Truck Wars Continue to Heat Up

Pickup lots II

Look for the competition among truckmakers to become even more vicious as each fights to build its market share. According to Automotive News, full-size truck dealerships are getting aggressive with incentive money to make their trucks as attractive as possible to value shoppers. To the casual observer it can seem like the truckmaker that puts the most money on the hood wins, but strategy is very important here.

Ram, Ford and GM are trying not to fall into the same traps of the recent past when incentive wars cut deeply into corporate health and exposed two simple truths. First, propping up total sales numbers and strong market-share numbers with big incentives is not a sustainable model. Second, you need to have a well-stocked pipeline of various products to execute a healthy long-term plan. The new economic reality means the new truck buyer is more sensitive to the struggling economy and likely is more willing to trade off brand loyalty for a great deal on his or her next pickup purchase. And that means both truckmakers and truck dealerships may have to do things differently to win over a smarter, more savvy truck buyer.

All the truckmakers are positioning themselves to take advantage of the new reality, but some, like GM, may have to be more careful than others — especially with pricing. With big incentives on the hoods of the Chevrolet Silverado and GMC Sierra, and a pair of new, smaller trucks on the way, pricing issues will be even more complicated and important for GM's success than the others. We'll have to see what happens.

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Comments

@Jeff S - I just read that TTAC story. GMC will come out with a new truck in 2018.

That would indicate that the current 2014 model will not be out for long.
I wonder if sluggish sales were the impetus for change?

I am sure that Ford Fanboys will say that it is another example of GMC copying Ford but that shows a lack of understanding as to how long it takes to design and release a new vehicle.

The 2014 GMC siblings never impressed me as a "new" truck and it makes perfect sense now.

They are a bridge from the GMT900's to a "totally" new truck.

@HemiMonster - I'd rather see an off topic run that is intelligent in nature. I hope that it is a sign that this site is maturing and we are shedding the childish commentary.

I do agree that the other thread that started brining in religion, gays etc. was a bit much and for the most part was a troll attempt by whomever planted those posts.

Nothing like lobbing a "gay grenade" into the midst of traditionally conservative truck guys to watch the fur fly.

@papa jim
I do think you are too 'US' centric and not able to focus on what has occurred globally. Here's some sobering points;

1. Pre-GFC when the US went into recession global commodities went down with the US economy. This didn't occur this time, as a matter of fact commodity prices increased, due to demand. These lower commodity prices aided the US to climb out of recession, it can't occur this time.

2. As soon as anyone mentions public health you try to align the 'Euro' experience to the US. There are many countries outside of the Eurozone. These countries have better health care. The US pharmaceuticals/health system needs to be restructured. It's unfair.

3. Using gold to support the USD would have been catastrophic for your economy during the GFC as it would have artificially inflated the USD. What little manufacturing the US has wouldn't have increased due to the devalued USD. In other words you would still be importing with a stronger USD. Countries like India, China and all the developing nations would have kept the price of gold high.

4. The US economy is becoming less influential everyday. This means even what we are doing in Australia will impact what the US can or can't achieve.

5. The US off shored much manufacturing. This has lifted the standard of living in the US as consumer goods became much cheaper up until the GFC. As a ratio the demand for developing economy goods for themselves is now above 50% of what they produce.

6. The US, Europe, Japanese, OECD, etc have been creating a massive amount of restrictive barriers in the way of trade of certain industries. Now they want to trade out of debt, but who wants to trade with them? So FTA's are becoming the norm.

7. Who will the US trade with? The Eurozone? Japanese? They are trying to do what the US is doing and are as broke as the US. The Chinese and other developing nations? Most US and OECD consumer product is to expensive.

8. Most OECD economies ie, US, Japan, Euro have had their currencies devalued, it isn't that the AUD, NZD, HKD, SNGD, developing economies currencies increased. In other words the Euro/US/Japanese have taken a hit, not the other countries increased.

9. The US currency has dropped against developing nation currencies over the past decade.

This will make US manufactured consumer items more attractive. But, the side effect is your USD will buy less US manufactured goods than Chinese/developing nation goods.

