Automotive News [AN, sub] continues the Black Tuesday mop-up; this time they pickup on pickup profits. Or lack thereof. "The segment is expected to shrink by about 500,000 units this year to as low as 1.65 million. That's a far cry from the 2.5 million in the peak years of 2004 and 2005." Buried at the end of an article suggesting that now might not be the best time to be launching a new Ford F150 or Dodge Ram (if not now, when), AN reveal that F150 annual sales are tumbling from last year's 690,589 to, by Ford's admission, "well below 600,000 this year." Rounding that out to a 100k hit, at $8k – $10k profit per vehicle, that's $800m to $1b the cratering market's excising from FoMoCo's annual pretax profits. (That's profit folks, not turnover.) Using those same numbers, Ford's "horrendous" 142-day supply (226k) of F150s equates to $1.808,000 to 2.26b to worth of profit locked-up on the lots. AN doesn't run the numbers for GM and can't do the math for Chrysler (it's now mostly owned by private equity). Instead, they offer this helpful tidbit. "Chrysler remains hopeful for a turnaround. 'Whenever gasoline prices spike, there's a free fall in the truck segment,' said Mike Accavitti, director of the Dodge brand. 'But the market is still sizable.'
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That also means that GM+Chrysler lost about 400,000 trucks combined, and Toyota+Nissan the rest.
That’s far more than Ford.
Oh, and 2.5 million minus 1.65 million equals 850,000 units, not 500,000. So, AN, where’s the rest?
“Chrysler remains hopeful for a turnaround. ‘Whenever gasoline prices spike, there’s a free fall in the truck segment,’ said Mike Accavitti, director of the Dodge brand. ‘But the market is still sizable.’
Serious rectal/cranial problem.
At the current level of sale, if Ford quit building the F-150 tomorrow, they’d still have a 4 month supply. At one local Ford dealer, the F-150 and its larger variants make up 2/3rd’s of the lot.
I don’t have my copies of Automotive news in front of me, but sales of the old Dodge Ram will still be near 300,000 units this year. Even if they shrink to 250,000 that’s a hell of lot of trucks, enough to keep a plant in 3 shifts, expecially if they make another 50k for Nissan. Who wouldn’t want a vehicle that selss 250-300k a year? If Ford still sells 500k F150’s then good for them. Trucks will sell and will make a profit, they just won’t be the gold mine they were in the past. Now the domestics will have to learn a different dance if they want to remain in business.
Mid-size Pickups could easily pick up some of that profit loss iff (if and only if) their levels of refinement approaches that of Toyota and Nissan…
Not much development funds were earmarked for Ranger improvements, unfortunately. It could have been updated simultaneously or initiated development when the current F150 was released.
Again, it’s a case of short-sightedness or lack of vision.
Hint: Knowledgable Enthusiasts are NOT at the helm.
Mullaly may well properly perceive redundacy of efforts within Ford and address them in due time, but it will still require the vision of a Car Guy to correct the slightly out of step product line.
Two things need to be restated in the article:
#1 I think that $10K profit per unit is too high when you factor in the already extensive incentives that have been placed on F150s for some time now.
#2 The profits are not “locked up on the lots”. The vehicles are paid for by the dealers (floorplan companies) when the trucks are shipped from the factory. Ford already has their money.
I want to know how truck sales are doing in Texas. If they’ve cratered there, then I’ll know it’s over.
Plee
#2 The profits are not “locked up on the lots”. The vehicles are paid for by the dealers (floorplan companies) when the trucks are shipped from the factory. Ford already has their money.
Actually Ford’s money is still tied up in inventory sitting on dealer lots. From Ford’s 2007 annual report:
Most of the vehicles sold by us to our dealers and distributors are financed at wholesale by Ford Credit. Upon Ford Credit originating the wholesale receivable related to a dealer’s purchase of a vehicle, Ford Credit pays cash to the relevant legal entity in our Automotive sector in payment of the dealer’s obligation for the purchase price of the vehicle. The dealer then pays the wholesale finance receivable when it sells the vehicle to a retail customer
So while it’s true the automotive division of FoMoCo gets paid when they sell the vehicle to the dealer, Ford’s money is still tied up in dealer inventory because Ford Credit is financing most of them. The Credit division gets paid when the dealer sells the car.
Well, that’s what happens when you put all of your eggs into one gas-guzzling basket.
Ford and Dodge have no choice but to release new models. The Ram is basically an 8 year old platform, it is not competitive with the new Tundra and Silverado. Either they get out of the truck business or they stay competitive.
