December 8, 2010
Big 3 bulk up vehicle inventory | detnews.com | The Detroit News
Big 3 bulk up vehicle inventory
Automakers say supplies anticipate strong 2011 sales
Are Detroit's new automakers falling back into old habits?
Auto analysts were startled when General Motors Co. disclosed that its vehicle inventories had expanded to more than a three-month supply.
Jim Bunnell, general manager of GM's dealer networks, said the automaker anticipates strong demand in the new year.
"We don't want to leave anything on the table. We don't want to be short," he said on last week's monthly sales call. "So we're very happy with our overall inventory levels."
GM has a 95 days' supply of vehicles, Bunnell said, up from 76 days in August.
Those stocks are considerably higher than the industry average, which is a 67 days' supply, according to Citi Investment Research and Analysis. "With December production poised for a typical seasonal slowdown, inventory should end the year around the 60-day norm," Citi analyst Itay Michaeli wrote in a report.
Automakers typically build up stocks ahead of plant shutdowns over the winter holidays.
But high inventories raise red flags because they signal that automakers may not be aligning their output with customer demand. In previous years, Detroit's automakers churned out vehicles to keep their plants running, but were then forced to discount them.
GM has good reasons to anticipate rising demand. Automakers usually offer end-of-year marketing deals, and sales are recovering.
Industry experts say pent-up demand is swelling because people have been holding onto their cars longer than usual. On average, vehicles on the road are now more than 10 years old.
But GM runs a risk if its expectation of a robust sales month doesn't materialize. "If they don't get it, then Wall Street will pun-ish them in January," said Warren Browne, a retired GM executive who now runs his own firm, WP Browne Consulting LLC.
Some GM dealers say they have suffered shortages of popular models, such as the Chevrolet Equinox SUV, Chevrolet Cruze compact, Buick Regal sedan and GMC Terrain crossover.
At the same time, demand is slowing for other nameplates, such as the Chevrolet Malibu, and that's pushing up stocks, said Matt Stevens, a new car manager at Vic Canever Chevrolet in Fenton.
In Metro Detroit, residents have spotted lots filled with Ford Motor Co. trucks — but Ford has an explanation: Some trucks are being shipped out to dealers, but some of its top-selling 2011 F-150 trucks are waiting for a new part.
"There's an inventory of trucks parked in various lots, and they are shipping now," said spokeswoman Anne Marie Gattari.
She declined to say how many 2011 F-150 trucks are waiting to be fitted with a new part, but said it is "a small number." She did not identify the component.
George Pipas, Ford's market analyst, said the Dearborn-based automaker has a 71 days' supply of vehicles — roughly in line with the industry average.
Chrysler Group LLC had a 79 days' supply at the end of November.
For the past two months, the overall selling pace has topped 12 million cars and light trucks on an annual basis, and Pipas expects that improving trend to continue this month.
"Is it a strong end to the year?" Pipas said.
"It sure is stronger than the beginning of the year."
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