Yes manufacturing has increased in the US, but people can only afford less due to increased costs.

This will happen with your pickups.

papa jim this is the reality. The US is in a pickle, it will not ever be like the 'Olden Days'. It will take decades for the US to be what it once was.

This isn't anti-American or anything like it.

@papa jim--There are more trucks produced than the market will absorb. Whenever you have to heavily discount a product it is either overpriced and/or there is too much inventory, which is basic economics which has existed long before Obama. Is Obama to blame for the financial crisis during 2008? I am not saying that I approve of everything Obama does but I am not going to blame him for everything bad that happens including the weather. The US has been living beyond its means and most cannot afford these trucks or most of the other vehicles available unless they borrow heavily. Big Al has it right that we cannot maintain our current level of spending nor the life styles we have become accustomed to. People will eventually adjust their spending to what they can afford even if it is smaller more basic vehicle or a used vehicle. Our standard of living has been declining long before Obama became President, this has been happening since the early 70s. Heavy discounting of any product usually means they are trying to move the metal (too much inventory).

@Lou BC--Yes I believe that the 2014 Silverado/Sierra was just basically a refresh because GM knew that it was going to have to lighten the weight of their trucks and put more efficient drive trains in them to meet the new fuel standards.

@ Jeff S

please Jeff, tell me how you reduce production in a plant that has too much capacity, without raising the per unit cost of finished goods.

@Big Al

Please consider: We discussed two key points.

First: You seem to believe that American can print an endless stream of currency that keeps declining in purchasing power--without eventually paying an awful price.

Second: Your previous comments suggested that we can borrow our way to prosperity and pay higher minimum wages to unskilled workers who are not competitive in the global markets.

Before you write another commentary on the where American should be in thirty years, please address those two above comments, OR please yield.

@papa jim
First; I have never stated the US can print unlimited money. Ever. You are making that assumption because you can't comprehend how and what the effects are of what I'm discussing.

Second; I have never stated you are required to borrow to prosperity.

You don't understand economics as well as you might have thought.

How does increasing the minimum wage increase borrowing? Really. What impact on the economy will this have? Think about it.

The USD will devalue against other currencies globally. This isn essence reduces the cost of wages.

It will cause inflation.

You will afford less, reducing debt.

You will buy more US manufactured goods, reducing debt.

Because of the above you standard of living will reduce. But, this will be the case anyway.

Papa,

I 100% agree with you about certified preowned. My aunt was looking for a new loaded honda crv. I talked her into a honda cpo 2012 crv loaded with 14k mi. She paid 21500 cash out the door. A 2014 would have sold for 29000. She saved $8500. Yes the 2012 had a couple small scratches but nothing really noticeable.

-------
As far as the future of employment and life in the US.......if you don't have a meaningful 4 yr college degree in a math, science, computer, engineering, or business/accounting field you are fu&$ed. I tell my 14, 12, 8 yr olds that you never want to be middle class in the future. They need to be rich to survive and live comfortably (and yes, help the poor). That's why I bust my a$$ so they can all go to a private school so they can accel and be around other highly successful friends and family. I feel sorry for those who feel stuck In the middle class or worse. Education is your only chance to get out. I'm 44 yrs old and just finishing a masters degree to continue crawling up the ladder. It's tough but I feel like we have no choice. My wife and I are trying to pay the house off in 5 yrs if we can do that we will be 100 % debt free. It has not been easy but nothing worthwhile is.

@Big Al

1. The increase in the MW that Obama recently signed to great fanfare, is limited only to the employees of US firms contracted to projects working for the government. For your info.

2. Increasing the minimum wage under almost any circumstance, acts exactly like a tax increase, as does monetary inflation. Everywhere and always!

During the last 3 years, America's deficit spending has been so grotesque that the US Treasury borrows almost 40 cents of EVERY dollar spent by the government. Almost half, Al.

Forcing the government to spend EVEN MORE to fund projects that require a higher than average minimum is a fools errand. We are today in unknown territory.

