Detroit's Cash Cow Stumbles

• Published in: The Wall Street journal. Eastern edition
• Main Author: Neal E. Boudette and Jeffrey C. McCracken
• Format: Newspaper Article
• Language: English
• Published: New York, N.Y Dow Jones & Company Inc 01.08.2006
• Edition: Eastern edition
• Subjects: Automobile sales; Automobiles; Contractors; Gasoline prices; Housing starts; Interest rates; Profits; Shutdowns; Trucks
• ISSN: 0099-9660

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%. 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." 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.