Back in early 2000, five Nissan auto designers fresh off the plane from Tokyo took to the highways and byways of Texas, where big pickup trucks are almost a religion. Outfitted with cowboy hats and boots, they stopped along the way to talk to ranchers, contractors, and other macho truck drivers. What they found is that Americans like their pickups big, very big, and loaded with creature comforts. The Nissan Motor Co. (NSANY) designers took careful notes.
Now comes the payoff. While General Motors Corp. (GM) and Ford Motor Co. (F) go to the mat in what promises to be a nasty price war over their profitable pickups, the newly designed F-150 and the Chevrolet Silverado, the Japanese are swooping in for their piece of the $48 billion U.S. pickup truck market. On Oct. 17, the first Nissan Titan rolls off the line at a new factory in Canton, Miss. Four days later, Toyota Motor Manufacturing North America Inc. will break ground outside San Antonio for its second U.S. truck plant.
It's scant comfort to the Big Three that the Japanese auto companies are late to the pickup market. The full-size pickup market has been one of the few lucrative segments Detroit has had almost to itself -- until now. The Japanese are about to squeeze profits and hold Detroit to higher standards, just as they have done before with minivans and sport-utility vehicles.
The new Titan is a pickup even a Texas rancher could love. Yet Nissan is also betting the truck will appeal to weekend warriors toting jet skis, speed boats, or just hauling home a few sacks of mulch. It sports a powerful 300-horsepower V-8, serious towing capacity, and a spacious cab. And to avoid being just a me-too truck, Nissan is offering nifty innovations, including sliding dividers for the truck bed and a built-in toolbox.
Toyota Motor Corp. (TM), which made early gaffes in the U.S. pickup market, has plans to make its pickups bigger and tougher. Toyota has gradually increased both size and horsepower after launching its original small and underpowered T100 pickup in 1993 to the derision of many truck owners. Its successor, the Tundra, introduced in 1999, got bigger and added a V-8 engine, but is still smaller than American pickups.
In early November, though, Toyota will begin selling a roomier "Double Cab" version of the Tundra. And Toyota executives make little secret of plans to make the next-generation truck, which will arrive in 2006, as big and powerful as a Chevy or Ford. Says Jed Connelly, sales chief for Nissan North America Inc. (NSANY): "Sooner or later, Toyota is going to get it right."
Even if the new Japanese trucks aren't huge hits, they still pose a big problem for Detroit. Nissan and Toyota together will add 250,000 trucks to the slow-growing U.S. truck market. With sales of full-size pickups now running around 2.3 million annually, the stepped-up competition is sure to bring down prices. That will slice into fat pretax profits that currently average about $10,000 per truck, before incentives, says Saul Rubin, auto analyst at UBS Warburg. As a result, Rubin expects "an all-out price war" in big pickups.
For now, the older Chevy Silverado looks vulnerable. Expect GM to compensate by revving up the price war against Ford's revamped F-150. Though a popular seller, it costs $1,500 more than its predecessor to build. DaimlerChrysler's (DCX) Dodge Ram could be hurt worst of all. The 2003 Ram boasts a powerful Hemi V-8 engine, but hasn't made many other improvements. Despite rebates of $2,500 to $4,500, Ram sales fell 11% in September after double-digit gains earlier this year.
Foreign-brand trucks still have image problems among the Big Three's intensely loyal customers. "To be a carpenter and buy a Japanese truck takes some cojones," says Larry Dominique, the Nissan manager who oversaw development of the Titan. But that's changing. After this fall, Detroit's last big profit bastion will never be the same. By Kathleen Kerwin in Detroit