Let’s assume for a moment that the run up in gasoline prices is nothing but a function of speculators causing there to be artificial shortages.  That this is simply a bubble that, as all do, will burst.  That there will be a correction in the market, and that gas prices will fall in the not-too-distant future to more-reasonable levels.  You know, like $3.50 a gallon or thereabouts.

Does this mean that things will get back to “normal,” that people will return to dealerships, looking for a deal, but looking for a deal on big SUVs and pickup trucks?  After all, isn’t it a “necessity” to have things that can haul 10,000 pounds or more, even for those who don’t own a trailer or a boat?  Isn’t there an abundance of children in all households who must be transported in luxurious space, complete with DVDs to keep that several hundred mile trip Up North tolerable to them?  Isn’t there the right to be able to climb over multiple parking blocks with nary a sensation of things going “bump”?

I’m guessing that the answer to the first question is a simple “no.”  And from that the negatives follow.

No, I am not suggesting that the sales of large vehicles are going to disappear.  But I am suggesting that no longer will they be the on the order of 50% of the market as was once the case.  If we look back at many of the capital investments made by the Big Three in the not-too-distant past we will see that a significant portion was at increasing the capacity to make pickups and SUVs.  At the time, one could argue that it made nothing but sense.  Strike that.  It made nothing but dollars—and plenty of them.

Now it seems as though those investments were nothing but bets that aren’t going to pay off.  Snake eyes.  The Big Three have all cut back on the production of large vehicles.  Ford president and CEO Alan Mulally has been the most vocal on the need to reduce the corporation’s capacity in this area.  As he said last week (May 22, 2008): “The challenge affecting the entire industry is the accelerating shift in consumer demand away from large trucks and SUVs to smaller cars.”  And so Ford has laid out plans to up production of small cars and crossovers—through the adding of shifts and working overtime—and reducing large truck and SUV production for the second half of ’08—through additional downtime, shift reductions, and “line-speed actions.”  Note the contrast: Overtime versus downtime, shift additions versus shift reductions.  This year Ford is introducing the Ford Flex crossover and the new F-150.  While the F-150 will undoubtedly outsell the Flex by a considerable number, the future profitability of the company will be predicated more on things like Flex, shown in the accompanying photo, than on full-size pickups.

Do you remember back to the oil shocks of the early ‘70s and ‘80s?  Detroit was caught short when it came to having the types of cars that were being sought by customers, which opened up a comparatively clear path for the Japanese vehicle manufacturers.  While they’re also having to deal with too much light truck capacity right now, chances are they’re not going to get strike three because this time it could mark the end of some domestic manufacturers (at least as we know them).