Big Three clobbering each others’ profits?

2019 chevy pickup

The American Big Three — General Motors, Ford, and, yes, Fiat Chrysler (FCA) — have already fled from sedans and coupes into pickup trucks to gain sales. There are a few reasons for that, including an apparent Japanese ineptitude at creating credible full-size pickups and odd American fuel-economy rules that reward making larger vehicles; but the fact remains that Ford relies almost entirely on the F-series pickups for sales and profits, and GM and FCA aren’t far behind.

Yet, the Big Three are working hard at slashing their own pickup profits, as they fight for dominance.

2019 chevy pickup

Ford, the default pickup choice regardless of performance, started in one way — switching to costly aluminum construction, using expertise borrowed from Old Chrysler (via the old Plymouth Prowler engineering team, which jumped ship after Daimler took over Chrysler). The new trucks reportedly cost thousands more to build, but Ford sold them at about the same price as the old steel models.

Today, Ford’s giving customers up to $12,000 back on the 2018 F-150s, a hefty discount. Chevrolet and Ram aren’t trying for #1 so much as competing for #2; and the 2018 Silverado carries a $13,000 discount, while the Ram 1500 is selling at up to $16,000 off. These are dealer-discounted rates — almost certainly subsidized by the manufacturers — and you won’t see them on brand web sites or TV ads.

It tells you something that the companies are still making money on pickups at those prices, with average sales prices running around $43,500 — an insanely high number when compared against sedans, coupes, or crossovers.

Some of the discounts might be temporary, as Chevrolet and Ram try to attract Ford customers after a supplier fire, and GM tries to clear out its 2018 inventory as the 2019s come in; Ram is making both new and old pickups at the same time, and the older ones are getting bigger discounts (statements made at a recent investors’ meeting suggests they might keep the “classic Rams” in production longer than you’d think).

Still, automakers and retailers alike (J.C. Penney, for example) have found out that it’s easier to start giving out rebates and incentives than to cut back. Once you start giving people thousands back, even on brand new cars, people will refuse to buy until they can get the deal. That makes nonsense out of list prices but likely hurts future profits.

What happens if gasoline prices go up? Each of the pickups has a high-mileage version planned or ready, the most credible of which is probably the Ram hybrid V6, which uses regular gas and the highest city-mileage benefit; it also has a diesel coming. GM will have both diesel and four-cylinder bases covered, while Ford relies on a diesel and aluminum body. The hope is both to stay within rising fuel-economy limits (assuming these aren’t reversed) and be ready for customers demanding more economical pickups. Chances are, though, that most customers seeking better gas mileage will simply move back to sedans or crossovers. If that happens, Toyota and Honda will be laughing all the way to the bank, and Detroit’s big players will be in an all too familiar “oops” position.    Based on a story from Automotive News.

About David Zatz 90 Articles
The founder of famed Mopar site allpar.com (and its publisher for 20 years), David Zatz has been writing about cars and trucks since the early 1990s; he also writes on organizational development and business at toolpack.info and covers Mac statistics software at macstats.org David has been quoted by the New York Times, the Daily Telegraph, the Detroit News, and USA Today. You can reach him by using our contact form (preferred) or by calling (313) 766-2304

Be the first to comment

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.