DETROIT -- One look at April's results leaves little doubt about why each of the Detroit 3 is scrambling to build more pickups.
Full-size pickup sales shot up nearly 10 percent last month and are up nearly 7 percent for the year. Average transaction prices continued marching higher -- up 5 percent for the year through mid-April, to $41,543, J.D. Power data show. Inventories remain tame by historical standards.
Straining to keep their big-gest profit engine humming, Fiat Chrysler Automobiles, Ford and, to a lesser extent, General Motors are mobilizing to make more. In all, they are on track to boost total capacity by about 5 percent, or an extra 125,000 pickups, by 2017, IHS Automotive estimates.
But some industry pundits worry they'll be ramping up production just as the market is peaking.
They point to the slowing growth of the overall market and additional downside risk from weakening demand in Texas and other oil- and gas-producing regions.
"We believe capacity [additions] in a flattish demand environment will pose downside risks to large pickup/SUV" pricing and in turn could sap profits at the Detroit 3, Barclays Capital analyst Brian Johnson wrote in a March research note.
For many months, industry insiders have debated how much longer the record light-vehicle sales run will last. But whether the stout pickup market still has legs probably matters more to GM, Ford and FCA because of its outsize profits. Pickups alone account for 55 to 67 percent of North American operating profit at GM and Ford, according to a Citigroup Inc. report last week.
Building more pickups will pay off only if demand keeps growing, or at least stays steady. If not, those extra trucks could disrupt the Detroit 3's "oligopolistic" pricing power and cut into profits, Johnson says. He estimates that by the end of next year, GM could face losing $1 billion to $2 billion in annual profit from weaker pricing and market share amid Ford's and Ram's production boosts.
Others, too, are eyeing the pending capacity additions with apprehension.
"When you enjoy superordinate profits, additional capacity comes in and erodes it," says Susquehanna Financial Group analyst Matthew Stover. "It's a legitimate concern."
For now, the Detroit 3 seem more concerned about cashing in on the booming pickup market than oversaturating it.
Ford is thought to have expanded its pickup capacity by as much as 10 percent through a more-flexible shift schedule installed for the changeover to its redesigned F-150, launched in late 2014, and through the addition of Super Duty chassis cab production this year at its Avon Lake, Ohio, plant.
Joe Hinrichs, Ford's president of the Americas, sees it as a simple supply-and-demand issue.
"We took the best truck and made it even better, and the customers have been willing to pay for that," he told Automotive News last month. "The demand from the dealers has been greater than what we've been supplying."
GM executives have said they're increasing pickup production but haven't publicly detailed how. They don't see any of the telltale signs that the pickup market will downshift anytime soon. Average transaction prices have been steady, even as the current generations of the Chevy Silverado and GMC Sierra surpass middle age. Inventories and incentives have been held in check. And economic underpinnings remain solid.
"All of these are indicators that should really sustain the pickup market," GM spokesman Jim Cain said.
The biggest threat to pricing power might come from FCA's planned production expansion, analysts say. Stover views FCA as the wild card because it has the biggest opportunity to increase capacity significantly through a massive reshuffle of its pickup factories as soon as late 2016, in anticipation of the launch of the redesigned Ram 1500 in early 2018.
IHS expects FCA to boost its straight-time full-size pickup production capacity by 22 percent by 2018, to 620,000 units, although some of that extra breathing room could simply allow FCA to operate more efficiently, rather than maximize production.
Not everyone is worried. Citigroup analyst Itay Michaeli estimates that pickup capacity has fallen 15 percent since 2007. He posits that the industry was too quick to succumb to the notion that many truck buyers left the market for good amid the Great Recession.
"We think the story continues to revolve around a unique supply/demand imbalance caused by ... too aggressive capacity cuts in 2008-09," Michaeli wrote in a March report.
At Banner Chevrolet in New Orleans and sibling store Banner Ford, just outside the city, the hit to the area's oil industry has sapped pickup business, dealer Rick Flick says. Inventory at the Ford store has crept higher in recent months, but the Chevy store could use a few more trucks.
One trend that could give pause to Detroit 3 execs: Used pickups are selling faster than new ones, Flick says.
"Prices on new trucks have gotten so high that I think buyers are just more price-conscious," Flick says. "Used trucks are gold right now."
Nick Bunkley and Larry P. Vellequette contributed to this report.
