Slowing sales cut output and profits of Big Three

Thursday, August 24, 2006 Pickup sales are down nearly 16 percent this year. CLINTON, Mich. (AP) — Tom Wright's dark-blue GMC Sierra Extended Cab pickup is 12 years old, but so far he's dismissed any thought of replacing it. Although it has 165,000 miles on it, Wright says times are a little too slow in the carpentry business to replace the truck, which he uses for work and to haul around his family. Much to the detriment of Detroit's Big Three, people like Wright are delaying truck purchases, cutting into profits and forcing Ford Motor Co., General Motors Corp. and DaimlerChrysler AG's Chrysler Group to idle some assembly lines. Pickup sales overall are off 15.7 percent in the first seven months of the year from the same time last year. Sales of Ford's F-series pickups, the highest-selling vehicles in the nation, are down 12.3 percent. The No. 2 seller, the Chevrolet Silverado, is off 20.1 percent as the company changes production to a new model. Dodge's Ram line is down 11.7 percent. Last week, Ford announced that it would cut production by 168,000 vehicles, or 21 percent, in the fourth quarter to bring supply back in line with growing inventories. GM already has cut vehicle production by 7 to 8 percent in the third quarter, and Chrysler on Wednesday said it would cut production in the fourth quarter by an unspecified amount. The company already announced a 10 percent cut in third-quarter production, mostly in trucks and sport utility vehicles. Wright, 45, who lives near Clinton, a village about 60 miles southwest of Detroit, says he gets mailings from his dealer telling him it's time to buy. But as long as the Sierra remains dependable and the economy remains uncertain, he'll keep it. "I just have a hard time justifying $30,000 for a new truck right now to replace this one," he said while installing new windows in a downtown building. "There's no sense in spending the money right now, the way I look at it." Two categories Industry analysts say the people delaying truck purchases fall into two categories: Those like Wright who use pickups primarily for work and those who use pickups as their personal vehicles. Most sales are for personal use, and analysts say that with $3 per gallon gasoline, many of those customers are leaving the market for more fuel-efficient vehicles. "The customers who don't have a need for the product have opted for something else," said Tom Libby, senior director of industry analysis for J.D. Power and Associates. So the Big Three, which rely more on trucks for profits than their foreign competitors, are likely to face more hard times as truck demand softens even further in the second half of the year, analysts say. Nearly 32 percent of Ford's sales came from pickup trucks through July of this year, the highest percentage in the industry, according to Autodata Corp. GM's was 25 percent, while Toyota's was at 11.5 percent. Kip Penniman, an analyst with KDP Investment Advisors in Montpelier, Vt., predicted that Ford would be particularly hard-hit later in the year as GM and Toyota come out with brand-new pickups that could cut into the F-series' market share. "If they don't do something with the pickup trucks, which is their bread and butter, these guys are just gonna see some very sharp distress over the next several years until they finally turn around," Penniman said.