Image: Dodge Ram
Bill Pugliano  /  Getty Images
The new 2009 Dodge Ram pickup truck is revealed at the Detroit auto show.
updated 1/14/2008 4:33:31 PM ET 2008-01-14T21:33:31

Pickup buyers will be the winners when the new Ford F-150 and Dodge Ram trucks go on sale this fall, but automakers could wind up the losers if heated competition in the all-important segment forces them to keep prices low.

Automakers are facing the daunting prospect of selling pickups in a slumping market that has been hammered by the slowdown in home construction. U.S. pickup sales fell 6 percent in 2007, compared to a 3 percent drop in vehicle sales industrywide, and analysts aren't expecting things to improve anytime soon.

"There's no chance of pickup sales reviving until the economy recovers," Mike Jackson, chairman and chief executive of auto retailer AutoNation Inc., told The Associated Press on the sidelines of the North American International Auto Show. "I think everyone's plans for the pickup truck segment will be difficult, new product or not."

Incentives helped automakers weather the downturn in 2007. Dodge piled more than $6,000 per truck in incentives on its old Ram pickup last year, while Toyota Motor Corp. spent an uncharacteristically high $2,827 per truck on its new Tundra, according to auto research site Edmunds.com.

Incentives will likely be used again this year, hurting automakers' profit margins on pickups, which are traditionally some of their most lucrative vehicles. Toyota and General Motors Corp., which introduced a new Chevrolet Silverado last year, will fight to defend their turf.

"Our Silverado and Sierra have been very well received," GM Chief Financial Officer Fritz Henderson told The Associated Press. "We like our pickup trucks. It's not like they're going to be long in the tooth."

As a result, Ford Motor Co. and Chrysler LLC may be forced to put incentives on their vehicles as soon as they hit the market. The F-150 and Dodge Ram were revealed this week at the Detroit show.

"We expect the profit contribution from a relaunch to be muted as the new vehicles face fresh competition from one-year-old GM and Toyota pickups, as well as a soft pickup market," Lehman Brothers analyst Brian Johnson said in a note to investors.

Johnson said Ford, in particular, is depending heavily on the F-150 to improve its profits. F-series trucks have been the best selling pickups in the U.S. for 31 years.

Still, Jackson said automakers understand that good products and new features will help the market more than incentives. Automakers have been dialing back on incentive spending, and in December, overall spending per truck was down nearly $200 compared to the two previous Decembers, Edmunds said.

"I think there's an understanding that the overall economy, the overall environment, is so tough that it's not all about pricing," Jackson said. "You can't solve the size of the segment with price in this environment. So you only want to use incentives to the extent of competing with other choices for the consumers."

Jackson said overall U.S. sales in 2008 will likely be even lower than 2007, when they were at their lowest level since 1998. He's optimistic that interest rate cuts and possible tax cuts could improve the outlook, but not sooner than 2009.

"I think everybody understands the seriousness of the situation for the American consumer and this economy, but that medicine is going to take time, and I don't expect it to fully kick in by the second half of '08," he said.

Jackson, whose company is the largest U.S. auto retailer with 325 new vehicle franchises, said he's impressed by both the F-150 and the Dodge Ram, which were rebuilt from the ground up and have a host of new features. He said they can help transform Detroit's image with consumers.

"I think the drumbeat of negative news about the Detroit manufacturers in total has created a perception issue, a perception gap, with where their products really are today," Jackson said.

"People haven't made the connection that, even though they're struggling with their business model, underneath that they've really transformed their quality and design and performance characteristics of their products."

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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