This Detroit disconnect sets up America’s ailing automakers for even more ridicule. A half a world away last week, India’s Tata Motors introduced the world’s cheapest car—the $2,500 Nano, an engineering marvel that is held together with glue instead of welds and goes up to 50 miles per gallon. Tata, a fast-growing automaker that is in the pole position to acquire Jaguar and Land Rover from Ford, expects to eventually sell 1 million little Nanos and put the world’s emerging markets on four wheels instead of two. Meanwhile in Detroit, Ford and Chrysler today introduce titanic trucks loaded with whiz-bang features and high on horsepower, but with little or no improvements in mileage. Even the most fuel-efficient versions of the Ram and the F-150 are likely to get less than 20mpg, based on the sketchy information the automakers provided. “They risk looking out of step with the times,” says Global Insight auto analyst John Wolkonowicz.
Why roll out big rigs when you’re trying to earn green street cred? For Detroit, it’s all about another kind of green: the Benjamins. Whatever may be going on in the R&D lab, Detroit still makes the most money on its biggest models. And nothing hauls in profits like pickups, which generate up to $10,000 per model. In fact, pickups account for five of America’s top 13 selling vehicles, with the F-150 and Chevy Silverado ranking No. 1 and No. 2. (This lucrative truck market explains why Toyota risked the ire of environmentalists by launching its own jumbo pickup last year). When it comes to selling economy cars, Detroit still loses its shirt. Ford CEO Alan Mulally last week said he has no interest in getting into the $2,500 car business along with Tata, although he is interested in selling India’s emerging middle class a slightly more expensive small car. Mulally and Detroit’s other car chiefs are furiously retooling their companies so they can eventually make a buck selling small cars, like Toyota and Honda have long done. But for now, the big boys in Detroit’s lineup are still what keep the lights on. “They need these larger vehicles,” says Edmunds.com auto analyst Jesse Toprak, “to keep themselves in business.”
The problem is the pickup business is following SUVs into the ditch. Pickup sales fell 6.2 percent last year, thanks to the housing bust and $3-a-gallon gas. And since Toyota’s new Tundra arrived, the battle for buyers has become pitched and pricey. Last month, automakers on average offered $3,859 in discounts per pickup to move the metal, according to Edmunds. Ford’s closeout deal on the old version of the F-150 topped $4,000 per model, while Chrysler offered $6,379 on the Dodge Ram. Those kind of profit-corroding rebates explain why Detroit is losing billions.
That means there’s a lot riding on these new versions of the F-150 and Dodge Ram. For starters, Ford and Chrysler hope to dial down those discounts on their new and improved trucks. Yet, at first glance, you’d be hard pressed to notice them as “new.” Each model’s design retains the massive motif of their predecessors. Some analysts wonder in these days of reducing our carbon footprint, if these trucks’ Sasquatch-sized paw prints might be out of step. The automakers, though, argue that truck buyers like ’em big and brawny. “The customer keeps tells us one clear thing,” says F-150 chief designer Patrick Schiavone, “they want it tougher.”
But F-150 and the Ram trucks are hauling around more baggage than big-foot styling. Because it takes three to four years to engineer a new model, these trucks were designed in a time of low gas prices and booming home construction. As an expression of that now bygone exuberance, these new models are loaded with fabulous new features, like a huge extended cab on the F-150 that can fit a big-screen TV in the backseat and cavernous storage bins built into the fenders of the Ram that the automaker says can hold “10 cases of 12-ounce beverages” (bringing new meaning to the term “guzzle.”) What they lack, though, is restraint or fuel-economy focus.
Ford, for example, drops its fuel-efficient V6 engine in its new F-150 in favor of an “all V8 strategy.” That might have been a good idea back when horsepower was king and gas was cheap. But now fuel economy is at the top of the charts among tire kickers. And Ford will be the only major automaker not offering a V6 engine in its truck. So now Ford is scrambling to engineer a new V6 that probably won’t get into the F-150 for another two or three years. “Things shifted around us faster than we could anticipate,” says Ford spokeswoman Afaf Farah. Ford is quick to point out that its truck is equipped with a new V8 engine that gets mileage equal to the old V6, while boosting horsepower. But as Ford’s product development chief Derrick Kuzak said at a fuel economy briefing recently: “Not getting worse is not enough.”
Chevy couldn’t be more pleased that Ford is ceding the V6 pickup market. “Significant numbers of people are looking at the V6 option and choosing it,” says Chevy spokesman Brian Goebel. More than half of the bare-bone Chevy Silverado work-truck models are outfitted with V6 engines and that percentage is rising along with gas prices, says Goebel. When you include all versions of the Silverado, V6 engines make up about 13 percent of the mix, just slightly more than the 12 percent who went for a V6 on the previous F-150. Chevy and Ford’s V6 models start below $20,000, which attracts many first-time buyers, especially young men who might stick with your truck over the long haul. Now, though, those F-150 V6 buyers might go elsewhere. “Ford decided they didn’t need a V6 when gas was cheap and then the world changed on them,” says Wolkonowicz. “This is going to cost ’em.”
Chrysler’s challenge is to try to make the hulking Hemi engine in its Ram seem eco-friendly. They say that the famous muscle-car V8 has been re-engineered to give a 4 percent gas-mileage boost. That will improve the Hemi model from 14mpg in the city and 19 on the highway, to 14.6mpg city to 19.8mpg highway. That’s a long way off the 40 percent increase the new fuel-economy regulations are calling for by 2020, when all an automakers’ vehicles must average 35mpg, up from 25mpg today. And despite the Hemi’s improvements, it will be hard to convince buyers that it is anything other than a big gas guzzler. “The Hemi has a huge brand name for horsepower,” says J. D. Power auto analyst Jeff Schuster. “It needs an image boost. And it will be interesting to see how that goes over.”
This old-school display of metal and muscle might mark the end of an era at the Detroit Auto Show. With Tata’s Nano taking the emerging world by storm and Toyota’s Prius hybrid selling more than 1 million units, massive models like the Ram and F-150 are looking like dinosaurs. Oh, sure, as long as there is work to be done—on ranches and construction sites—there will be a healthy market for pickups. But their days as the star of the show are waning. All those mileage misers cropping up at this year’s show demonstrate that the only way for Detroit to find itself in clover again is to head down the garden path.
