||Pickups: America Falls Back in Love
Texas is pickup truck country and the front line in an expanding battle among auto makers to load up on profits from pickups, one of the richest businesses up for grabs as the global auto business roars back to life.
After years of waiting on the sidelines, pickup buyers are returning to dealer showrooms, offering millions of dollars in profit and potentially lifelong brand loyalty to Ford Motor Co., General Motors Co. or Chrysler Group LLC and rivals.
Sales of large pickups are up 20% for the first four months of this year compared with a year ago -- bigger gains than in small cars or midsize cars, according to Autodata Corp. In Texas, pickups accounted for a whopping 23% of the state's 22.6 million registered vehicles last year.
The battle for shoppers is expected to intensify into 2014. Last year, 1.6 million pickup trucks were sold in the U.S.; this year, analysts and industry executives expect sales nationally to hit 1.8 million and possibly 2 million in 2014.
Mike Mack, president of Golden, Colo.-based Centerline Solutions LLC, says until recently his cell-tower company was delaying replacing vehicles in its truck fleet, or buying used trucks. Now, it is growing again and he is looking to buy new light and heavy-duty pickups. "We'll be purchasing 25 to 30 more trucks in the next couple of years," he says.
"You have the recovering economy, a recovering housing market and a consumer who is now ready to buy. It has been about 13 years, on average, since these customers have been in the market. All that is coming together right now," said Citi Research analyst Itay Michaeli.
The auto makers are gearing up for higher demand. Ford, which currently leads by number of trucks sold, earlier this month disclosed plans to add a third shift at one of its F-series assembly plants. Since March, Chrysler has had three crews of workers building its redesigned 2013 Ram pickups at a plant in Warren, Mich. Both are trying to gain share ahead of General Motors's summer rollout of redesigned 2014 Chevrolet Silverado and GMC Sierra trucks. GM held the overall sales crown in large pickups as recently as 2009, and executives say they want it back.
"This is big for us and we know it," said GM North America President Mark Reuss. "We are going after our competitors, we are going after market share and we are going after customers who want trucks that get the job done. We're putting it all out on the table."
GM recently rented a ranch just outside San Antonio to show off the latest generation of its full-size Silverado. Participants were allowed to take the truck "off road" on the working cattle ranch. The vehicle's new features include a passenger cabin that is so quiet ranchers won't hear the clang of a horse trailer pulled behind it.
The redesigned Silverado comes with one new six-cylinder engine and two eight-cylinder engines rated at 23 highway miles on a gallon of gasoline -- more efficient than Ford's best-selling six- or eight-cylinder motors. The Chevy truck's interior is designed to feel like a plush sedan -- except with more power outlets. Starting price for one of the most popular versions: $32,710 -- the same as 2013.
That pricing strategy points to the intensity of competition. Average selling price for a full-size pickup averages $35,178, according to J.D. Power & Associates. Analysts believe manufactures make $7,000 or more in operating profit on each truck sold -- margins that would be celebrated by most luxury car makers.
Pickup sales are vital to the profits of the Detroit Three. They so dominate this market that the recent weakening of the yen likely won't make it easier for Toyota Motor Corp., Nissan Motor Co. or Honda Motor Co. to steal away Detroit brand pickup loyalists. But it could mean intensified competition for the Detroit auto makers in the compact and midsize sedan and SUV segments, where margins are narrower.
Toyota this month has no-interest loans for the purchase of its full-size Tundra, Nissan on its midsize Frontier, and GM on its 2013 Silverado 1500 and Sierra 2500. Ford and GM are offering cash back for purchases of their full-size trucks.
Large pickups, which weigh between 6,500 and 7,000 pounds, are outliers in a global auto market dominated by compact and midsize cars and sport-utility vehicles. Sales are minimal outside of North America -- an anomaly in a business where car makers strive to design vehicles that can be sold in most countries. These trucks are the last major vehicles where the Detroit Three maintain an oligopoly.
"We aren't building trucks for someone driving down Madison Avenue -- kind of the urban cowboy," said GM Chief Executive Dan Akerson said last week in Warren, Mich. "Where I grew up in Minnesota, people make a living with their trucks. They want mileage, they want efficiency and they want technology and that is what we hope to deliver with this family of trucks."
In place of a serious competitive challenge from Japan, the Detroit brands are feeling the heat from customers demanding better fuel economy and from federal and state regulators who want large pickups to catch up with sedans and SUVs on safety and reduced gas emissions.
In 2010, with pickup sales still depressed by the housing slump, Ford put a six-cylinder turbocharged engine in the F-150, and began promoting the "EcoBoost" motor as the class leader in both fuel economy and pulling power, or torque.
Ford truck marketing manager Doug Scott says he is confident Ford will sustain its recent sales volumes of about 60,000 trucks a month, and keep the F-series the No. 1 selling large pickup. Ford's rivals "are largely playing catch-up," he says. "We don't feel we are susceptible to any amount of conquest."
Chrysler's redesigned Ram now features a combination of a six-cylinder engine and an eight-speed transmission -- a first in pickups -- and rated at 25 highway miles a gallon. It also has start-stop technology that shuts off the engine when idling to reduce fuel consumption. Features range from plenty of leather to a large dial that replaces the standard shifter, creating more room in the front cabin.
GM has countered with "Ecotech" technology that automatically switches the engine to run on four cylinders when eight aren't needed and its own oversize control buttons. GM claims its Ecotech provides added fuel savings without sacrificing performance.
"Ford is essentially telling its customers that you can start with a six-cylinder (engine) that builds up to eight-cylinder as long as you are willing to pay extra," said Chevrolet Vice President of Marketing Chris Perry. "We have an eight-cylinder engine that is standard, will shift to four cylinders and you don't have to pay anything extra for it."
In the next few months, Chevrolet will have to balance the demands of launching the 2014 Silverado, which goes on sale beginning next month, against the job of unloading a hefty 99-days' supply of 2013 models still on dealer lots.
Mr. Perry says Chevy plans to phase in the new models with more expensive, four-door models arriving first, and the least expensive 2014 two-door models last, he says. "It will take months to sell them all out," Mr. Perry says. "The point when we start retailing more of the new trucks than the old trucks is the fourth quarter."
(Source: The Wall Street Journal, 05/16/13)
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