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Despite high gas prices, pickups are still key to profits for Ford and the Chrysler division. Failure of these two redesigns is not an option
Ford (F) and Chrysler, even as they battle each other for "green" bona fides with hybrids, plug-ins, and clean diesel vehicles at the North American International Auto Show this week, yearn for the days when every Polo-wearing, baby-boomer, weekend deck-builder looked at pickup truck ads with the longing eyes of a debutante coveting the latest Gucci purse.
Pickup trucks are a must for carpenters, farmers, landscapers, and contractors. And in states like Texas and Oklahoma, every young man in pants with a driver's license is trained from birth to want a truck. That market will never dwindle. But between high gas prices and a housing recession that has slowed homebuilding and kitchen renovations, pickups are no longer the glamour vehicle for people who don't really need a pickup in town or the countryside.
And yet, for Ford, its redesigned F-Series pickup truck, to be introduced this week and to go on sale in the fall, is by far its most important new model. For Chrysler, which is showing its all-new Dodge Ram pickup, reception of the new truck by the public is critical to its nascent turnaround as a profit maker, and also as bait to other automakers. Chrysler is hoping that it can sell its truck-building expertise to other automakers, such as Nissan (NSANY) and perhaps eventually Chinese auto companies, which are looking to Chrysler to build pickups for them (BusinessWeek.com, 1/10/08).
A Staple of Ford's Business
Ford saw the steepest decline, with F-Series, the category leader, down 13.2%. GM's Chevy Silverado was down 3%. Dodge Ram was down 2%. Sales of Nissan's Titan were down 9%. Honda's Ridgeline was down 15%. Toyota (TM), which launched an all-new Tundra pickup last January, sold 196,000, up 58%, but not without lathering on heavy sales incentives out of the gate. Pickup truck sales were 12% of total vehicle sales last year, compared with 15% of total vehicle sales in 2004.
Even with the decline, Ford's chief of sales analysis, George Pipas, says the pickup truck market remains a staple of Ford's business and the American driveway. "A full-size pickup has been the best-selling vehicle, car or truck, in the U.S. for 26 years in a row. Not only that, there are five full-size trucks on the list of the top 13 selling vehicles in the U.S.," he says. Ford sold 690,589 F-Series pickups last year. The automaker earns a profit of around $10,000 per truck. Given the fact that Ford's North American auto business has been losing big money, it's easy to see how awful the company's fortunes would look without the F-Series. "The F-Series is a firewall of the company," says Ford Americas President Mark Fields. "We have gotten some other things wrong, but we don't get the F-Series wrong, and if we ever do, we'll have to close up."
As strong as Ford's leadership in pickups is, the automaker isn't safe from interlopers by any means. Since Toyota redesigned its Tundra, it is pulling nearly twice as many buyers from Detroit brands. According to Power Information Network senior analyst Tom Libby, 12.3% of Tundra buyers in the fourth quarter came from Ford trade-ins, vs. 6.5% a year ago. General Motors (GM), too, is feeling it. Tundra got 7.5% of its truck trade-ins from Chevy, compared with 3.9% a year earlier. Those are worrisome trends as Toyota looks to increase its pickup business.
Stretching the Backseat Passenger Area
Fortunately for Ford, the 2009 Ford F-Series won't disappoint its faithful. Indeed, when Ford engineers or a knowledgeable salesperson takes a customer or journalist through the development of this pickup truck, one can't help but wonder if Ford would have lost its second-place status in U.S. sales to Toyota if it applied the same level of resources to all its vehicles as it does to its pickup.
It starts with the frame, or skeleton of the truck. Ford starts with fully boxed steel rails. That creates body strength and rigidity that help make the truck so durable and tough against sometimes brutal use at the hands of contractors, builders, and ranchers. The interior of the truck matches the best interiors of passenger cars. And because the fastest-growing part of the shrinking truck market is dual-use (commercial and business buyers who also use the trucks for family and personal use), the backseat passenger area was stretched by six inches from the old one.
The rear seat also folds up and out of the way to reveal a flat load floor spacious enough to carry a sizable load of groceries, a flat-screen TV, or an array of supplies without having to expose it to the weather in the cargo bed. The new truck will also be offered with Sync, which is Ford's in-cabin communications and entertainment system that allows voice-activated control of MP3 players and cell phones, including hands-free texting. It will also come with Travel Link, which, when combined with a navigation system, gives the driver voice-activated traffic, weather, and locations of service stations and the like, even with gas prices.
Premium-Edition Trucks Still in Demand
More than 30 storage areas are built into the interior, ranging from a bin on the top of the instrument panel to a number of small spaces designed to accommodate tools like cell phones, MP3 players, PDAs, and gate access cards. "The pickup today has to be the most capable and smartest tool the customer has," says Derrick Kuzak, Ford product development chief.
Even if truck buyers are fewer these days, the ones that are still showing up like to spend money. Half of Ford's Super Duty trucks in the last year are premium "Lariat" editions with multiple creature comforts, retailing for between $40,000 and $50,000. And after thinking it could only sell about 3,000 King Ranch editions of the trucks with even more niceties and luxury features making for a $50,000-plus sticker price, the automaker actually sells around 35,000 per year.
Buyers also like fashion, too, and Ford has tinkered with the front end of the new truck. A more pronounced chiseled hood, combined with Ford's now signature three-bar chrome grille, gives all the F-Series trucks the tough-looking image of the Super Duty truck. For the wealthier ranch owners and builders to whom the pickup truck is a ride to be pimped, Ford is offering a new Platinum series, the most luxurious F-150 ever. This truck includes a satin chrome grille with fine mesh inserts, 10-way leather captain's chairs, ash-wood grain accents and real brushed aluminum panels, and 20-inch wheels. The price tag will be around $60,000.
Clever Storage in the New Ram
Ford managed to boost the fuel economy of its V-8 engine lineup by 1 mpg. It may not sound like much, but that adds about 20 miles per tank. And every bit helps when trying to increase the company's overall Corporate Average Fuel Economy rating. There is no more V-6 offering, nor a fuel-saving manual transmission. In 2010, direct-injection turbocharged V-6 engines will be offered as an even more fuel-efficient alternative. Those engines, known as Ford's EcoBoost engines, will pack as much or more horsepower and torque as V-8s, but with at least 15% better fuel economy.
Chrysler's new Dodge Ram is trying to hold on to its loyal truck buyer base by emphasizing its long-standing brawny styling and Hemi engine. The new incarnation of Chrysler's popular engine brand gets 380 horsepower. But it's clever storage that is the calling card of the new Ram. The top rails of the pickup bed sides above the rear wheels open to reveal a lockable dry storage "Ram Box" for bike helmets, basketballs, and the like. There is also a cooler built into the rear floor of the cab suitable to keep iced beverages. "Pickups today have to be capable, smart, and very comfortable, not just tough," says Chrysler designer Ralph Gilles.
The last Ram design lagged Ford and GM for interior appointments. The new design is chasing the dual-use personal/commercial market with such cockpit refinements as leather, wood-grain inserts, and chrome. "The Ram is coming up in the world, because our buyers have moved up and want to be treated better while behind the wheel," says Chrysler Vice-Chairman Tom Lasorda.
Both Ford and Chrysler are chasing an important but shrinking number of buyers. And even contractors with less work these days want to be treated like the Boss.
See the BusinessWeek.com slide show for more of the new Ford F-150 and Dodge Ram.