The government now spends an amount equal to roughly one quarter of the entire national product (and services) each year. No country in history has done this successfully. Never.

Today's challenges facing your country are NOT a result of deflation. Instead, the Australian dollar has considerably more integrity than the currencies in the EU, the US and Canada. Japan suffered a similar fate during the last 20 years. It resulted in closing factories and moving production of high value goods to other countries.

None of this will end well.

@buddylam:
"There is no government mandate that requires I load up my truck with leather seats, multi CD player, power windows, auto transmission and heated seats. Just so I can get a diesel engine."

On this I agree with you 100%. I fondly remember when you could go to a dealership and order a vehicle a-la-carte. Having the ability to pick and choose each and every option was great because you got exactly what you wanted, no less, no more.

Unfortunately, this did generate a problem for the manufacturers as they had to almost hand-build each car to the option choice which increased costs. As such, they started offering option packages that would conform to the 'typical' groups of options--usually between three and four groups for each model (as we've seen, Ford has gone to overkill with their TEN trim packages on the F-150. Worse, there's an $8,000 jump between their XLT and Lariat models because...? The Lariat is the first one to have the majority of desired mid-level options. An XLT is still considered by most as a "stripper". Neither Ram nor GM have quite gone that far, though if you bring GMC and Chevrolet together then they're just as bad as Ford. My point is here that there really doesn't need to be that jump, but obviously it works for Ford and the others as drivers are stupidly willing to pay $5000-$7000 more for that relatively minimal change.

Worse, Ford's "Limited" model drops back to the EcoBoost engine? At over $50,000? It's going to be limited all right... what fool would be willing to pay so much for so little? And this doesn't even BEGIN to consider their gross size that now serves NO purpose. Why?

Ok, I agree that a-la-carte can be added cost. With today's automated assembly methods it is nowhere near the issue it used to be. Ford, GM, Ram, they all tout how they can build different models on the same assembly line and have each component reach the line as the vehicle it's intended for reaches that point in the line. A-la-Carte is no longer the issue it used to be. Let us once again order the options we want and take a new statistical analysis of buyer wants vs manufacturer desires. More than once I've said, "If I take this model, you'll be removing these options," and meant it.

@Angelo: How do you fit an 84"-wide mid-sized truck through an 82"-wide garage door? Take a look at the specs on the Colorado/Canyon.

@roadwhale

question:
How do you fit an 84"-wide mid-sized truck through an 82"-wide garage door?

answer:
With a reciprocating saw. Or two!!!

@RoadWhale - "How do you fit an 84"-wide mid-sized truck through an 82"-wide garage door?"

Speed

Newton's law. An object in motion remains in motion until an opposing force acts upon it.

If the kinetic energy of an object excedes the resistance or opposing energy of the wall - it will fit ;)

KE = 0.5 x mv2

KE - kinetic energy (energy in a mass in motion)

M = mass

V = velocity (or speed)

This is why we see "speed kills" campaigns. There is an exponential increase in KE with an increase in velocity.

Road Whale

If you got 84 inches wide at Wikipedia Chevy Colorado I think it is a misprint. The Isuzu D Max is 73.2 & the Holden Colorado is 1882 mm which converts to 74 inches.

@papa jim--You have flexible plants that can produce more than one type of vehicle. Produce a vehicle that is similiar. If these trucks have to be heavily discounted then that is a indicator that the supply is greater than the demand. A company cannot consistently overproduce a product and heavily discount it unless they are making money somewhere else or the government provides them loans. This is not sustainable even for Ford because eventually the bottom line will turn red. You can blame Obama and Washington all you want but the manufacturers are to blame for creating an environment where heavy discounting becomes a normal way of doing business. This is just plain economics.

Ok Jeff, one more time:

tell me how you reduce production in a plant that has too much capacity, without raising the per unit cost of finished goods.

If a corporation owns 5 assembly plants running at an average of 80 percent capacity it is the equivalent of one plant at full idle.

They have 2 choices, close a plant and suffer HUGE shutdown costs, labor reduction costs...

