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New Incentives?


Full Member
Jun 9, 2002
Renton, Wa
Dec. 4 ? The big automakers are going to be cranking out more and more SUVs and light trucks this year. But as production increases, some analysts think the result may be a price war.

THE CATEGORY is called light trucks, but it?s a bit of a misnomer because it includes not just pick-ups but also minivans and SUVs.
According to Deutsche Banc?s auto analyst Rod Lache, on average, the automakers make $5,500 more off of every mid-size SUV than they do off of a car. But he and other analysts are now saying that profit margin is not going to hold up much longer.
They believe the automakers are going to be ramping up their light truck production to keep their plants humming and to lessen the increasing loss of market share to foreign brands.
?They?re doing everything within their power to fend off that competition,? said Lache. ?And that includes very, very aggressive insentivizing of vehicles.

Unfortunately, that is likely to be even worse. In all likelihood, within a few years, you will see profitability of the light truck market more or less in line where the cars are today. And that?s simply a function of raising overcapacity in that market.?
Gary Lapidus at Goldman Sachs says in a research note out this morning that the automakers are setting up a game of what he calls ?light truck chicken.?
He writes that skyrocketing incentives on light trucks are the likely outcome and that likely means a collapse in light truck profits during 2003.
At Ford, incentives to consumers and dealers averaged $3,741 on each new vehicle sold in the United States in November, according to CNW Marketing Research, a Bandon, Oregon-based forecasting service. GM trailed slightly with an average of $3,582, while Chrysler averaged $3,288, CNW said.

Upward pressure on incentives will increase next year as sales soften, analysts said.
Paul Ballew, GM?s director of industry sales analysis, said he expects U.S. light vehicle sales to fall by half a million cars and trucks next year to about 16.3 million or 16.4 million. Some Wall Street analysts believe sales could slide further to around 16 million, down from a record 17.4 million in 2000 and about 16.7 million expected this year.
November sales for GM and Ford fell sharply, and the companies ended the month with unusually high inventories of unsold cars and trucks. Still, both said Tuesday they planned to produce more trucks in the first quarter.
GM said it expects to produce 87,000 more trucks in next year?s first quarter than in the year-earlier period, while Ford is targeting an increase of 50,000 trucks. Both automakers trimmed their North American production estimates for cars for the quarter.

While Detroit?s automakers have seen their share of car sales slip, they have staked their ground in trucks ? including SUVs, pickups and minivans ? which provide the bulk of their profits.
?Above-normal inventories and efforts to hit year-end market-share targets point to higher incentives,? said Merrill Lynch analyst John Casesa.

Ford spokesman George Pipas said the bulk of Ford?s higher truck production is the result of the slow ramp-up of production last year of its new Ford Expedition and Lincoln Navigator full-sized sport utility vehicles.
?Our optimism can be understood by looking at how the Expedition is doing,? Pipas said. November sales of the Expedition were the strongest since March 2001, he said.
But the overall truck lineup at both Ford and GM is aging and faces more competition from European competitors, analysts said.
The Ford F-150 pickup truck, the best-selling vehicle in the United States, is in its last year of production before a changeover to a completely new model next fall, a move that usually leads to lost production and high incentives to clear out older models. Many of Ford and GM?s other high volume trucks are also several years old.

Meanwhile, Nissan Motor Co. Ltd. will start production next fall of its first full-sized pickup truck at its new plant in Mississippi, becoming only the second foreign automaker to enter that market.
Foreign automakers continue to make headway into the SUV market. Japan?s Honda Motor Co. Ltd. sold more than 8,000 of its new Pilot mid-sized SUVs last month, while South Korea?s Kia Motors Corp. sold 3,330 of its Sorento SUVs.

Figures....and I just bought one! :cautious:
ouch - a decade ago, who would have thought that the big 3 would soon be cut off and have a big chunk of sales go to imports?

Sigh... :cautious:

BTW, if this adds to the argument, my dad will trade in our family van (a '97 Chevrolet Venture) when we have the $$$. He really wants to trade for a Honda (that again) Odyssey. But, those dumb Honda people never thought to put a 3-seat bench in the middle row, which many 2-parent 3-kid families (including mine) need if they're going to go on a camping trip. (sit in the front, take away back seats, stuff gear in). So the odyssey is out of question. THEN some genious at Honda decide to make the 8-seat Honda Pilot (mentioned above). That fits the requirement. But even then, the Venture (shorter base version) still has a larger space. So, back to GM. :love: :B: looks like the Venture may be a possibility after all. :love:
It is a fact...that most of the American manufacture's seem to be in a rat race to try and freshin' their truck product line...look at the f-150...after how many years of no major exterior design change...we're finally going to see the face on that guy change like a gemini....and the Chevy line is also going through changes to become competitive.....

I feel that the domestic trucks will always hold the ground in the working man's truck segment.....I don't think the Tundra or Tacoma are going to be the new boys on the block when it comes to this common theme... :B:
I agree. The working man's truck will remain firmly based in the big 3's collective backyards for some time to come. There will always be a strong sence of brand loyalty here.