Auto Inventory Troubles, On The Rise Once Again

Anthony Fontanelle
February 6, 2007

Stephen Girsky, a top industry analyst and former General Motors Corp. adviser, said Detroit automakers are headed for more inventory troubles this year after managing to reduce their stockpiles of unsold vehicles at the end of 2006.

Girsky, speaking at an auto industry roundtable hosted by J.D. Power and Associates in conjunction with the National Automobile Dealers Association's annual convention, added that vehicles are piling up again for domestic automakers.

General Motors Corp., the Ford Motor Co. and DaimlerChrysler AG's Chrysler Group each likely had over 100 days’ supply in January, after dropping to 70 or 80 days' supply at the end of last year. The Toyota Motor Corp, on the other hand, has about 40 days' supply.

Selling the vehicles as fast as they could is critical to these Detroit automakers. This is because each vehicle languishing on their lots could mean losing hundreds of dollars. They have to do rigorous campaigns and blending it with potent strategies to sell more. Girsky said Chrysler is in the worst shape, with the Chrysler, Dodge and Jeep brand models sitting unsold the longest.

Automotive dealers, often pressured by manufacturers to take hard-to-sell vehicles, need to do more to discourage such sales on which Girsky said, "Manufactures can't be putting out products that sit on dealer lots for 120 day. They need to focus product lines on what sells."

Girsky also added the domestic dealer network must shrink much faster than it already is to make up for the lost market share. There must be 60 percent to 70 percent fewer domestic auto dealers that exist now if those businesses are to be competitive with foreign rivals.

It is obvious that the sales of top American brands have significantly declined in recent years. According to the J.D. Power and Associates Power Information Network, the average Chevrolet dealer sells 583 cars a year. Ford dealers sell 631 vehicles a year on average, while Dodge dealers sell 375 on average. All these brands are sharply down these days. Compared to Japanese rivals, the Detroit automakers are way behind them. The Toyota dealers sold 1,685 vehicles, while Honda dealers closed 1,289 sales on average in 2006.

Detroit automakers’ dominance in the auto industry is glaring in the past decades. However, said dominance is gradually deteriorating. GM, the world’s largest automaker, is manufacturing its vehicles in 33 countries. These vehicles are sold globally under Buick, Cadillac, Chevrolet, GMC, Holden, Hummer, Opel, Pontiac, Saab, Saturn, Vauxhall brands. Ford, the Dearborn-based automaker, is the world's third largest. Its global brands include Lincoln and Mercury of the US, Jaguar, and Land Rover of the UK, and Volvo of Sweden. The automaker also own controlling interest in Mazda. DaimlerChrysler, created by the merger of Daimler-Benz and Chrysler Corporation in 1998, manufactures vehicles under the brands Chrysler, Dodge, Jeep, Mercedes-Benz, Smart, and Maybach. The Mopar brand name owned by Chrysler Group sells parts and accessories like EBC pads.

Detroit automakers’ brilliance is greatly challenged by foreign rivals led by the Toyota Motor Corp. It builds vehicles under three brands – Toyota, Lexus and Scion. Toyota is the best-selling brand of the automaker. Its hot-selling car for 2006 is the Toyota Camry followed by the Corolla. The Lexus division was organizationally separated from Toyota in 2005. Said division is given is own set of directors and their respective centers. The Scion division, which means descendant or heir, is founded in 2003. Now, Scion is gaining a positive reputation in the American auto market. Analysts in the industry are predicting a new Big 3 would be proclaimed soon. Said prediction is said to be in favor of Toyota.

Source: Amazines.com