Buyers of Heavy-Duty Pickups Turning Their Backs on Diesel
July 09, 2008

By Bill Visnic

DETROIT - It's not like the domestic automakers need more worry, but another of their sacred cash cows, the diesel-powered medium-duty pickup, is being slaughtered.

The Detroit Three's "heavy duty," commercially oriented three-quarter ton and one-ton pickups have long been outsized profit centers, largely because their buyers are famously wedded to diesel engines, an expensive option loaded with profit margin.

The industry's overall pickup business already is enduring a well-publicized battering - but now, inflated diesel fuel prices have the historically diesel-favoring heavy-duty customer - those who are still buying, that is - fleeing for the comparative comfort of engines that use $4 gasoline instead of $5-plus diesel.

How bad is it?

Diesel's portion of the heavy-duty pickup "mix" has consistently run at 70 percent or better, on average, for General Motors Corp., Ford Motor Co. and Chrysler LLC. Chrysler, for one, has had diesel penetration rates approaching 90 percent for its Dodge Ram Heavy Duty, which has exceeded 80 percent diesel share since 2005.

Now, however, those numbers are beating a hasty retreat: in May, the ratio of Ford Super Duty Pickups sold with a diesel engine stood at just 51 percent - during the same time last year, the Super Duty diesel take rate was 71 percent.

Looking at January-to-May sales periods for heavy-duty variants of Chrysler's Ram, diesel-engine share reached a high point of 88 percent in 2006, and was 87 percent in 2007. For the same period this year, diesel-engine sales for Ram Heavy Duty are down to 82 percent, while overall Ram Heavy Duty sales are off by 38 percent (some of the downturn in overall sales may be attributed to customers' knowledge an all-new Ram is coming this fall).

The serious plunge in diesel-engine installations is rubbing salt into the wound of the industry's major downturn in overall pickup truck sales. The erosion of diesel-engine share in automakers' heavy-duty pickup lineups is exacting a heavy toll in profits driven by the engine option's huge premium: At Ford, the  6.4-liter Power Stroke V8 turbodiesel (made by International Truck and Engine Corp.) costs $6,895; GM's Duramax 6.6-liter V8 turbodiesel commands a huge $7,195 premium and Chrysler's 6.7-liter inline 6-cylinder turbodiesel (made by Cummins Engine Co.) is a $6,100 option.

At the International Truck and Engine plant in Indianapolis that produces the Power Stroke for Ford, an International spokesman said the plant had scheduled several weeks of downtime "because of low demand at Ford." The two companies also have been engaged in an ongoing dispute regarding past warranty issues and the future of the supply arrangement.

Buyers of heavy-duty pickups have long favored the diesel engine because of its reputation for longevity - and its superior torque and fuel economy compared with gasoline engines. In addition to fuel economy, the diesel engine typically has rewarded purchasers with attractive resale values, both combining to justify the extravagant option price.

But in the last year, the diesel engine's high initial price has become more difficult to justify because of the price relationship of diesel fuel to gasoline, which has inverted in relation to historic trends. In the past, gasoline typically was priced considerably higher than diesel fuel, magnifying the effect of the diesel engine's inherently better fuel economy.

But as the price of diesel fuel has skyrocketed past gasoline, the payback equation has drastically shifted in favor of gasoline engines. Where heavy-duty pickup buyers once checked the diesel-engine option knowing the combination of cheaper fuel, better economy and higher resale values would fairly quickly recover the thousands of dollars spent for the engine, in customers' minds the high price of diesel fuel has turned that formula upside down - and along with it, the heady profits on which automakers and their engine suppliers once could depend.

Photos by manufacturers

1 - The '08 Ford F-350 Super Duty

2 - Cummins 6.7-liter inline 6-cylinder turbodiesel for heavy-duty variants of Dodge Ram pickup

3 - Ford Power Stroke once was serious mojo for heavy-duty pickup buyers; with diesel fuel a $5-plus per gallon, maybe not so much.

4 - The 6.4-liter Power Stroke V8 turbodiesel supplied to Ford by International Truck and Engine

 

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