The Pickup Downturn

Posted by: David Welch on April 29, 2008

Times have changed. Consumers keep shying away from trucks and it’s taking its toll on General Motors. The company said it’s going to slash pickup truck production by 138,000 vehicles this year. That’s sure to hit profits as GM struggles to get its U.S. operations back in the black.

Gasoline prices and a weak housing market, which keeps contractors out of dealerships, have hammered pickup sales. In the first quarter, sales of the Chevy Silverado and GMC Sierra pickups were down 19% and 6% respectively. What’s worse is that GM-North America President said in a statement that GM sees “a downward trend on current and future market demand for full-size trucks.” That means that GM doesn’t see a rebound in one of its most-profitable business lines anytime soon. And it’s cold comfort that GM’s rivals, even Toyota, have had to slow down their trucks plants in face of the current market, too.

Here’s the deeper problem. With gas prices inching closer toward $4 a gallon, consumers will keep moving toward smaller vehicles. GM doesn’t have a strong brand image for many of those vehicles. And no one makes the $5,000 or more in profits that pickups once delivered. All the company can really do is keep designing new crossover suvs and passenger cars for the individual buyers. Then the company has to hope that the housing market rebounds eventually and helps shore up truck sales. But that market has clearly shifted. GM, Ford and Chrysler, all three of whom have long relied heavily on truck profits, will have to start making money elsewhere.

Reader Comments

Noz

April 29, 2008 1:07 PM

In terms of pickups, GM has once again shot itself in the foot. With the Silverado and Sierra on a deepening slide, the remaining two lighter duty pickups are just short of an embarrassment. Not even up to Ford Ranger standards, minimal at best. CR rates these rolling wrecks as unsuitable as I recall. And they are right. Bad ride, bad handling, lousy seating, lack of reliability, features we have come to expect in the domestics. It is as if they were designed to low-ball the buyer into the cage where he can be conned into the larger trucks. Just as were the sorry older models, the GMC Sonoma and the Cheevie Crumbler, whatever. 'Forgettable' is their other name. And just what was the SSR all about anyway?

So, once again Toyota comes out smelling pretty good with the Tacoma. This PU sells very well throughout the entire world, but with beds made more for use than to look at and haul groceries and the wife and dog.

Once again, nuthin' quite like lousy/greedy management. The Failing Three share in this, have done so for years, and now they are paying the price and whining all the way down the tubes.

Kevin

May 2, 2008 2:40 AM

They used to say, "As GM goes, so goes the country." In today's economic environment, the reverse is apparently true as well. Despite producing some of the highest quality cars and trucks in the company's history, GM is a victim of bad timing as much as management failure. The Silverado and Sierra lines are award-winning in many respects, but $4 dollar a gallon gas is a game-changer. If the engineers can't figure out how to improve truck mileage dramatically, GM's profits are unlikely to rebound anytime soon. This downturn is driven by external events, and GM's recovery depends as much on a resolution of the war in the Middle East as a rebound in the fortunes of Middle America.

Angelo

May 3, 2008 5:57 AM

Lousy/greedy management are still getting paid. The American auto worker is the one that is paying the price with lost jobs and lower pay scale because management does not have the ability to manage. The auto worker just builds the car that management cannot decide on a decent product to build.

Snoz

May 5, 2008 1:57 AM

When history repeats the 2nd time, it's called a farce. Even before the 1st oil speculation scam, GM and Ford claimed its Vega and Pinto were the answer to market assault of VW,Toyota,Honda and Datsun(Nissan). Chrysler imported a car from co-supplier Mitsubishi, called it the Plymouth Arrow,and sold under a stupid slogan: "Plymouth Arrow, that's all the japanese you need to know." After the 1st oil scam, GM,Ford,and Chrysler tried to produce small economical but comfortable cars but failed miserably because to pocket the high profit margin the Big3 decided to cut many corners. Example: Ford's LN7. In time, the expensive gas prices eased as consumer wages inflated, and Big3 trashed small car development in favor of big sedans and pickup trucks. As the money rolled in,it is easy to understand how the Big3 had amnesia. Forward to the '90s: Big SUV, big sedan sporting V8,10,12, and biggest mother of all pickup trucks in history. Profit so big even Toyota and Nissan had to dip into the action with their own Tundra, Sequoia, Titan, and Armanda. However, as $4.00 gas loomed over the horizon, the Big3 faced judgment day-- again. As in the 1st oil scam, the current oil speculation scam shows the Big3 have nothing to offer but panic-- again. What a Farce. What a circus. GM's 3 clowns, Lutz,Wagoner,Wellburn, had not learn the mistake of GM's ex-CEO Roger Smith; Henry Ford JrII/Nassar not only ignored history, but committed even greater sin by building the Excursion and Expedition, both are guttons for fuel. As for Chrysler, it's been a soap opera: bankruptcy under Townsend, resurrected by taxpayer loan, sold to the Germans who had a fire sale sending a gift to Cerberus. Having bet the farm on its truck division -- Chrysler lost its nicker. You would expect better from GM, the American icon of business acumen, prowness, and industrial might. Instead, the 3clowns' leadership is an embarassment to this country. The old-boy network within the board of director protects them. The senile Roman senators raised more objection in its final days than today's GM board of directors. Mean while, shareholders and auto workers are left holding the bag. Is this the start of the final death of the American auto industry? The last TV tube was produced by Sylvania over 20 years ago. Last US assembled TV, over 30 years ago; last light bulb(invented by Edison,an American)assembled in US,over 30 years ago; the VCR, invented in US, has never been manufactured in USA, same for DVD and LCD. The Blu-ray?, deja vu. What will be the history of the American car industry? You have seen through the leaderships of GM,Ford, and Chrysler the future of the American auto business. And it's a Farce.

logic

May 5, 2008 5:01 PM

Just nobody say "peak oil", please, and keep whistling past the graveyard...

In Colorado

May 6, 2008 5:37 PM

GM's saving grace will that it can tap into its European divisions for small cars. It is unlikely though that any will be assembled in the US. I'll also give GM credit for working on a plug in hybrid to be introduced in 2010.

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Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

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