Counting on hefty pickups to haul in profits

By Martin Zimmerman

Nov. 19, 2006 12 AM PT

Times Staff Writer

There’s a monster truck battle brewing in dealer showrooms across America.

Redesigned versions of three industry heavyweights -- the Ford F-Series Super Duty, the Chevrolet Silverado and the Toyota Tundra -- are going head-to-head in a fight for the shrinking but highly lucrative market for full-size pickups.

The showdown has deep implications for Ford Motor Co. and Chevy maker General Motors Corp., which need to boost truck sales to shore up their sagging finances. Toyota Motor Corp. is banking on its redesigned Tundra to finally give the Japanese auto giant a solid foothold in the American truck market.

Ford, awash in red ink, has the most at stake. Pickup trucks have been a bedrock of its product line for years -- its F-150, introduced in 1948, is the bestselling vehicle in the United States.

The all-new Silverado is already in showrooms, and the revamped Tundra will arrive in late January or early February. Although the redesigned Super Duty is expected to create excitement among Ford fans when it arrives early next year, it represents only about 40% of F-Series sales. The flagship F-150 isn’t due for a makeover until 2008.

“Probably the biggest concern for Ford right now is coming up against the redesigned GM trucks and the upcoming redesigned Tundra,” said Jesse Toprak, an analyst at automotive information service Edmunds .com in Santa Monica.

The truck battle is being played out at state fairs and farm conventions, on the Internet and in direct-mail promotions. And despite all the uproar this year about high gasoline prices, the automakers are battling for buyers who care less about miles per gallon than payload and towing capacity.

“This is a group that gets excited about pulling big things,” said Ben Poore, head of truck marketing at Dearborn, Mich.-based Ford.

It’s also a group known for its brand loyalty. And with that in mind, Ford is playing to its base with a marketing campaign aimed at NASCAR fans, farmers and ranchers. Reaching out to rodeo buffs, Ford even gave away a bull named Super Duty.

“We’re going to stick with what has worked very well for us,” Poore said, noting that the centerpiece of the campaign remained the 29-year-old “Built Ford Tough” slogan.

Detroit-based GM is following a similar strategy. Its marketing campaign for the redesigned Silverado includes a 200,000-mile club, which invites Chevy owners to submit photos and brag about their trucks. The website (www.chevy200k.com) features loyalists such as Archie from Texas, who sent in a photo of his 1994 truck’s odometer reading 303,166.

Toyota, meanwhile, is unleashing its biggest U.S. launch campaign in a effort to make a bigger dent in the full-size pickup segment, which has remained firmly in the grip of the U.S. manufacturers. Toyota hopes that its redesigned Tundra will be a big hit with buyers and is projecting sales to double next year to 200,000.

There’s a good reason the automakers are pulling out the stops: Trucks produce profits for them -- as much as $10,000 per vehicle, according to some estimates.

This is particularly important for Ford, which makes money on trucks and not much else in North America and counts on pickups for a third of its sales, said analyst Christopher Ceraso of Credit Suisse in New York.

Big Three rival DaimlerChrysler, which won’t have a redesigned version of its Dodge Ram in showrooms this year, relies on pickups for 23% of sales. Its difficulties in moving big trucks this year contributed to its $1.5-billion net loss in the third quarter.

Sales of full-size pickups are down almost 10% this year from 2005. When pump prices hit $3 a gallon this year, shoppers who didn’t need to drive a pickup opted for something that got better than the sub-20 mpg that’s typical in the category.

“The pickup market has suffered the last two years primarily because those people dropped out of the market,” said Art Spinella, president of CNW Marketing Research Inc. in Bandon, Ore. “The only thing they use the bed of the truck for is empty beer cans.”

The slowing housing market also took a toll as contractors put off purchases.

Combined with even steeper declines in sales of similarly profitable full-size sport utility vehicles, the falloff in pickup sales has been a big factor this year as Ford and GM have been losing money by the bucketful. Ford is shuttering an F-150 plant in Virginia to bring its production capacity more in line with demand.

The good news for truck makers is that other categories of pickup drivers -- contractors, farmers and ranchers, recreational vehicle and boat owners, and government and corporate fleets -- make up close to 80% of the market, and they aren’t going anywhere. They may put off buying a new truck, but eventually they are going to need another one. Indeed, truck sales have ticked up in recent months as gas prices have retreated.

“There has been a lot of postponing rather than abandoning,” Spinella said.

Automakers typically revamp vehicle models every three to five years, freshening designs, adding new features and beefing up performance. Splashy redesigns can have a dramatic effect on sales. When Ford last overhauled the F-150 in 2004, sales jumped 11% from a year earlier.

Ford, GM and Toyota are adding features designed to appeal to “serious” truck owners. For instance, the new Super Duty, Silverado and Tundra all offer bigger engines for increased towing capacity and heavier payloads -- key elements of truck marketing.

Ford and Chevy will maintain an edge with the RV crowd by offering diesel engines, which are the preferred power plant for big towing jobs. (About 75% of Super Duty buyers opt for diesel engines.) Toyota doesn’t offer a diesel-powered Tundra and has no plans to.

There are smaller touches as well.

The Silverado, named “best redesign of the year” by Kelley Blue Book, features door handles designed to be more easily manipulated by someone wearing work gloves. The Super Duty has an innovative tailgate step that makes it easier to step up into the truck bed. And the Tundra has headrests that accommodate hard hats and cowboy hats alike.

Much of the competition will play out in California, which runs neck and neck with Texas as the No. 1 market for F-Series sales.

Truck owners stopping by the Home Depot on Figueroa Street north of downtown Los Angeles recently spoke highly of the domestic models, but Toyota has fans in the Golden State as well.

Mark Sheffer, an Altadena real estate investor, pulled his 2004 F-150 crew cab into a parking spot at lunchtime and wasted no time explaining why he was behind the wheel of a Ford.

“It’s a great truck,” he said. “I’ve had trucks for 30 years, mostly Ford and Chevys. But I prefer the Ford. It’s durable and well-made.”

Toyota may have stumbled with its work-truck pretensions when it introduced the Tundra in the late 1990s. But drivers such as Manuel Jacquez of Los Angeles still have fond memories of the automaker’s compact Hilux pickup from the 1970s.

“That was a great truck,” he said, recalling the economical model that helped get him through his college years -- and laid the groundwork for the Toyota Tacoma pickup he bought three decades later.

“I drive a Ford truck for work and it’s fine,” said Jacquez, an employee of the Los Angeles Department of Water and Power. “But the durability and reliability of the Japanese trucks is overwhelming.”

Recent Toyota ads, mindful of the “heartland” appeal of pickups, have played up the automaker’s U.S. manufacturing presence, and the company is quick to point out that the new Tundra will be built in Indiana and Texas.

Analysts said Ford and GM had learned from past lapses in the passenger-car market not to take the challenge from Japan lightly.

“They aren’t resting on their laurels any more,” said Catherine Madden, a senior analyst at consulting firm Global Insight. “It’s been proven to them that Toyota can come into any segment and take over if they want to.”

martin.zimmerman@latimes.com

(BEGIN TEXT OF INFOBOX)

Who buys trucks?

Here’s a breakdown of the U.S. buyers of large pickups.

Contractors: 40.2%

Lifestyle buyers: 21.7%

Farmers, ranchers: 13.1%

RV, boat owners: 12.6%

Fleets* : 12.4%

*Government and corporate

Source: CNW Marketing Research

The Ford F-Series is the bestselling pickup in the U.S. (by market share as of October)