Epiphany about truck prices in general

[astro_fusion]

Historically comparing anything to a Corvette is a stretch. The Corvette has always been in it's own odd little corner. It just so happens to be that price, I wouldn't say the market pushed it there, quite opposite vs the F150 economically.

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[Tone]

Oh, how I'm waiting for the major gasp of non-truck buyer's remorse.

 

[Pedaldude]

It’s definitely a perfect storm of factors screwing over consumers. Which none alone explain why trucks in particular have become so expensive.

Legislation for increased crash protection as well as better fuel economy along with a consumer expectation of performance has made new trucks incredibly fast and safe while maintaining somewhat decent MPG and plain silly towing figures. Back in the day; it was just understood that if you were towing something that weighed as much or more than your half-ton truck, that you would be creeping up mountain passes at 35-40mph while your engine was screaming while you kept one eye on the temperature gauge. Today however, if you can’t effortlessly pass already speeding traffic at 80MPH while towing a 5th wheel; your truck is considered a dog.

Banks approving over MSRP ADMs made manufacturers want to get in on the action and the dealerships are still slow to return to reality. To ‘streamline’ production the base trims or packages/engines were dropped on many models.

Manufacturers were focused on making vehicles with technology that they wanted to sell to consumers at crazy prices but still, warranty costs are through the roof and shareholders need to get paid.

With the crappy infrastructure today, I’m amazed that anyone would buy or drive a sports car. My first three cars were Porsches and I knew it was an impractical decision to daily drive my 78 911SC when my driver’s side window fell off its track and into the door after hitting a sequence of potholes on the West Side highway in Manhattan. Which brings up the crazier thing going on today. I bought that car for $5,000 in 1999 and pretty much all used cars were cheap. Later when I moved from the East Coast in 2006 I bought a used 2001 cargo van for $1,600 that had 80,000 miles on it. While it was a good deal it was perfectly normal and the real crime today is the used car market. I was just checking on used Mavericks and there wasn’t a single one LESS than MSRP! Some had over 80K miles on them and were $2K OVER the original factory MSRP. We’re living in crazy times! Before I got my driver’s license it was common for high school kids and auto mechanics to be given cars for free from strangers because nobody wanted a shitty old car that barely ran or the maintenance cost was getting too much, or it was an old station wagon that ran like a top but got 6MPG. Now there’s jokers trying to sell cars that won’t even start for $3,000 in my neighborhood and I just saw a 2011 F150 for sale with a blown up engine for $5,000, it’s just plain nuts!

 

[amschind]

Well, they're either making a ton of $$$ or you're about to bail them out again. Either way, they're making money.

You didn't do any of your homework, and it is apparent in your answer. Let me make it even easier for you:

GM Q2 2024 Earnings
Ford Q2 2024 Earnings

So we're looking at a 6.1% margin for GM and Ford's EBIT (i.e. made up BS) margin is 5.7% and their real Net Income is so bad that I can't find it in their earnings slide deck. I didn't bother looking up Stellantis because their CEO just resigned over the fact that the board felt that his COST CUTTING was too extreme and was alienating both customers and dealers. I am not an expert on the auto industry, but those are VERY thin margins for a capital and R&D intensive industry. As a comparison, AMD was regarded as dying when their margins fell below 40%, with 50% being far healthier in cutting edge microchips, which reflects the fact that a huge portion of their operating cost is in capex and R&D, both of which are paid for out of "profits".

So you're saying that the Big 3 are raking us over the coals so hard that the janitors are lighting Cubans with $100 bills and I'm saying that their earnings (which, as you see with Ford's presentation, they dress up to show the HIGHEST POSSIBLE earnings and margins) are awful and may be so bad that they aren't sustainable as going concerns without substantial improvement because their current margins do not support the required levels of R&D and CAPEX. There was a time when I owned Ford stock, and FoMoCo actually paid for my books through college with dividends, but I haven't seen them as a good investment in DECADES and things are even worse now.

I strongly agree with you that truck pricing is insane (tractor pricing is even worse), but repeating the "Greedy Corporations" line is intellectually lazy, factually inaccurate, and diverts our attention from discussion of the real drivers of the problem.

