3 Reasons Trucks Won't Ride to Detroit's Rescue
The Detroit carmakers have hung in there admirably during a bumpy and now newly catastrophic economy. To a degree, they've been counting on the sale of profitable, large trucks to help them fully recover. After all, General Motors (GM) and Ford (F) almost always have the two best-selling vehicles in the U.S. -- and they're full-size pickups. GM even made a bet on a moderate truck recovery later this year, but stranded itself with too many pickups.
So Motown isn't going to get its truck bump, which means it needs to look elsewhere for survival. Here's why:
- A housing recovery could take forever. Contractors not building houses means contractors not buying trucks. Luckily, the Big Three aren't as reliant on full-size pickups as they were a decade ago. GM has made a smash with the compact Chevy Cruze sedan, which was nearly America's best-selling car for the past two months (it was just edged out by the Toyota (TM) Camry in July, in a itself a remarkable result given the the challenges, post-quake, that the Japanese carmaker has faced). Detroit is also building smaller SUVs in greater numbers now, which should give it a hedge against the declining big truck market.
- Gas prices will resume a long-term trend. Oil is dropping like a rock, but the markets will inevitably recover, and then oil will march back up. Carmakers have no illusions about this. They don't sit around their board rooms and engineering studios reminiscing about the days when gas was $1.25 a gallon. You can squeeze MPGs out of pickups -- Ford has done it with its turbocharged V-6 version of the F-150 -- but there's a threshold beyond which the engine is just too small for the size of the vehicle. This is actually a big plus, as it has forced Motown to invest in fuel-efficiency across the board, and in the development of electric vehicles.
- Customers are running for the hills. Make no mistake, if you need a car, you need a car. But you might not be willing to ante up for a truck. Especially a full-size pickup that may leave you with a sizable payment in an economy that could head back to a 10-percent unemployment rate. People who buy a truck tend to buy another truck -- except when they don't really need one in the first place. Then they start looking at their monthly budget. And there's simply not as much space for a $30,000 outlay when a $15,000 one will get them from A to B -- even if it can't tow a boat or be filled with lumber for that home renovation than now might not happen.