|Photo credit: MIKE HAMEL|
May 5, 2008 - 12:01 am ET
Click on the Web sites of several auto dealers in central California and you'll find Dodge Ram pickups offered at $13,000 below sticker.
With four months to go before a redesigned 2009 Ram arrives in showrooms, inventories and incentives are sky high on the 2008 model. Dodge has a 109-day supply of 2008s, and dealers say they're struggling to unload them.
The Ram is emblematic of a difficult pickup market. Sales of full-sized pickups fell 22.1 percent in April from the same period a year ago and are down 16.6 percent for the first four months of 2008.
For Dodge dealers, that has resulted in deals such as the ones offered in the Sacramento, Calif., area last week. Folsom Lake Dodge ran a newspaper ad that featured a Dodge Ram 1500 Quad Cab SLT 4x2 for $19,995 — $12,800 below the sticker price of $32,795. At Swift Dodge, also in Sacramento, $13,000 in discounts are offered on the same model.
The Dodge Ram was the most heavily discounted vehicle in March: an average of $8,260 per vehicle, according to Edmunds.com.
Tough market for pickups
It's standard practice to put money on the hood of the old model to make way for the shiny new one, and Dodge has a new Ram on the way this fall. The problem is, the bottom has fallen out of the pickup market.
Not only that, but Ford has a new F-150 arriving at the same time as Chrysler's 2009. Meanwhile, Toyota and General Motors have relatively new models on sale.
Managing build-out crucial
That makes it crucial that Chrysler manage the build-out so that few of the 2008 pickups remain on dealership lots when the Ram is launched, says Tom Libby, an analyst for the Power Information Network.
“They need to manage this so they avoid excess inventory of "08s,” Libby says. “They need to avoid immediately incentivizing the "09 and hurting its value.”
Steven Landry, Chrysler LLC executive vice president for North America sales, says the automaker is on target for the Ram build-out.
“We think our incentive plan will support an orderly run-out,” Landry says.
Incentives usually are high during the last year of a model cycle, he says. The Ram's price is higher than the competition's, “which is why our raw incentives are higher,” Landry says.
“It is absolutely tough out there for pickup trucks, both in terms of the competition and some buyers waiting on the sidelines,” he adds.
“We have pretty aggressive incentives out there and will remain competitive.”
Fuel prices hurt
Dealers blame a lethal cocktail of high gasoline prices, the credit crunch and a depressed housing market for bringing the once-booming pickup market to a screeching halt.
“Until we get gas under three bucks a gallon, these pickups are not going to move,” says Gus Whiteside, president of Tom Whiteside Auto Sales Inc. (Chrysler-Jeep-Dodge) in Mount Sterling, Ohio.
Dealerships face a double challenge. Sales of used pickups are slow as well because high fuel prices hit used-truck buyers particularly hard. That pushes dealers to lower prices for trade-in pickups, Whiteside says, leaving some shoppers with high negative equity on trade-ins.
“That devastates selling new ones because you don't want their trades,” says Whiteside. “I can't do anything with them.”
Mark Hodos, president of Monarch Dodge in Lauderdale Lakes, Fla., has 120 2008 Rams on his lot. Normally at this time in the run-up to a new model, he would have half that number. Hodos says he's not sure how he's going to sell them all before the new model arrives this fall, even though he has rebates totaling about $8,000 on them.
“If it was a regular market, we wouldn't have a problem,” he says. “But this is not a normal market.”