US light trucks slump

It's a sign of the times when even Americans are deserting their trucks for more economical cars.

The most popular car in the USA last month wasn't the F-150 Ford pick-up (pictured), it was the Honda Civic. Ford sold 42,973 units of the light commercial vehicle, to 53,299 units of the Honda. The Ford was also out-performed by the 52,826 Toyota Corollas, 51,291 Camrys and 43,728 Honda Accords also sold during the month.

The gradual decline in the American light truck market has been observed a long way off, but the writing is on the wall in indelible ink now that four passenger cars have gained sales supremacy over the former most popular vehicle in the US (top selling vehicle of any kind in the market since October 1991, according to respected American industry journal, Automotive News).

To add insult to injury, the four passenger cars were not built by the traditional 'Big Three' domestic manufacturers, although Honda and Toyota do build cars in the US and, in fact, at least two of the four models are American-built.

Automotive News reports that Ford has immediately implemented employee pricing incentives on the whole F Series range of trucks, which includes the relatively small F-150. Sales of the F-150 have fallen away by 30 per cent YOY for the month of May, the Detroit News advises, but Ford has a new model F-150 on the way, scheduled for the northern hemisphere autumn (our spring). The company is also said to be working on a sub-F-150 model, code named project P525, which may be marketed as the F-100, reviving a name from the past.

Automotive News quoted an observation from Jim Farley, Ford group vice president for marketing and communications, that the change of fortune for the F-150 was a "significant development."

"But it's not surprising, given the fuel price," Farley said. "That's just a sign of the times. I think May has been a watershed month."

Does this mean that the F-150 has seen the worst case scenario and things will now start to improve? Not according to Farley's boss, Ford CEO Alan Mulally.

"I think we're seeing a structural shift where, with [fuel] prices being high in the United States, we're seeing exactly what happened in Europe a number of years ago, where the customers are going to make economic decisions, and they're going to move toward smaller and medium-sized vehicles," Mullaly told Automotive News.

Over in the greener grass camp, Dick Colliver, executive vice president of American Honda, said: "The dramatic increase in car sales appears to be one of the most profound shifts in automotive buying patterns in more than a decade".

"Record sales of the Honda Civic clearly demonstrate an accelerated trend toward fuel efficiency."

Last month, Ford announced that it would cut truck production and lay off as much as 12 per cent of its white-collar staff to meet a 2009 profitability target.

Current truck market woes may also force the fast-tracking of the T6 light commercial vehicle project currently in development by Ford Australia. A plant in South Africa will build the T6, which replaces the current Ranger, but won't enter production until 2011. The Ranger is currently built in Thailand for markets around the world other than the USA. In America, the Ranger is too small for the market, but with the sudden fuel price sensitivity, the T6 may yet be built for the US too. According to the Detroit News, Ford is considering the T6 option for America, selling alongside the P525 model.

Ford is not the only company to do some serious soul searching in the respect of its light truck business. Automotive News also reports that General Motors has announced the end of light truck manufacturing at four plants and is reviewing the Hummer brand, with the bespoke offroad marque being considered for sale.

Two of the plants to cease building commercials are based in Ohio and Wisconsin; the other two are based in Ontario, Canada and Toluca, Mexico. Vehicles that may be progressively phased out of production from next year as a result of the plant closures include Chevrolet Silverado, GMC Sierra, Chevrolet Trailblazer, GMC Envoy, Saab 9-7x, Chevrolet Tahoe, Chevrolet Suburban, GMC Yukon and Chevrolet Kodiak. These vehicles are either light trucks or truck-based SUVs. The cuts will result in an annual cost saving of over US $1 billion by 2010, according to information obtained by Automotive News from GM's CEO, Rick Wagoner.

"Employees of these facilities were notified this morning," Wagoner said. "These are difficult decisions and we'll work with our union partners."

GM's pickup and SUV production capacity will drop by over 700,000 units as a consequence, but on a happier note, GM also announced that it would introduce a third shift at the company's Lordstown plant for production of a new Chevrolet compact car commencing 2010 and the Volt hybrid-drive car has been approved for production.

The Detroit News further reported that a third shift at the Orion plant in Detroit will lead to increased production of the mid-sized Chevrolet Malibu and Pontiac G6 models.

Still up in the air for the moment is Hummer. Wagoner told Automotive News that GM will commence a strategic review of Hummer and its place in the GM global portfolio. A sale is not definitely confirmed, but GM does aim to reduce its sales dependency on trucks (and luxury SUVs such as the Hummer models) substantially over the next few years. Currently, GM sells a 50/50 mix of cars and trucks, but Wagoner wants that to change to 60 per cent cars versus 40 per cent trucks within three years.

This news was greeted by an improvement in GM's share price, suggesting that a company only has to pay lip service to some longer-term strategy and the sharemarket will respond favourably.

The Detroit News reports that GM hasn't turned a full-year profit since 1994 and fuel prices around US $4 per US gallon are not helping even the much leaner corporate giant survive.

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