Inventory management woes have played a huge role in the decline of America’s domestic automakers, but according to a lengthy piece in Automotive News [sub], the days of inventory pushing are now officially a thing of the past. Unless they aren’t. At the moment things look good. AutoNation CEO Mike Jackson enthuses:
It’s the most exciting thing we’ve ever seen. I’ve lived for this day to come. The inventories for the industry are the cleanest and in the best shape ever — ever.
AN [sub] says inventory levels are at their most sane levels since they began tracking data in 1992. That gives Detroit executives the opportunity to crow over their discipline and the sustainability of their business models, despite the fact that the Detroit firms still top recent average incentive estimates. And long-term estimates show up to 2m units of overcapacity will be re-accumulated by 2012. “I hope [inventory push] is dead,” says Group 1 CEO Earl Hesterberg. “I doubt it’s completely dead just because of the fixed cost pressure on manufacturers.”
>>>>>”And long-term estimates show up to 2m units of overcapacity will be re-accumulated by 2012.”<<<<<
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Who wants to bet that most of this overcapacity will be reaccumulated within Government Motors? Anybody? Buehler?
Overcapacity means fixed overhead. Fixed overhead means churning out iron. Chrning out iron means increased inventory. Increased inventory means increased sales incentives. Increased sales incentives means increased 5-year cost of ownership. Increased 5-year cost of ownership means decreased sales. Decreased sales mean reaccululated overcapacity.
It's a nice little circle Government Motors is setting up here. Rinse and repeat, under new ownership.
Toyota may soon see 100 day supplies of inventory…
This is good news. However, there are still some stray new vehicles out there going all the way back to 2004:
http://www.cochran.com/new/Buick/2004-Buick-LeSabre-b6ecd9e77f000001004f0b5b855b89aa.htm?useHistory=true
That’s gotta be a computer glitch. That’s a steady selling car in a common color. If the dealer isn’t a total moron, a CARFAX entry of the VIN would find that it’s been driven 40 or 50,000 miles around Pennsylvania. Probably never exceeding 60 mph.
2004 may be pushing it, but I know for a fact that my local Pontiac-Buick-GMC-Cadillac (ugh) dealer routinuely has “brand new” vehicles that were built up to three years ago on their lot. I saw a few very old/new Saturns at the Saturn dealer down the street, too. (I ought to check and see if they are still open.) The Chevy dealer across the street from the PBGC dealer usually doesn’t have much ancient inventory, however.
I still don’t understand the bashing of higher incentives for the domestic brands. If I were Ford/GM and saw Toyota having a PR nightmare I’d throw more cash on the hood too. They need to get people back into their cars and show the progress they’ve made. I understand its easy to accuse them of falling back into bad habits but in this case I think they saw a chink in the armor and decided to run the sword through. I’m willing to bet they’ll have higher incentives until the Toyota debacle dies down. If they still have higher incentives in June then I’d be worried.
Plant managers and his managers got bonuses based on how many units left the door, be it engines, transmitions axles or cars. Their bosses, the vp’s and executives got bonuses based on how many vehicles were built. No wonder they were all in cahoots to continue building even when the sales were not there.
Then the same crooks (LaSorda, and the above) are payed a retention bonus to stay with the company when it was sold!!
So, is there a correlation between rational inventory policy and ownership structure? For all the talk about Obama’s communist takeover of Detroit, this is the first time in recent memory that GM and Chrysler had reasonable inventory levels. Interesting.