 

[amschind]

It’s definitely a perfect storm of factors screwing over consumers. Which none alone explain why trucks in particular have become so expensive.

Legislation for increased crash protection as well as better fuel economy along with a consumer expectation of performance has made new trucks incredibly fast and safe while maintaining somewhat decent MPG and plain silly towing figures. Back in the day; it was just understood that if you were towing something that weighed as much or more than your half-ton truck, that you would be creeping up mountain passes at 35-40mph while your engine was screaming while you kept one eye on the temperature gauge. Today however, if you can’t effortlessly pass already speeding traffic at 80MPH while towing a 5th wheel; your truck is considered a dog.

Banks approving over MSRP ADMs made manufacturers want to get in on the action and the dealerships are still slow to return to reality. To ‘streamline’ production the base trims or packages/engines were dropped on many models.

Manufacturers were focused on making vehicles with technology that they wanted to sell to consumers at crazy prices but still, warranty costs are through the roof and shareholders need to get paid.

With the crappy infrastructure today, I’m amazed that anyone would buy or drive a sports car. My first three cars were Porsches and I knew it was an impractical decision to daily drive my 78 911SC when my driver’s side window fell off its track and into the door after hitting a sequence of potholes on the West Side highway in Manhattan. Which brings up the crazier thing going on today. I bought that car for $5,000 in 1999 and pretty much all used cars were cheap. Later when I moved from the East Coast in 2006 I bought a used 2001 cargo van for $1,600 that had 80,000 miles on it. While it was a good deal it was perfectly normal and the real crime today is the used car market. I was just checking on used Mavericks and there wasn’t a single one LESS than MSRP! Some had over 80K miles on them and were $2K OVER the original factory MSRP. We’re living in crazy times! Before I got my driver’s license it was common for high school kids and auto mechanics to be given cars for free from strangers because nobody wanted a shitty old car that barely ran or the maintenance cost was getting too much, or it was an old station wagon that ran like a top but got 6MPG. Now there’s jokers trying to sell cars that won’t even start for $3,000 in my neighborhood and I just saw a 2011 F150 for sale with a blown up engine for $5,000, it’s just plain nuts!

I think that one issue is that we are EXPORTING a ton of vehicles without truly realizing it. In Texas, the Mexican Trash Trains of 2-4 junk vehicles from the Shreveport auto auction driving down 59 or I20 to Mexico with the least trashed vehicle pulling 1-3 worse cars down the road. I can't understand how Texas DPS isn't all over these things, but they look like they are constantly about to explode. The fact that these vehicles are leaving may not be the cause, but rather a symptom. Many years ago, a friend who is in business in the highway diesel industry pointed out that in the 1960s and 70s, poor folks could buy a worn out car and fix it up. The proliferation of plastic connectors and added complexity microelectronics means that tons of parts on modern cars simply require replacement, even if the user is willing to write off creature comforts. Vehicles that would've previously stayed in the US market and met lower income consumer demand are now flowing out of the country because the parts to make them run again cost just as much as a new vehicle.

It's easy to blame that phenomenon on parts price gouging by the Big 3, but as the links above demonstrate, the Big 3 aren't rolling in cash. Their gouging on parts is less like Scrooge milking every last penny out of his tenants and more like a drowning man attacking a rescuer in panic and desperation. I think that we have to look deeper to find the real root of the problem, and it's probably affecting more than just the auto industry.

 

[VRFlyer]

In Texas, the Mexican Trash Trains

Here I thought you were talking about a game of Dominoes. ?

 

[Graygoose2021]

Second, my comment is about economics, not about politics. As far as "getting over it", you are very likely in for a very rude awakening within the next year. Again, it's economics, not politics.

The economy has been bleak for some time. We will always get screwed one way for another. There is no perfect world. People want cheap phones, cheap TV's, cheap cars and cheap medicine but we have to face the fact, also Americans want $50 an hour and do nothing but make TikTok videos.
We cant have "I want it cheap or else" and complain the markets aren't lop sided or against the "small guy".
The economy could be awesome, but someone will always be making a killing somewhere.
If tariffs were as bad as we were told recently, why didn't they change them is my question.
Somebody's is always making a killing, either way.

