America's auto industry hinges on the sales of Pickups, "Not Cars"

Discussion in 'Other Manufacturers' started by tigerhonaker, Oct 3, 2006.

  1. tigerhonaker

    tigerhonaker Platinum Contributor

    October 1, 2006

    Fading fortunes

    America's auto industry
    hinges on the sales of pickups,
    not cars.

    Layoffs are rolling across Indiana's 100,000-employee automotive industry.

    BIG HURDLE: A Ford F-150 rolls off the line at Michigan’s Dearborn Truck Plant. Full-size pickups are the only models Detroit still sells in big volume. Year-to-date through August, pickup sales fell 14.4 percent. - CARLOS OSORIO / Associated Press

    Hurt by high gasoline costs and a slower construction market, Detroit's three automakers are cutting production of pickup trucks, sport utility vehicles and other models.

    Next year, the Big Three might produce no more than 9.6 million vehicles of all types, a volume 6.7 percent below this year's expected level, and a full 22.5 percent off the recent peak, in 2002.

    Layoffs haven't riddled Indiana's automotive economy, partly because surging Japanese automakers Honda and Toyota are expanding.

    But analysts now sense America's truck craze has eased and the Detroit automakers won't soon regain 2002's production levels. That could touch off factory shutdowns and acquisitions of parts-making companies.

    "The Big Three are preparing to make fewer pickup trucks,'' said auto analyst Erich Merkle of market researcher IRN of Grand Rapids, Mich. "It doesn't bode well. Detroit depends on pickup trucks.''

    Indeed, Detroit's pickups outsell by two to one the combined volume of the Japanese automakers' most popular midsized sedans -- Toyota Camry, Honda Accord and Nissan Altima.

    While the car market gains buyers, the truck market quakes. Among the developments in recent weeks:

    • DaimlerChrysler temporarily closed Indiana Transmission Plants No. 1 and No. 2 at Kokomo this week and last week, idling about 2,500 workers.

    • Cummins idled assembly line workers three days this week and two days last week at the 850- employee Walesboro plant that makes Dodge Ram diesels.

    • GM Chairman Richard Wagoner, at the Paris auto show this week, renewed discussions aimed at a possible alliance with the French-Japanese combine Renault-Nissan.

    • Renault-Nissan hinted it would discuss an alliance with Ford.

    • International Truck and Engine in Indianapolis, diesel supplier on the F-series pickup, furloughed 417 autoworkers.

    • Steel Parts Corp., a Ford- reliant supplier in Tipton employing 237, declared bankruptcy.

    • Ford supplier Visteon laid off 147 in Connersville.

    • New York hedge fund Pardus Capital raised its stake in Visteon and began pushing for a seat on the board of directors.

    • Honda supplier Asahi Tec bought Chrysler supplier Metaldyne, which employs 1,700 in Indiana.

    • Ford said it would sell or close its 1,900-employee Indianapolis steering plant by 2008, along with sister plants employing 10,400 in its Automotive Components Holding group.

    • BorgWarner, a Ford supplier in Muncie, laid off 76 and furloughed 850 for a week.

    • Ford supplier Cooper Standard laid off 65 in Auburn.

    That may not be the end of the cuts.

    "We think demand for these trucks is going to fall further,'' Merkle said.
    Workers are worried. And disgruntled.

    "We're all concerned about what's going on. The truck market's not like it used to be,'' said Jeff Trent, 53, of Noblesville, a team leader on the DaimlerChrysler assembly line at 1,898-employee Indiana Transmission No. 1.

    "I don't like it because all you hear in the press is how great Honda and Toyota are,'' Trent said. "You don't hear anything about their recalls or that our quality is as good as theirs. I'm not real strong union, but I'm tired of hearing people talk about how lazy UAW people are. I have a small team, six or eight members. You ought to see us in there keeping 37 machines going.''

    Fewer trucks, fewer parts

    For all the hard work, one stubborn fact remains.
    In a typical year, 76 percent of the transmissions made in Kokomo -- Chrysler Group's sole source of transmissions -- go into trucks. The segment includes big vans, minivans, sport-utes, pickups and crossovers, a new breed that looks like an SUV or tall wagon but is built of car parts.

