Yet Another Scandal In The Auto Industry?

Includes: F, GM
by: David at Imperial Beach


Ford and GM may have another scandal brewing. This time it's pickup truck payloads.

Determination of max payloads is a safety issue, not merely bragging rights.

Exceeding a truck's gross vehicle weight can also void the warranty and involve driver fines, if caught by police illegally overloading the vehicle.

Excessive advertising claims could backfire on the companies involved.

Truck sales are the industry's bread and butter. Any backlash could endanger profitability.

I recently read on MSN that Ford (NYSE:F) has been lightening its popular F-250 F-350 and F-450 heavy-duty pickup trucks before weighing then to determine load capacity. Such "non-essentials" as the spare tire, the rear bumper and even the radio and center console have been removed to register a lighter vehicle weight, in order to claim a larger load carrying capacity.

The story was first published in Automotive News July 28.

General Motors (NYSE:GM) admits to swapping steel wheels with lighter alloys for the same purpose, using the excuse "Ford did it first". But supposedly Ford excluded the F-150 from the practice, while GM engaged in it only on its light-duty pickups. Now, however, it plans to extend the practice to heavy-duty models for 2015.

Chrysler's Ram Truck division and also Toyota Tundra and Nissan Titan have not followed suit, and stand to gain if the scandal gains media momentum. They are to be commended for staying honest.

This issue has the potential to become big, because overloading a vehicle is a safety issue. Vehicles may experience unexpected equipment failures if critical components such as wheel bearings are stressed beyond their ratings. This could easily result in accidents. The NHTSA should put a stop to the practice, since it deliberately misleads consumers into thinking their vehicles have more load-bearing capacity than they actually have. Any resulting accidents or equipment failures may cause the companies to be subject to lawsuits by trial-happy lawyers. It should be noted that operating a vehicle without a rear bumper could also be easily construed as a safety issue in and of itself. This is not a practice that auto companies should be encouraging.

Ironically, exceeding a truck's gross vehicle weight can void the warranty. It could also result in driver fines if a vehicle is stopped by police and found to be illegally overloaded beyond its capacity.

The practice strikes to the heart of how trustworthy advertising claims are from GM and Ford. Customers who value truth in advertising may well decide to choose Dodge Ram, or an import from Toyota or Nissan, which are proving to be more trustworthy. Buyers can be fickle beasts and easily turn to alternatives if they feel that they are being taken advantage of or deceived in any way. The very attempt to deceive the customer is offensive.

This is obviously a deceptive practice and cannot be defended by any reasonable person. Easily detachable equipment like the spare tire, maybe, if it can be shown that removing such equipment while hauling large loads is a common practice, but certainly not integral parts of the interior like the radio and the console.

Both at Ford and GM, trucks are among the most popular and profitable models they sell. Loss of market share in this segment to Chrysler, Toyota or Nissan would show up on the bottom line in reduced earnings.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.