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A three-letter word - mix - is suddenly casting a long shadow over the financial stability of the Detroit carmakers and their suppliers.
Mix is the industry term for the proportion of various vehicle types in a carmaker's line-up. Its importance as a measure of the industry's financial health has grown as Americans stampede from gas-guzzling sport-utility vehicles and pick-up trucks to more fuel-efficient - but far less profitable - cars and crossover vehicles.
Carmakers do not disclose the profitability of individual models, but it is no secret that vehicles such as General Motors' Chevrolet Silverado, Ford Motor's F-Series and Chrysler's Dodge Ram pick-ups are by far their biggest money-spinners. Chris Ceraso, an analyst at Credit Suisse, estimates that each light truck contributes an average of $9,000 to pre-tax profit, while the average car earns only $3,000.
The shift in mix has accelerated dramatically in recent weeks. Cars accounted for 57 per cent of US light vehicle sales in May, up from 53 per cent in April and the highest proportion in 12 years.
The smallest cars, such as the Honda Fit, Toyota Yaris and Chevrolet Aveo, soared from 8 per cent in May 2007 to a quarter of all sales last month.
The financial pain is exacerbated by sliding volumes. Light vehicle sales in May fell to an annualised 14.3 million units, from 16.3 million a year earlier.
Carmakers - including Toyota - are also sacrificing profit by offering generous sales incentives to move gas-guzzlers off dealer lots. Ford said this week that it was reviving an employee-discount-for-everyone promotion on the F-Series trucks to bring down inventories.
The three Detroit companies are far more vulnerable than their foreign rivals to the shift in mix. According to Lehman Brothers, light trucks, including minivans, made up 72 per cent of Chrysler's sales last month, but less than a third for Honda and Nissan.
Ceraso concludes that the savings to General Motors of closing four truck assembly plants, announced earlier this week, and a higher contribution from passenger cars will be outweighed by lost profits from the 700,000 trucks that the plants build each year.
Credit Suisse has cut its estimate of GM's 2009 earnings from a $351 million profit, equal to 62 cents a share, to a $1.25 billion loss, or $2.21 a share.
Fritz Henderson, GM's president, said earlier this week that "we need to be able to produce more profitability from our passenger cars because we'll be under pressure in terms of revenue".
The big question is how.
The success of BMW's small 3- and 1-series and its Mini subsidiary shows that it can be done, says John Hoffecker, managing director at AlixPartners, a consultancy.
Rebecca Lindland, an analyst at Global Insight, says that "you start praying for a strong dollar if you're General Motors", referring to the potential for importing more small cars from its South Korean affiliate, GM Daewoo, which produces the Aveo.
More broadly, Hoffecker advises carmakers to "find some innovation that allows you to differentiate to the consumer". High-margin and luxury accessories can boost a vehicle's popularity and price tag.
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