http://www.businessweek.com/stories/2008-04-28/the-pickup-downturn

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The Pickup Downturn


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.


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