OR they can run the five plants at full blast and discount the hell out of product in hopes of forcing a weaker competitor out of the market.

Option two makes the workers happier, makes the dealer network happier, makes them more competitive for market share.

Weaker competitors will scram. Can you say Suzuki? Can you say Isuzu?

@papa jim
Close down plants, reduce variants of models, improve competition forcing companies to perfrom.

papa jim, I think you need to get out of the US and look at the country from the outside.

I do know what I'm discussing here because Australia was in a similar position by the end of the 1970s.

During the 50s and 60s Australia benefited from a resources boom during after the WWII recovery. Japan was a smaller version of China.

What did Australia do to protect manufacturing? What the US, Europeans and most other OECD economy has been doing up until recently. Protectionism and subsidisation.

That's why the changes were made in the 80s to atone Australia financial and economic position. Our dollar at the depths of our lows would only buy 49c US.

That's why a Pulsar cost $20 000 AUD in 1990 when wages were less than half of what they are todays and a Pulsar is still only $20 000.

The problems confronting the US isn't Washington. It's people like you prepared to take a haircut for the future generations of Americans.

Like I stated the other day, you feel your entitled to a Suburban. Well maybe like I stated a midsize CUV should be all you can afford.

This isn't socialism as many try to project. This is sound business to keep the business of America afloat.

You aren't looking at the correct areas to repair the country. What has been destroying the US is it's lack of a competitive position. Social welfare doesn't cost massive amounts.

In social welfare the old costs more than the young. So why not asset test the old as well. That means if you own a couple of homes, investments, share, etc you will not receive welfare until you reach a certain asset value level.

This sounds harsh and many will think I'm entitled to this. Well isn't that a left wing ideal if you have that attitude. Or, I've earnt it. Well the US is like any business, ie, GM, Chrysler. Guess what the 'workers' in America have left it with little money to afford these luxuries.

This is called means testing. We have had this for over 30 years. That means those who truly deserve a 'handout' receive a handout.

Look at how much industry is costing the US tax payer.

Also, your figure is more like a tad over 40% for US government money as a percentage of US GDP.

The US only collects 27% back in tax.

For the US to survive it is necessary to inflate prices without a wages blowout. This also means the working poor will need assistance, or more pay because they earn peanuts right now.

I don't envy those in the US. Hard decisions will be necessary by the population. Hopefully people just don't consider themselves and look at what is necessary to occur to bring the US out of its current malaise.

@Big Al--Yes, you brought up some very solid points. Not everyone can afford a large full size truck whether it be a Suburban or a Silverado. If a manufacture is making lots of products and then has to drastically discount their products continually this is not a success and in the long run it costs both the customers and the taxpayers. For a while Ford and GM were closing older plants and adjusting their production to what was selling with lower inventories. Short term flooding the market with these trucks will be cheaper but over the long term this is not sustainable. Just because you want something doesn't mean that you should buy it, maybe it is too expensive for you and in order to buy it you have to mortgage the farm. Yes as a buyer I might love this but as a taxpayer eventually the birds will come home to roost.

Maybe I am making too big a fuss about this but this type of business operations has been done in the past and the results were flooding the market with too much product and large losses. Do you remember the tent sales Chrysler had in 1979 when they were running out of space to put their cars and trucks and they were selling them at fire sale prices. GM also did this before the 2008 financial crisis. Maybe this won't happen but these are the types of things that lead to bankruptcy.

When we discuss just the truck as a product, while RAM and Ford took risks and innovated, GM and Toyota were conservative and it's showing in the sales figures.

RAM thinks the client of light duties want a top MPG and a top quality ride and interior. For the HD's they think the consumer wants top capacities.

Ford thought that great power and torque is most important for a light duty trucks and it also seems their approach for their HD's.

GM thinks that a V8 with best MPG is most important for the light duty, for their HD's they think their diesel engine/tranny combination is the best out there. For the styling, they think the truck buyer is conservative. For top MPG, they think the consumer will pick a mid-size truck.

