[Rhodes22-list] New Tow Vehichle

Brad Haslett flybrad at gmail.com
Wed Aug 2 08:22:25 EDT 2006


For any of you who may be considering a new tow vehichle for your Rhodes-22,
now is an excellent time to upgrade.  Here is an article from yesterday's
Wall Street Journal.  I've been out kicking tires at dealers for a
replacement for our tired and ragged Ford F-450.  We've decided
to continuing nursing along what we have until the next tax year but there
are some great deals out there.  Good luck at the pump!

Brad

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   [image: The Wall Street Journal] <http://online.wsj.com/home>

August 1, 2006


By *NEAL E. BOUDETTE* and *JEFFREY C. MCCRACKEN*
August 1, 2006; Page B1


ANN ARBOR, Mich. -- Carl Babcock, a home builder in this prosperous college
town, has wanted to upgrade his small pickup truck to a bigger Ford F-150
for more than a year now, but the thought of filling up with $3-a-gallon
gasoline has stopped him. And now with higher interest rates slowing housing
starts, he figures it is better to wait awhile.

"I would love to go out and buy a new truck, but I will probably just drive
the one I have into the ground," Mr. Babcock says. Because of gas prices and
interest rates, he adds, "it doesn't make much sense to buy one right now."

The Big Three U.S. auto makers, which are already facing plenty of
challenges, now have another problem on their hands: Sales of big pickups
are slowing down.

The pickup-truck business is critical for *General Motors* Corp., *Ford
Motor* Co. and *DaimlerChrysler* AG's Chrysler Group. Some 2.4 million
full-size pickup trucks were sold in the U.S. last year -- one of every
seven new vehicles -- and they generated $67 billion in revenue for the
industry.
[image: [Needing a Pickup]]

Ford and GM typically sell 900,000 or more full-size pickups a year, and
Chrysler about 400,000; each gets a big chunk of its profit from this
segment. On average the U.S. auto makers earned $4,000 to $5,200 in gross
profit on each big pickup last year, the University of Michigan
Transportation Research Institute estimates. Truck buyers have also remained
fiercely loyal to Detroit, even as car buyers have defected in droves to
foreign brands.

Sales of full-size pickups had been holding up despite higher gasoline
prices, in part because GM, Ford and Chrysler have raised incentives and
rebates. Another factor: about 75% of all pickups are sold to contractors,
builders and other businesses that can't make do with smaller vehicles.

But now Detroit's cash cow is looking wobbly. In the first half of 2006,
large-pickup sales fell 10% to 1,104,983. In 2005, pickups made up 14.5% of
total vehicles sales in the U.S. But that dropped to 13.7% in the first
quarter and to 12.5% in the second quarter -- a sign that buyers are leaving
pickups for other vehicles.

GM's full-size-pickup sales were down about 20% in the first half; the
company is hoping for a boost when it launches a redesigned Chevy Silverado
this month. *Toyota Motor* Corp. and *Nissan Motor* Co. have seen declines
of 10% or more in their full-size-pickup sales, but they are less affected
because trucks make up only a small portion of their total U.S. sales.

Ford's F-Series sales are down 2% so far this year, but fell 6% in May and
10% in June, drops that forced Ford to speed up a six-month-old
restructuring program that is slated to close 14 plants and eliminate 30,000
jobs by 2012.
[image: [Bumpy Ride]]

"Clearly the pie, at least in the quarter, for the full-size-pickup segment
is shrinking," Ford North American head Mark Fields said last week in a
conference call.

Auto makers believe "personal use" truck buyers -- suburban cowboys who like
driving pickups but don't necessarily need them for work -- are now shifting
to cars or other more fuel-efficient vehicles. Tom Libby, senior director of
industry analysts for J.D. Power's Power Information Network, noted that 64%
of pickup owners bought another one when they traded in or sold their
vehicles in the second quarter. A year ago, according to PIN, the figure was
70% and three years ago it was 77%.

The Federal Reserve's string of rate increases also appears to have slowed
home construction enough that some contractors are using older trucks longer
and delaying purchases of new ones.

Mr. Babcock, the builder in Ann Arbor, says he has enough work but has seen
other contractors shut down or scale back the number of work crews they
have. "It's not a good time to pile on additional debt with a new truck," he
says.

Because the large-pickup business is so big and lucrative, even a mild
softening can have major consequences for Detroit. "The domestic brands
haven't developed strong enough car businesses to carry their brands," says
Earl Hesterberg, chief executive of Group One Automotive, a large
auto-dealership chain based in Houston. He says that full-size pickups "are
the heart of the Ford and Chevy businesses."

A drop of 10% in large-pickup sales this year would translate into 250,000
fewer vehicles than in 2005. That is the equivalent of a typical plant's
annual production. Because Toyota will soon start production at a new truck
plant in Texas, the industry could end up with significant excess
manufacturing capacity in pickups, which could force some manufacturers
either to cut prices or cut production.

Mr. Libby says the move of buyers away from full-size trucks could be
"unsettling" for the Big Three because they are likely to move to smaller
vehicles that generate far less profit, or turn to foreign brands. Some data
collected by PIN suggest pickup buyers are moving to midsize or compact cars
-- segments where foreign brands are stronger. Any big move of buyers out of
pickups "would mean that all of a sudden the whole industry is wide open,"
Mr. Libby says.

Ford, which has lost $1.3 billion in North America so far this year, has cut
its North American truck production by 45,000 for the third quarter of this
year, largely because of sales drops of the F-series and larger SUVs like
the Ford Explorer and Lincoln Navigator. That production cut will take a
chunk out of Ford's earnings and revenue in the third quarter, a period that
is already the toughest for auto makers because of summer shutdown and model
changeovers.

Maintaining robust F-Series sales is crucial to Ford's goal of restoring its
North American operations to profitability by 2008.

Ford will launch an even bigger "Super Duty" version of the F-series early
next year. However, the F-series isn't scheduled to get a full makeover
until late 2008, meaning it will be one of the oldest pickup trucks on the
market the same year that Ford has pledged to finally become profitable in
North America again.

*Write to *Neal E. Boudette at neal.boudette at wsj.com1
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