    Foreign automakers in contrast are less likely to be whipsawed. Trucks account for 42 percent of Japanese automakers' U.S. sales.

    And a good chunk of those trucks are crossover SUVs that get better mileage than Detroit's traditional trucks built on heavy steel frames.

    It's not only the prospect of spending $50 to $75 every week to fill a gas tank that could erode Detroit's truck sales.

    Trucks, especially the big ones, are popular for their room and ride, and for many, the image they convey.

    That image might slip.

    Demand for pickups and big sport-utes swelled when many reveled in U.S. technological prowess in the 1991 war that repelled Iraq's invasion of Kuwait.
    General Motors soon redesigned its Cadillac line, including the popular Escalade SUV, around the theme of American art and science. GM styled the Hummer H2 luxury sport utility like an army truck.

    GM marketers wanted a model American boys would aspire to buy. Surveys had revealed many teens viewed the U.S. Army HumVee, a workhorse truck of the 1991 war, as an authentic symbol of independence and ability.

    Now analysts sense a shift might be under way in the popular culture. With gas prices still high compared with the 1990s, and the present Iraq and Afghanistan conflicts unresolved, a more conservative taste may take hold.

    For years, many in America lampooned big-SUV drivers as people merely trying to appear wealthy. The trucks still sold -- until the pinch of high gas prices crumpled demand. Full- size SUV sales slid 23 percent this year through August compared with a year ago.

    While the sport utilities are essential to Detroit's profits, the real lifeblood has been the full- size pickup. It's the only model Detroit still sells in huge volume and is more profitable than the heavily discounted cars. Industrywide, though, pickup sales fell 14.4 percent through August.

    Ford executives took note. In January, Ford announced a restructuring plan. In September, sensing the truck market wouldn't soon rebound, Ford accelerated the plan, and ordered a 21 percent cut in fourth-quarter vehicle output.

    "It's clear we were too optimistic in January about our ability to stabilize market share given the quicker-than-expected shift in the market,'' Mark Fields, head of Ford Americas' operations, told Wall Street analysts recently.

    As bad as the 1980s?

    Just how many jobs Indiana loses remains to be seen.
    "We've never laid anybody off. We've been in business 28 years. We don't intend to lay off anyone in the future,'' said Jody Fledderman, president of Batesville Tool and Die, a 340- employee Honda and Ford supplier in Batesville.

    Dozens of Indiana's 200 auto-parts plants, like Batesville Tool, have allied with foreign automakers. More orders are coming as Honda prepares to build a car plant in Greensburg and Toyota installs a Camry assembly line in Lafayette.
    That's cushioning some suppliers.

    So are job cuts made earlier.

    From 2000 to 2004, nearly 20,000 Indiana autoworkers were let go as parts orders were dialed back from 1990s' boom levels.

    Now many independent factories run leaner than the Detroit automakers. GM, Ford and supplier Delphi are trying to catch up. They plan to shed more than 70,000 workers, chiefly through early retirement, by 2008.

    "Detroit's always had too much production capacity. With the truck bubble bursting, that's certainly hurt Ford and GM,'' said auto analyst Robert Schulz of Standard & Poor's, a credit rating agency in New York.

    Just how bad could it get in Indiana?

    The 1981-82 recession devastated the auto industry. Jobless rates rose into the double digits.

    "I don't want to say it's more severe today than it was then, but I think the production cuts we're seeing today are more permanent,'' Fledderman said.

    "I don't think all the cuts Ford is making in volume will come back. It's not going to be easy. But back then we didn't have anything else to fall back on. The Big Three was all there was.''
  2. Chuck

    Chuck just the messenger

    Last night, as I entered the Texas side of the Red River, for the first time I saw a state trooper pickup truck.
  3. tigerhonaker

    tigerhonaker Platinum Contributor

    Chuck, Who would ever have thought that. I wish you would have had a Pic of that for your Post. That would have been cool. ;)

    Terry (tiger)

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