Toyota thinks that the reliability will sell, regardless of the lack of innovation. They also think that a mid-size truck will make it up for the lack of HD options.

The sales numbers and tendencies probably show who's right. When the product isn't great, one has to sell the deals. The publicity and distribution is also important.

@George - you are correct in your assessment. We are seeing different truck ideologies being played out.

To succeed one needs to find the right blend of innovation and conservatism mixed with an acceptable level of durability.

@Jeff S

One last time:

Please tell me how you reduce production in a plant that has too much capacity, without raising the per unit cost of finished goods. Until you can answer that question in a few words, your extended responds are fancy BS.

@Big Al

All of this talk avoids they key discussion. Global auto manufacturing capacity has been a fact of life since the 1990s. As a major producer you have two choices

1. Do you endure the high costs of closing a plant (in order to right-size mfg capacity)

2. ...or do you continue to over produce in the hopes of flooding the market and stealing market share from your competitors?

This is what I was trying to cover with Jeff S but could not seem to stay focused on.

@papa jim - in actual fact we have seen a bit of both. Manufacturers have bit the bullet and closed factories. Some like Fiat or most of the companies with capacity in Europe are hamstrung by powerful unions and socialist governments that will not allow the closure of factories or the downsizing of them.
I suspect that is why FCA is moving head office to the Netherlands with a Tax centre in England and a stock offering in New York. They can tell Italy to go f^ck themselves if the government/unions will not allow a change in product mix or a downsize in workforce.

There is a difference between overproduction and overcapacity. I wonder if that is where you and JeffS are stuck on.
Overproduction means making more than you can realistically sell while making a profit.
You can have overcapacity but still produce the numbers to meet demand. The problem lies with excess overcapacity and that is what has hurt the auto industry. That excess capacity hurts profits since it is expensive to underutilize resources (people or physical plant).

Excess capacity and overproduction with inflexible unions is basically what killed GMC. They set records in the business world for financial losses.
Closures have been carried out to get rid of EXCESS overcapacity. Excess overcapacity hurts profits just like overproduction. The hope with over production is to steal clients form weaker companies with the hope that the weaker company will die before you do.

That did not work out too well for GMC.

Even after the turn around they were bragging about #1 sales whereas Ford sold much less but had 4 times the profits. VW sold slightly less than GMC and had higher profits than Ford.

@JakeD: Unfortunately, that data didn't come from Wiki or any printed source; it came direct from the mouth of a GMC representative at the Philadelphia Auto Show this past weekend (Feb 16). In fact, another couple who were the people asking the question immediately claimed they would be unable to purchase the truck because it would not fit in their garage. They ended up going to the Toyota display, where the Tacoma is only 72" wide and easily fits through their 82" garage opening.

@papa jim
In any market, the market can only sustain a certain amount of activity.

If over production occurs, willfully for whatever reason the supply and demand situation will see a drop in price.

Lou, pretty much hit the nail on the head.

I also think the overproduction problem within the US is a sad part of the Detroit culture that still exists. The attitude appears to be, 'even if we sell at a loss the competition doesn't get a sale at all'. Until they go broke, who's going to bail them out next time, the Chinese?

@papa jim--I have answered your question you just didn't read the answer. You either shift the plant to produce a vehicle that needs more plant capacity, you can produce more than one type of vehicle in a plant with over capacity, or you can bite the bullet and close some of those plants which in the long run is better than saturating the market with too many trucks thus reducing your profit margins. Lou is right about excess capacity and overproduction. I was hoping that GM learned from the past but if this continues then further failure will be guaranteed. It is not just GM but Ford and Ram are heading the same way. I would rather have these corporations survive than overproduce themselves into bankruptcy. At least plant closing can be written off on taxes. It is much better for all of these manufacturers to become leaner and more efficient by eliminating excess capacity. Better to be the most profitable manufacturer than to be the sales leader.

GUTS
GLORY
THE WINNER OF THE WAR
DEFEATING GM AND FORD
RAM

@Jeff S

I never proposed a strategy for car makers--you did. You asserted that they should cut production.

