Pickups Save Detroit - Film At 11

December 19, 2002

Forbes Commentary by By Jerry Flint

If it weren't for big pickup trucks, Detroit probably wouldn't be making any money at all.

The car magazines love the hot stuff, the cars that go from 0 to 60 in seven seconds and whip around corners with all four wheels on the ground. Families love sport utilities, especially the ones with plenty of leg room.

But Detroit loves big pickup trucks. That's where the money is today. That's where General Motors , Ford and American Chrysler are fighting their war. These aren't the small pickups like Ford's Ranger or Toyota's Tacoma. I'm talking about the big ones, such as: Chevy Silverado and GMC Sierra, Ford F-150, Dodge Ram and Toyota Tundra. List prices start at $20,000, but the Full Monty, with four doors, extended cab, four-wheel drive, V-8 and leather will move the sticker well past $30,000. And you can go beyond $40,000 for the fanciest and biggest models.

Why are these pickups the most important vehicles Detroit builds? Look at the sales figures in the table. Unit volumes are almost twice those of the bestselling sport utilities or cars (400,000). Pickups account for nearly one-fourth of Ford's vehicle revenues and one-fifth of GM's and Chrysler's. And these are profitable revenues. A $35,000 truck probably produces $5,000 in operating profit.

Chrysler's big pickup, the Dodge Ram, is as much a success as the minivan, which Chrysler invented. Before the Ram, pickups were just pickups. But Chrysler's designers (this was pre-Daimler) gave it a macho look that GM and Ford have yet to match. Ram sales went from 80,000 a year to 400,000, and it's a pillar in Chrysler's recovery today.

Detroit also makes money by exploiting the platforms--the frame structure underneath those pickups. They are used in other vehicles, which spreads costs and builds profits. The T800 platform on the GM pickup is used on the Tahoe, Yukon and Suburban SUVs, and even on the Hummer H2. The combined platform total is 1.6 million units. That's how GM makes money.

Let's also not forget that the government standards on emissions are easier to meet, an average 22.7 miles per gallon, compared with 27.5 for cars. A full-size pickup with a big V-8 and four-wheel drive gets 16 miles to the gallon. And buyers seem more satisfied with their quality, or maybe don't expect as much fit and finish from trucks as they do from cars.

Best of all for Detroit, the Japanese aren't in this segment in a big way yet, so customers have more loyalty. Toyota is the only foreign manufacturer building a big pickup, the Tundra. But at 100,000 units a year out of a plant in Indiana, Toyota doesn't build enough or offer enough variations to seriously threaten Detroit. And Toyota has had a problem understanding just how big we like our trucks.

Still, the Japanese are coming. Toyota is believed to be planning a second truck plant, in Texas, and the next model will be bigger. Nissan is building a truck plant in Mississippi that will go into production in a year. So in a few years we can figure on a big-truck capacity of between 250,000 and 300,000 from the two Japanese makers. That may be why Detroit fights so hard for the truck business. General Motors is giving $2,500 rebates on Chevy Silverados. These are darn good trucks. I believe they could sell those trucks without such a big rebate. But they are sending a message to Japan: "You want this beach? Fine. But you are not just walking in." So Toyota has had to put a $500 rebate on its Tundra.

Who are the customers? Even for extra-large models (like the Ford SuperDuty), most of the buyers are not businesses; they're just people. We own a '97 GMC Sierra. Why? I wrecked my wife's little Miata sports car and owed her a vehicle. She fell in love with an extended-cab four-wheel-drive monster with a 5.7-liter engine.

We use the truck to tow her horse trailer (you just can't tow a horse trailer with a Toyota Prius hybrid) and to carry loads of mulch and horse manure for the garden. Once we even pulled a stuck car out of the mud. We think that maybe someday we'll get a travel trailer, hook it to the pickup and travel across America.

Are those reasons good enough? They aren't overwhelming. We could do without that pickup. But we want it. And in upstate New York everybody owns a truck; a car is a second vehicle. Right now hicks like us are saving Detroit.