• by Karl Greenberg , April 9, 2010

If there's a vehicle segment whose sales behavior sticks as close to economic market fundamentals as Renee stuck to Estella (for fans of Cuban rumba), it's likely to be heavy-duty pickup trucks. The market, which tends to represent about 30% of total pickup sales, reacts swiftly to housing starts, construction, and capital investment by business.

If so, the first quarter this year was a misleading indication of how much demand there was for Dodge Ram, Chevrolet and Ford pickups -- especially heavy-duty trucks. Sales of pickups were up significantly, suggesting the economy was starting to pick up.

But Doug Scott, Ford's truck group marketing manager, says those improvements suggest big incentives, not healthier economic fundamentals. Meanwhile, Ford has just launched a big ad campaign for the big haulers, and Scott says the payoff will be in market share, not raw sales numbers. Scott unpacks the cargo with Marketing Daily.

Q: Since the economy looks better, at least by last year's standards, are HD pickup sales improving?

A: Full-sized pickups were a little better in March. But sales the first two months of the year were running at about 10.5% of the industry -- which was pretty much equivalent to all of last year, but that was largely on incentives. Toyota had 0% for 60 months on Tundra.

But overall, [the market for] heavy-duty pickups is weaker than light-duty. Our position is that we haven't really seen the improvement in key areas of the economy. For example, we look very closely at housing starts because we know from experience that there is a very high correlation between housing starts and full-size pickup sales. We haven't seen that turnaround in housing starts.

The most recent data do suggest some improvements in requests for building permits, but housing starts are actually still declining. I will tell you in March, despite the fact that the whole pickup segment was stronger, the heavy-duty segment was a lower percentage than normal. In March, the heavy-duty part of the whole pickup segment was only 20% of all pickup sales, versus the more typical 25% to 30%.

Again, it's sort of consistent because of the two, the heavy-duty segment is more of a tool for contractors and people in trades. So the fact that that part of the business is still weak is no surprise.

Q: So, improvements are being driven entirely by incentives then?

A: Yes, in particular, the pick-up in sales from February through March. We are just not seeing those fundamentals change in housing and in consumer confidence. While there's been a little improvement there, the indicators have not materialized and we haven't seen the impact of stimulus money.

Another point we would make is that we are very strong in fleet and commercial. In heavy-duty trucks we have 60% share of heavy-duty pickup in fleet and commercial sales. But we know in talking to fleets -- they have told us that during the recession -- as they downsize, they are parking equipment against the fence because of fewer employees.

And when they need equipment they are sourcing from existing inventory rather than ordering new product. They are telling us it will be more like 2011 before they return to purchasing behavior.

Q: Given that, isn't launching a new heavy-duty truck campaign now a bit like dropping a baited hook in an empty lake?

A: First of all, it's always a good time to have new product, no matter what the size of the market is. Quite frankly, that's not controllable; what we have control over is our share of the market. One of the real big stories over the last 15 months for sure is that Ford's share has risen significantly in full-sized trucks.

So, despite the fact that the overall market size isn't what we'd like, we are doing better in that we are getting more of what's available, and the 2011 super duty will just help us further that: as the market returns we think we'll be the product of choice.

Q: How has the market for light-duty pickup trucks like F-150 fared in this economy?

A: The light-duty trucks have been more resilient. There has been more strength and improvement -- in the F-150 for us and 1500-level trucks from our competitors -- and it's the biggest part of the business, in terms of volume.

That product has been strong. It has really propelled us from a share standpoint, because the changes in the 2009 product were so good, especially lengthening the crew cab by 6 inches and the flat-load floor.