Closing plants and laying off personnel involves huge costs.

I replied that in a world of surplus capacity, a condition that's existed for almost 20 years, if you cut production, the cost per unit goes up.

I did not say that is a good thing or a bad thing. It simply is a reality. If only one of the worlds majors had a problem with over capacity, they could shift production around--but the entire industry is over capacity.

If you close a big plant it upsets the supply chains, the unions, and it invites intervention by the government.

Companies have instead responded by running plants near capacity, and using the surplus goods to upset their competitors--they all do it.

@papa jim--Yes the manufacturers will lower per unit cost but then they have to discount more. Short term maybe because if there is an upturn then you still have the plant and the labor but if this is done over a period of years then there are heavy losses. I am just stating fact from what has happened before. I do understand about unions and production costs but it the long run these manufacturers will bleed red from the losses. GM, Chrysler, and Ford have had record profits but if overproduction becomes a long term practice then those profits will be a distant memory.

I am not saying that closing plants will not effect suppliers and that this is a good thing. You also did not read my comment about shifting production of other vehicles or producing other vehicles in the same plants to utilize the excess capacity. Toyota does this in their San Antonio plant producing both the Tundra and Tacoma. Manufacturers will have to be more flexible with their manufacturing facilities because demand for certain types of vehicles can change much quicker than it has in the past. Flexibility to adapt to changes in the market is critical. It is much easier to blame politicians and bureaucrats than it is to take responsibility for your actions. That is not to say that politicians and bureaucrats are blameless but they are like death and taxes you cannot avoid them.

@Jeff S

You've talked this topic in circles!

Toyota is the only truck maker doing it (shifting).

bad example: Their Tundra is a TOTAL non-factor in the half ton truck market and they don't even have a bona fide HD. The Tacoma is a ten year old relic that continues to sell only because almost ALL of the other makers abandoned the midsize in the US market.

When Ford dropped the Ranger, they closed the Twin Cities plant, they did not make some other model there. When Ram dropped the Durango/Aspen, ditto. When GM dropped the Atlas engine line (Colorado, Trailblazer) the only way they kept the Towanda plant running was from federal (public) help.

Your point is not supported by facts.

@papa jim
Jeff S is describing rationalisation of production. In Detroit there isn't much rationalisation occurring.

A classis example of shared production is happening in Thailand.

Both Nissan and Mitsubishi have an agreement to build two completely different pickups on the one line. The line pumps out 100s of 1 000s of pickups.

In Australia the cheapest 'Japanese' pickups are the Mitsubishi Triton and Nissan Navara from Thailand. The midrange pickups in dual cab 4x4 sell for about $38 000 each. They are within a few dollars of each other.

Production sharing benefits the manufacturers. What this does is hedge against demand cycles.

This is similar to platform sharing. The best outcome for platform sharing like the little Chev and Nissan van is for both manufacturers to sell as many vehicles as possible. This will reduce the cost to the manufacturers.

So if Chev sells more vans than Nissan the Nissan will still be competitive for Nissan. This will help ensure their survival.

@Big Al

You made my point exactly, perhaps without knowing it. The two best known sharing arrangements of the last 30 years are the now defunct Fremont California plant co-operated by GM and Toyota. The other being the Flat Rock Michigan plant once co-operated by Mazda and Ford.

In each case it was no longer rational to continue. Pontiac went belly up, and Mazda/Ford stopped building mutual lines (Escape, Ranger/B-2500).

I don't have a dog in this fight, my whole point is about what the Big 3 want to do, not me saying what they SHOULD do.

@papa jim--Big Al is correct different manufacturers can share the vehicle and the same assembly line but also other products can be made in the same plant. I am not saying close all the excess capacity plants but a manufacturer that continues to have too much capacity and has to overproduce a specific product such as a full size half ton pickup is not going to succeed in the long run unless they take government loans or they are balancing their loses with a more profitable product. This is not just trucks but any consumer product. I am not saying a product should never be discounted, I am saying the large discounts cannot be sustained over a long period of time. Short term maybe, but long term no. This is another good reason to have a shared platform for multiple types of vehicles besides development costs, manufacturing facilities can be shared thus reducing excess manufacturing capacity. I am not trying to argue with you I am just trying to make a rational argument based on economics which in an ever changing global market becomes critical for survival. Even those who don't believe in human evolution believe in economic evolution. Survival of the fittest.

