Light Truck Sales Are Adding Zip To The Upturn...

What's good for Detroit's auto makers is usually good for the economy. With motor vehicle sales surging, U.S. auto makers have scheduled a 20% rise in car and light-truck output in the fourth quarter over third-quarter levels. As a result, says economist Diane Swonk of First National Bank of Chicago, motor vehicle production will add at least 1.75 percentage points to this quarter's growth rate.

The bulk of that boost will come from increased output of trucks--mainly light trucks such as minivans, pickups, and sport utility vehicles, but also the heavy trucks used by industry. "To a large extent," observes Swonk, "the automotive upturn that began last year has been driven by rising expenditures on trucks, rather than cars."

Statistics underscore the development. Sales of passenger cars fell slightly last year and are up only 3.6% so far in 1993. By contrast, light-truck sales have been posting double-digit gains and are currently grabbing nearly 38% of the total car and light-truck market, compared with just 28.7% in 1986. And sales of heavy trucks--mainly the big diesel-powered rigs that haul monster trailers--are up some 60% in the past two years and show no sign of slowing.

This bodes well for the expansion. Heavy-truck sales only run around 150,000 units, but the rigs can cost as much as $100,000, and unlike such capital goods as computers, they are almost entirely a U.S. product. Their impact on the economy is small but significant.

It's the 5 million-plus-unit sales pace of light trucks, however, that packs the biggest economic wallop. Like heavy trucks, light trucks are primarily a U.S. product, and the Big Three auto makers have virtually captured the growing market, boosting their share of sales from 80% in as recently as 1986 to 96% in the past six months. Indeed, with profits on light trucks running at $5,000 to $6,000, it's no exaggeration to say that the Big Three's rising fortunes are primarily a light-truck phenomenon.

At least for the foreseeable future, that's unlikely to change. Aided by a 25% tariff, the strong yen, and the comparative advantages of design excellence and product variety, U.S. auto makers are determined to hang on to this market. General Motors Corp., for example, recently declined to supply Toyota Motor Corp. with engines for a new pickup truck to be built in California.

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