing depression. "The decreased number of buyers and the increased numbers of competition and choices puts pickup truck buyers at the same level as car buyers," said Ford sales analyst George Pipas. "We owe it to our Ford dealers and Ford buyers to be priced competitively."

Pipas said some of the toughest competition could come toward the middle of the year when automakers will look to clear out their old models.

Both Ford and GM cut truck production last year to avoid a product pileup that would force them to take aggressive measures to clear out inventory.

But prospects for the coming year remain a top concern for the industry.

"The pickup market faced headwinds which we expect to continue through 2008," Lehman Brothers analyst Brian Johnson said Monday in a research note about the updated F-150 and Ram. "We expect the profit contribution from a relaunch to be muted as the new vehicles face fresh competition from one-year-old GM and Toyota pickups, as well as a soft pickup market."

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