@papa jim--Those joint ventures you describe lasted a long time but nothing lasts forever. Products come and go and what is popular today will not be necessarily popular tomorrow. Pickups were much more popular several years ago but many consumers are now buying suvs and crossovers in many different sizes. There are only so many trucks you can sell regardless of price. The Fremont plant did not close because it was failing, it closed because Toyota didn't want to be a part of the venture anymore. Toyota would prefer to have their own plants with no unions. The Big 3 will do whatever they want but the basic principles of economics do not change.

@Jeff S

Survival??? Nobody's in business to survive--we put up with the BS because we want to WIN.

You got pretty far afield on this but here's the way I understand it.

Detroit wants to sell at a profit, they want to plow profit into new product, they want to win market share.

What the DO NOT want to do is reveal their desired price point. That's why they advertise MSRP and their ads have more fine print than a cheap lawyer.

Re: Toyota, isn't their huge plant in Kentucky a UAW shop?

@papa jim--I understand MSRP but can you explain the logic to me of a 10k or more discount off of sticker? Also those who survive win. If winning to you is selling the most at any cost then that is a formula for failure. Maybe you will run out your competition but at what cost to you. You assumed that I meant that a manufacturer should never give a discount but you did not read what I stated, you just assumed. A manufacturer needs to realistically price a product and then have less discounting. You explain to me why it is a good practice to price something at a much higher price and then you have to discount it by 10k to sell it. I am not going to tell anyone what to do but the Big 2 (Chrysler is foreign owned) whatever they want. You obviously don't understand economics or never studied Economics 101 or you would get my point. There is what is called the Law of Diminishing Returns which basically is that you can keep increasing volume by cutting price but at a certain point you will not get enough additional sales to make up for the price cuts. For example during WWI US farmers increased wheat production because the US government was buying all the wheat and grains for the war and they guaranteed the farmers a price of $2 a bushel which was a lot. After the WWI the farmers kept increasing their production even though government did not guarantee them a price and even though demand started to fall. Those farmers expanded production because they thought that if they produced more then they would make more money just on volume. In otherwords wheat would become so cheap that more people would buy it. What happened was the price kept dropping and the volume did not expand. It finally reached a point where farmers were losing money and they could not give their wheat away, the grain operators turned the wheat away because there was no room to store it. The result was they dumped the wheat on the streets and many lost their farms. I guess the only difference is that the government has bailed out GM and Chrysler and it is possible they might bail them out again. My question is if this does happen how many times will the taxpayers be willing to bail the car companies out? Maybe you know something that the rest of us don't that you can overproduce and keep cutting prices and you will make money, but history says otherwise. I just saw a local dealership ad on TV advertising F-150s for up to 15k off sticker. Great deal but how long will it last?

@papa jim--No the Camry plant in Georgetown, KY is nonunion. There are no foreign plants that are union. Recently a VW plant voted on unionizing but it failed. The Georgetown plant is running at full capacity and they have up until recently been using a Subaru plant in Indiana to meet the demands for Camry. Now even Toyota is facing a glut of Camrys and has had to revert to some aggressive discounting as well. The competition in the midsize sedan market has become fierce with the redesigned Fusion and many other midsize sedans that are just as good as the Camry. Camry has retained their No 1 sales position but at what cost will they be willing to retain their status? At one time Toyota had the edge in reliability but then the competition improved and became just as good and in many ways better.

@Jeff S

You see, you are falling for it!!! if you don't truly know what their secret number is, you cannot know how much is fair or reasonable to pay--they win, their dealers win.

For some reason you're hung up about 10k discounts. What if the MSRP for a new F150 was 10 million dollars and they discounted it ONE MILLION BUCKS--Would they go broke? No because their margins are there!

