frank - up in grand blanc wrote:The Laramie Limited is for truck owners who want to be able to take their wife out to dinner in a luxury vehicle at night but still have a truck that's tough, said Bob Hegbloom, president and CEO of the Ram brand for Fiat Chrysler Automobiles.
"These are the people who ... own the company, the guy who is in the boardroom all day but he wants to brag to his buddies,"
The ugly and unshakeable truth about the US auto market is that cars are not as lucrative as trucksm hence the need for the OEMs to play in the segment. One in seven vehicles sold in the US is a pickup, and because there is limited demand for high-profit "premium" and "luxury" product from Detroit the home team is foolish to not serve up vehicles like the Laramie line of Ram pickup.
Fixing the economics behind the traditionally piss-poor profit from cars has long been a rallying cry for reform-minded folk in town. Only about half of the new vehicle market's volume is in "trucks," which ranges from nameplates like Ram-Laramie to Ford's Edge, so it cannot be numbers alone that work against the profitability of cars. The problem with cars is that buyers who are willing to spend have migrated to trucks, leaving the less spend-minded concentrated on the car side of showrooms. Within recent memory Ford made noise about turning real profit from cars by upcontenting product like Focus with hot-shit nav and entertainment systems. You have to give them credit for trying, but the going upmarket in what is perceived to be an economy car is like putting a Cadillac dealership on Hamilton in Highland Park. Another way to make money on cars (especially the high-MPG lightweights favorerd by CAFE, Obama, hippies, and the cheap) is to off-shore production. This move makes sense when a little car brings only a grand or so in profit. And it's also why I've never been able to bring myself to believe that Orion Assembly (Sonic, Verano) and Michigan Assembly (Focus) will keep their present product or, worse case, have any product at all.
A Morgan Stanley analyst estimated that the F-150 and the SUVs based on that platform contribute fully 90% of Ford's global profits. The automakers used to be called health care insurance companies that happened to make vehicles, now it seems they're truck companies that happen to make cars. There's the whole CAFE averaging thing that makes making small cars necessary, but the car segment is just brutally competitive. When you look at profits as a percent of assets employed or of revenue, it's not a compelling business.
They're really fortunate that the Asians haven't been able to gain much share in the full-size truck segment where most of the profits are made for the former Big-3. All the competition in the car segment has driven profits down to where economists would predict there'd be companies leaving the industry to employ their capital elsewhere. But there's a desire in many countries to keep the car companies going, even with lower than desired profitability. It's part an ego thing, everyone wants to boast that they make cars (India, China, Malaysia...), part industrial policy, part political necessity.
If you are in the market for a mid-size car in the US, how many choices from how many different companies do you have? Dozens. If you're looking to buy a pickup or Suburban/Tahoe sized SUV, you have about three choices. A Suburban shouldn't really cost $75K when a Camaro can be had for under $30K. There's not that much additional high-cost content in the Suburban.
They're still milking the truck market to make their money, just like before the melt-down. They took a crap load of criticism for producing "gas-guzzling" SUVs and pickups but that's what made them enough profit to stay in business before, and it's doing the same for them now.
