U.S. carmakers have a remedy for slower sales: pickups and more pickups

By Nick Carey

DETROIT (Reuters) - Overall U.S. new vehicle sales could fall for the second year in a row in 2018, but Detroit's automakers are betting they can sell more high-margin pickup trucks and sport utilities to prop up profits.

At this week's Detroit auto show, auto industry executives and economists predicted that overall car and light truck sales will fall to about 16.8 million vehicles this year from about 17.2 million vehicles in 2017. Rising interest rates, reduced access to easy credit and an influx of millions of nearly new vehicles that are cheaper than new models and are expected to undercut new sales.

Standing against those forces are a wall of trucks and SUVs, including several new models unveiled at the Detroit auto show, that automakers said offer the hope of strong profits even if total vehicle sales decline.

Investors on Wednesday bid down shares of Ford Motor Co (F.N) by 7 percent after it forecast lower profits for 2018. General Motors Co (GM.N) shares slipped less than 1 percent after it forecast flat core earnings, excluding investments in autonomous vehicles.

Fiat Chrysler Automobiles NV (FCAU.N) shares, however, rose nearly 2 percent. Fiat Chrysler's North American product lineup represents an almost pure bet on demand for big pickups, Jeep brand SUVs and retro muscle cars like the Dodge Challenger that are enjoying a renaissance thanks to cheap gas.

"We shifted most of our resources to the production of SUVs and pickup trucks," FCA CEO Sergio Marchionne said this week. "It's a recognition of the fact that it's become the fast-growing segment in the United States."

GM shares are up 18 percent over the past year, and on Tuesday the company stressed to analysts the profit potential of its new pickup truck lineup.

Last year 63.2 percent of U.S. sales were light trucks, up from 48.8 percent in 2012. Overall new car sales fell around 2 percent in 2017 as passenger car sales fell 10.9 percent but light truck sales rose 4.3 percent.

"Americans love their trucks," Mike Jackson, chief executive of AutoNation Inc (AN.N), the largest U.S. auto retailing chain, said at an Automotive News conference in Detroit on Tuesday. "Gasoline will have to get to $6 a gallon to get them back out of their trucks."

To capitalize on that, General Motors, Ford and Fiat Chrysler all rolled out revamped pickup truck models at the show while taking shots at their rivals' products and talking up their trucks' profitability.

"These are high margin" products, GM president Dan Ammann said of GM's pickup trucks at a Deutsche Bank conference on Tuesday. "Very high margin."

Federal tax cuts could help Detroit's pickup truck franchises, analysts at Cox Automotive said. A Cox map of consumer vehicle preferences shows many U.S. counties where pickup trucks are the most popular vehicles also voted for Republican President Donald Trump in 2016. Those counties also will fare well from the recent U.S. tax overhaul, chief economist Jonathan Smoke said.

(Reporting by Nick Carey; Editing by Phil Berlowitz)