 

[amschind]

The economy has been bleak for some time. We will always get screwed one way for another. There is no perfect world. People want cheap phones, cheap TV's, cheap cars and cheap medicine but we have to face the fact, also Americans want $50 an hour and do nothing but make TikTok videos.
We cant have "I want it cheap or else" and complain the markets aren't lop sided or against the "small guy".
The economy could be awesome, but someone will always be making a killing somewhere.
If tariffs were as bad as we were told recently, why didn't they change them is my question.
Somebody's is always making a killing, either way.

The share of income for the top 1 and 0.1% has never been higher. 2008-9 and 2020-23 saw the rise of the "K-shaped recovery", where the top 1% folks with all the stocks made an absolute killing, the 90-99th percentile of upper middle class owned enough real assets and equities to tread water and the remaining 90% got crushed.

 

[Larrymoe]

You didn't do any of your homework, and it is apparent in your answer. Let me make it even easier for you:

GM Q2 2024 Earnings
Ford Q2 2024 Earnings

So we're looking at a 6.1% margin for GM and Ford's EBIT (i.e. made up BS) margin is 5.7% and their real Net Income is so bad that I can't find it in their earnings slide deck. I didn't bother looking up Stellantis because their CEO just resigned over the fact that the board felt that his COST CUTTING was too extreme and was alienating both customers and dealers. I am not an expert on the auto industry, but those are VERY thin margins for a capital and R&D intensive industry. As a comparison, AMD was regarded as dying when their margins fell below 40%, with 50% being far healthier in cutting edge microchips, which reflects the fact that a huge portion of their operating cost is in capex and R&D, both of which are paid for out of "profits".

So you're saying that the Big 3 are raking us over the coals so hard that the janitors are lighting Cubans with $100 bills and I'm saying that their earnings (which, as you see with Ford's presentation, they dress up to show the HIGHEST POSSIBLE earnings and margins) are awful and may be so bad that they aren't sustainable as going concerns without substantial improvement because their current margins do not support the required levels of R&D and CAPEX. There was a time when I owned Ford stock, and FoMoCo actually paid for my books through college with dividends, but I haven't seen them as a good investment in DECADES and things are even worse now.

I strongly agree with you that truck pricing is insane (tractor pricing is even worse), but repeating the "Greedy Corporations" line is intellectually lazy, factually inaccurate, and diverts our attention from discussion of the real drivers of the problem.

Ya, I'm not reading any of that.

I can 100% guarantee you no one in the decision making echelon of any car manufacturer is losing a single cent in any situation.

 

[Larrymoe]

Second, my comment is about economics, not about politics. As far as "getting over it", you are very likely in for a very rude awakening within the next year.

Just like we supposedly did last time?

 

[Pedaldude]

Greed is a huge factor and when calculating margins, while corporations can’t get away with the shit Hollywood and the Catholic Church can, there’s definitely some creative accounting and if you factor in the profit without having to pay for failed moonshot technology programs and EV manufacturing/infrastructure development as well as the pimp hand money the dealership cartel structure takes off the top; we’re all being fleeced, but just not as bad as with other areas of the market.

One example of avarice is the optional 4x4 price, which used to be a nominal amount extra but because of the emotional value placed on it. Ordered from the factory, it costs more for the option than full MSRP for each individual part. Then there’s the harder to calculate cost of going from part time 4x4 to the full time 4A transfer case. Back in 21 it was easier to figure out because there were less features paywalled to trim levels but it was something like thousands more for a part that was just a few hundred dollars more. On my 4Runner, the more expensive locking center differential is pretty much the same price as the models with the basic full-time transfer case. Though since they do limit it to a single trim.