Detroit has Congress looking out for them (tariffs) and the Federal Trade Commission has never screwed with them over their deceptive advertising.

The daily newspapers are all in cahoots with the car dealers because the dealers all buy vast amounts of full color display advertising every Sunday, and especially holidays. The dealers get co-op ad money from the Big 3 so they overpay for the newspaper ads.

Just try to get the local Consumer Action reporter at your favorite newspaper to bust the local car dealers, or to even challenge his own ad sales team internally at the paper--WILL NOT HAPPEN. Why, because the dealers do not want ANYONE to know what their actual cost on vehicles is. Period.

You got your shorts all in a knot over this surplus-production crap. It is all a well orchestrated game, sir.

@papa jim - I do agree that car companies play a big game with prices and they do not want the public to know where the actuaprofit/loss line sits.

There was an interesting debate on TTAC where an "industry insider" metaphor for car salesman posted a story about TrueCar and Transparency in the retail sales industry.

The author joined the blog and was completely defensive about multiple comments.

If the exact price was known that would be the set point where everyone would want. it would also give the competition a hard target to undercut.

With that being said, the debate here wasn't so much about that but overproduction and overutilization.

GMC did try to flood markets and aimed for #1 sales as opposed to #1 profits.

We all know how that turned out and that saga is far from over.

That top picture has got to be the worlds most organized junkyard I've ever seen.

@papa jim--No I do not really care, I am explaining basic economic principles which you fail to understand. I do think that the Chicken Tax will be around for a while because it benefits the industry. I do understand about MSRP and dealer games, I have bought mostly new cars and I have played the game with the salesmen and the sales manager many times. I also remember when Chrysler produced so many vehicles that they were storing them at football stadium parking lots, abandoned shopping center parking lots, and anywhere they could and they did not stop producing vehicles even when they could not find anymore space. I am not saying this is happening now but it can happen if this continues. Detroit has a history of being slow to adapt to a market and just continue to do business as usually. Now if that Ford dealer decided to offer 50% off of MSRP then even I would bite even though I don't need a new truck. I doubt that will happen but if they start parking new trucks in mass then you will see some larger discounts. You are entitled to your opinion and I am entitled to mine.

@Lou BC--You made my point in that GM was so driven to be No 1 at any cost that they flooded the market and then went into bankruptcy. This also happened to Chrysler in 2008 and this happened to Chrysler in the late 70s and early 80s. I do agree if one is in the market for a new truck this is the time to buy. If I needed a new truck and wanted a full size half ton I would be looking for the best deal among Ford, GM, and Ram. I am not as brand loyal as many of the truck owners on this website and I actually believe all these trucks have their good and bad points but overall good. Having owned Ford, GM, and Chrysler products I have had overall positive experiences.

@SilveradoHD--Just pick the color and model you want, who knows they might decide to give them away. That is a lot of unsold inventory just sitting around.

@Jeff S

" ...@papa jim--No I do not really care, I am explaining basic economic principles which you fail to understand."

So let me guess, you've got advanced degrees in Economics and you're just helping me out???

Since we have a disagreement, you're going to lecture me from a position of superior attitude, Jeff, really?

My generous nature is being tested here, dude!

Let's agree that your opinion is different from the very top smart guys at GM Ford and Chrysler who manage billion dollar global corporations.

You are allowed to do that--just don't lecture me about it. I've read enough of your stuff to know better.

My family's business sold finished parts and tooling to several of the top automakers worldwide. I sold SAP supply chain software and consulting to a major Asian automaker in 2001 and 2002 for their assembly lines in the US.

My brother's inlaws are new car dealers in the midwest. We've been talking about auto manufacturing in my family for a long time.

My background on this is legit.

@papa jim--So where is your Suburban?

@papa jim--Maybe you are right about those smart guys at GM and Chrysler, they got the taxpayers to bail them out. We the taxpayers are the dumb ones. Thank you for your insight. It is much smarter to get someone else to pay for your mistakes. I finally agree with you.



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