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Back in business?

Large pickups stage a comeback in August. But is it the real deal?

The Chevrolet Silverado: America's top-selling light vehicle in August.
DETROIT — Sure enough, consumers drove more full-sized pickups off dealership lots in August than in any previous month in 2008. And, indeed, small-car share drifted back down from the stratosphere.

But has the mix been fixed? Are the truck behemoths really back? And has the slim-profit small-car craze peaked? Bean counters, beware. It ain't over till it's over.

Small-car sales were constrained last month by low inventory levels, and don't forget that gasoline — while cheaper than it was — still costs more than $3.50 a gallon.

And although full-sized pickups posted their highest sales and industry share month of the year in August, manufacturers had to shell out. The average full-sized pickup incentive was $5,723 per vehicle last month, Edmunds.com reported. That's the highest monthly pickup incentive since Edmunds began tracking the data in January 2002.

TV commercials in the Detroit area promoted as much as $9,000 off Ford F-series pickups. Nissan ran deep truck discounts in its 41 biggest retail markets, and 74 percent of Titan pickup sales came from those markets. A Nashville-area dealer advertised up to $12,000 off some Titans.

"Trucks got dirt-cheap," said analyst Jim Hall of 2953 Analytics in suburban Detroit. "Nine thousand dollars buys a hell of a lot of gasoline."

Still, manufacturers see the August mix as encouraging. Full-sized pickup sales rebounded to 13.2 percent of the industry last month, up from a low of 9.1 percent in May, according to the Automotive News Data Center. Small-car sales dropped from 29.0 percent in May to 22.5 percent in August.

"Lower gas prices certainly didn't hurt the situation and in fact may have kept some people that were on the fence in the (pickup) segment," Ford sales analyst George Pipas said.

Higher incentives on pickups probably allowed some of those buyers to get out of a negative-equity situation on their old truck loans, Pipas added.

While small-car sales represented a smaller chunk of the industry than in the four previous months, manufacturers said transaction prices on those vehicles are rising, and incentives are falling. Toyota said it has only a 16-day supply of the Yaris subcompact, a 24-day supply of the Corolla compact and a two-day supply of the Prius hybrid.

The mix change, plus an uptick in annualized industry sales compared with June and July, teased automakers with the possibility that the worst of the downturn may be behind them. August sales translated into a seasonally adjusted annual rate of 13.9 million vehicles, up from 12.8 million in July and 13.1 million in June.

No cheering yet

"At some point, gang, the market bottoms," said Mark LaNeve, General Motors' vice president for North American vehicle sales, service and marketing. "Nobody knows when the hell it is — me especially. I'd like to think it was June and July, and we're starting to crawl our way out of this thing."

But GM is not declaring victory on industry sales or the truck mix, La-Neve said. Company officials say they expect the full-sized pickup segment to stabilize at around 11 percent of the industry.

Toyota sees August's improvement over July as marginal but promising.

"There is not a lot of reason to go running down the street with balloons and flags because there are still energy, housing and credit issues," said Irv Miller, group vice president of Toyota Motor Sales U.S.A. Inc. "People are still nervous. But we are cautiously optimistic that August might be the start of pulling us out from where we were."

Even though industry panic subsided somewhat with August's sales report, forecasts are still grim.

Ford trimmed production plans and revised its already conservative sales forecast for the rest of 2008. Ford now projects sales on the low side of a range between 13.7 million and 14.2 million units.

GM forecasts 2008 light-vehicle sales in the low-14 million range but is operating its restructuring plan on the assumption that industry sales could dip as low as 13.7 million units this year. Last year's sales were 16.2 million.

Manufacturers must brace for a payback from heavy discounting. In late August, GM launched an employee-price-for-everyone sale that runs through September. The last time employee pricing took hold in summer 2005, automakers had a dismal autumn selling season.

Last week, GM's LaNeve said that payback could be minimal this time because sales didn't spike as much from employee pricing as they did in 2005. But Ford's Pipas said to expect noticeable repercussions from the heavy discounting.

Oil wild card

And all bets are off if gasoline prices spike again.

Last week, oil prices dropped to $106 per barrel, down from a high of $147 earlier this summer. But industry forecaster Global Insight says $200-per-barrel oil would trigger a global recession. U.S light-vehicle sales would fall to 13.8 million units in 2009 and stay low through 2011. Vehicle mix would change dramatically, Global Insight says.

One suburban Detroit Ford dealer said he is encouraged to see buying patterns stabilizing. Truck buyers in August selected those vehicles based on their need for that functionality, said Robert Thibodeau Jr. of Bob Thibodeau Ford in suburban Detroit. Still, another oil price spike could shake the segment back up.

Said Thibodeau: "The volatility is just scary." 

Jesse Snyder, Mark Rechtin and Lindsay Chappell contributed to this report

You can reach Amy Wilson at awilson@crain.com

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