Chrysler made a decision to stay in the shrinking minivan market with a new Caravan/T&C and even though their numbers are not what they once were, they are now dominating Honda and are on pace to sell 360K mini’s.
The new Ram and the F-150 will put Dodge and Ford back into the lead as far as competitiveness in the segment and will keep the $$$ flowing in when they both desperately need it, even if the $$$ isn’t as much as it was in the past.
This is shaping up to be a repeat of 1979. Instead of people racing around to replace pickups and SUVs it was people taking it on the chin to replace their full-sized sedans and wagons with subcompacts from Toyota and Datsun. Back then, the problem stemmed from politics. This time it’s geological. Oil went from $15 to $39 in about a year similar to last year’s $70 to this year’s $139 and climbing. We haven’t seen gas lines yet but the year is not over. To all the pickup pollyannas: the pickup and SUV markets are toast.
It’s not a total loss having the trucks sit on the lots. Ford Credit doesn’t loan the dealers money for free, they get paid interest.
Basically the domestic pickup hasn’t changed much for many decades. They just keep changing the sheet metal and beefing up the frame. Honda changed the pickup with the ridgeline. I don’t see how may’s detroit massacre will not be repeated for the forseeable future. I don’t see gas going down much and probably will head toward $5 by the end of the year if not earlier.
Anyone thinking that pickups/suvs will return is really reaching. Most likely we will start to see the micro’s from asia popping up here, assuming they can meet the crash safety standards. I have my bicycle but hate to think that I may have to ride it to do my shopping. Oh well, i will be healthier and skinnier. That isn’t all that bad. The american public needs to lose weight and this may be our ‘opportunity’. Remember to think positive.
I agree with plee. The $10k profits would only happen on loaded high-end trucks at close to MSRP. There were $10k profits back in the day, but I suspect they’ve been dropping somewhat for a while.
You have to realize that part of the reason Ford has so many trucks on the lots is that they will be changing their model over. The lines will ramp slowly the first few weeks and overall Ford will probably lose about 4-6 weeks of production time they otherwise could have had. Part of this inventory spike was planned.
Now, I’m not arguing they don’t have a lot of trucks sitting there, but it’s not all just poor planning. That 4 months of inventory will be needed to carry them through to September when we’ll start to see the first 2009 F-150s hit lots and will help keep inventory filled out as Ford transitions the models through the end of the year.
In either case, though, it’s good to see the F-series reign is ending – not because I dislike the truck or the company (my family has had three in the past 20 years), but because I dislike our propensity for over consumption and wastefulness. The days of the F-150/Silverado/Ram/Tundra/Titan commuter are coming to a close.
Fords biggest mistake was keeping the ranger a decade behind tacoma. Could you imagime a state of the art compact truck? Not a 2 ton tacoma which is as big as a full size pickup from the 90’s. A real technologicaly superior 4 cylinder with 170 hp and 31 mpg on the highway. I dont need 250 hp in my truck to haul my floor buffer and wax. I dont need a huge ( this is what midsize has become) truck to get to my jobs. No hemi, four doors, bed so high you cant reach in (F-150 I’m talking to you),and 19 mpg. What is so hard about this? How much has it cost Ford in the long run to not invest a few million updating the ranger?
Rday:
Honda changed the pickup with the ridgeline.
I disagree. This is kind of like saying the Ranchero and El Camino changed the pickup, which of course they didn’t.
Of all the lifestyle “pickups”, this is the worst offender.
Do they really make $8k profit per pickup truck?
Or is it gross margin, without counting the cost of factories?
The nice thing about the Ridgeline (if you’re Honda) is that you could kill it, and it wouldn’t make an appreciable difference. It was a low-risk gamble for Honda. All the Ridgeline had to do was keep truck-intending Honda buyers in Honda’s showroom, which isn’t exactly hard to do.
I do think it’s a silly truck, but if you think about it as an Odyssey with one less row of seats and an open trunk, it’s not so offensive. In fact, if Honda _actually_ made an Odyssey in such a configuration, it might’ve sold better.
I say bring back the El Camino and it’s brethren. If European contractors can get the job done with Piaggio Ape, surely North Americans could manage the same in a ass-less Toyota Matrix.
The Ridgeline was low-risk for Honda, but has been a disappointment by most measures. Honda’s sales goals were met only after discounting the model fairly significantly. Owner satisfaction has been low for a Honda, and has certainly never been as high as, say, the Civic or Accord. Honda probably didn’t win many loyalty points with it.
To add insult to injury, when I picked up my Elantra from the rental lot last week, it was parked across from a couple Ridgelines on the rental lot. Also nearby were two Pilots and three Odysseys. I have NEVER seen that many Hondas on a rental lot.