The elephant in the room can’t be truly discussed here though is inflation but a lot of companies have been using it as a red herring for padding their bottom line. Unfortunately, for Ford the extra profit had evaporated because of customers who are unfamiliar with touchscreens or can’t connect their cell phone to the car. While Ford does need to improve their quality control; one of the industry papers was talking about how the bulk of warranty work is for non existent technology issues. I’m sure there’s a lot of NVH problems that actually exist too though. But yeah, everything is more expensive and complicated.

 

[amschind]

Ya, I'm not reading any of that.

I can 100% guarantee you no one in the decision making echelon of any car manufacturer is losing a single cent in any situation.

Yes, but that's not what you said initially, which was that car companies are gouging us. Now you have completely altered that assertion to "Automakers are overpaying for personnel, particularly in upper management". That's a very defensible position, and while I don't think that it is the primary driver of vehicle pricing, it is likely true. I would encourage you to read more on this so that you can meaningfully participate in this discussion, because it's important to all of us.

 

[Larrymoe]

Yes, but that's not what you said initially, which was that car companies are gouging us. Now you have completely altered that assertion to "Automakers are overpaying for personnel, particularly in upper management". That's a very defensible position, and while I don't think that it is the primary driver of vehicle pricing, it is likely true. I would encourage you to read more on this so that you can meaningfully participate in this discussion, because it's important to all of us.

They are gouging you. It just goes to pay the corporate people their multi million dollar salaries.

They're gouging the fuck out of people. Farley made 26.5 million dollars last year. You don't think that would change some profit margins if he doesn't make that?

 

[FORDTEXAS]

who pays MSRP nowadays..
cmon let’s be realistic here fellas..

 

[amschind]

Greed is a huge factor and when calculating margins, while corporations can’t get away with the shit Hollywood and the Catholic Church can, there’s definitely some creative accounting and if you factor in the profit without having to pay for failed moonshot technology programs and EV manufacturing/infrastructure development as well as the pimp hand money the dealership cartel structure takes off the top; we’re all being fleeced, but just not as bad as with other areas of the market.

One example of avarice is the optional 4x4 price, which used to be a nominal amount extra but because of the emotional value placed on it. Ordered from the factory, it costs more for the option than full MSRP for each individual part. Then there’s the harder to calculate cost of going from part time 4x4 to the full time 4A transfer case. Back in 21 it was easier to figure out because there were less features paywalled to trim levels but it was something like thousands more for a part that was just a few hundred dollars more. On my 4Runner, the more expensive locking center differential is pretty much the same price as the models with the basic full-time transfer case. Though since they do limit it to a single trim.

The elephant in the room can’t be truly discussed here though is inflation but a lot of companies have been using it as a red herring for padding their bottom line. Unfortunately, for Ford the extra profit had evaporated because of customers who are unfamiliar with touchscreens or can’t connect their cell phone to the car. While Ford does need to improve their quality control; one of the industry papers was talking about how the bulk of warranty work is for non existent technology issues. I’m sure there’s a lot of NVH problems that actually exist too though. But yeah, everything is more expensive and complicated.

I think that the difference is that Hollywood is still largely private (though that is changing), whereas the Big 3 have been public from Time Immemorial. Go read through Ford's earnings slide deck: they have cut and sliced things every which way to make their bottom line look bigger. As I mentioned above, the biggest shocker to me is that the net income is completely missing from the entire document (which is a new low in a world already awash with "non-GAAP" and "EBITDA"). They aren't hiding earnings; they are slicing a sardine razor thin and then arranging it into a little flower pattern on the plate. Ford is basically the same price per share as it was when I was born and the dividend is nominally slightly above where it was when I owned the stock in college (i.e. it's actually down when you correct for inflation).

As several others have pointed out, if anyone is absolutely convinced that Ford is secretly making money hand over fist in a manner that is opaque to Wall Street and invisible on the balance sheet, then invest in Ford stock. My advice would be to NOT do that, as all of the measurables point to a company that is barely profitable, not growing, and may not have the income needed to fund the required capex and R&D. I am NOT an expert on cash flows in the auto industry, and I agree with the folks who are saying that automobiles in general and trucks in particular are way too expensive. I would love a discussion on that from folks who have more insight that I do. But so far most of what I've seen here is opinion without a lot of back it up.

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