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Old 02-21-2007, 01:04 PM   #1
STiMUL8
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Default Interesting article regarding monthly car sales #'s for mfgs

I'm not a car salesman. I glad I'm not also a domestic car salesman. Take a look at the inventory levels and sales of the big 2.5 vs. other makers like Honda and Nissan. Man, if Chop (King of Cars, Vegas) gets mad when his crew don't sell 5 new cars a day, he must be the exception to the rule!

I viewed this article on The Truth About Cars website.

Breaking the Law: Automaking's Supply and Demand Dilemma
By Frank Williams
February 21st, 2007 290 Views
A recent post questioned the relative power of engineers and MBA's in the automotive industry. A quick scan of corporate rosters reveals that the biz brains control most companies. The hierarchy makes sense; automaking is a business. Yes, but– whether their MBA came from Harvard, Yale, or Vinny's School of Business and Mortuary Services in Hoboken, the "suits" should know that too much unsold inventory is a bad thing. As a corollary, continuing production as unsold inventory piles up is a very bad thing. As in fatal.

Last year, Tommy LaSorda's mob over at Chrysler put the theory to the test. At one time, the guys stuffed Chrysler's 'sales bank' with 100K excess vehicles. And there they sat, waiting for the dealers to catch-up and cough-up. After drastic production cutbacks and "if you're breathing you're approved" financing offers, dealers managed to whittle that number down to something a little less, um, dangerous.

The holiday break certainly helped; the two week shut down cut off the unwanted flow at the knees. As the sun rose on the New Year, Chrysler's supply was closer to the industry's Maginot Line: 60 days. The carmaker claimed a 51-day supply of 300's, a 68-day supply of Jeep Libertys and a not entirely horrendous 110-day supply of gas-guzzling Dodge Rams.

When production started again, inventory levels rose with tidal inevitability. In January, Chrysler averaged 14 sales per dealer. Dodge dealers dealt 28 sales apiece and Jeep dealers averaged 13 sales per store.

The Chrysler Group then added an estimated 152K new cars to their inventory. And so, by the first of February, Chrysler/Dodge dealers sheltered a 78-day supply of 300's, a 98-day supply of Libertys and a 111-day supply of Rams.

Meanwhile, GM dealers are also choking on product. As of February first, GM's "Like Always" brand (a.k.a. Saturn) had a 230-day supply of Ions (which is only 29K units, but there you go). GMC dealers were sitting on 20K or 211 day's worth of Yukon XL's, a 98% increase from January's 113-day supply.

And the hits just keep on not happening. In January, Buick dealers averaged just four new car sales per store. No wonder they have a 170-day supply of LaCrosses and a 116-day supply of Lucernes.

Ford can't afford to laugh at their cross-town rivals. Mercury dealers only managed to move six cars apiece in January, staring down the barrel of 7K unsold Montegos (enough to last 147 days). Ford stores averaged just 35 sales each last month (mostly trucks), with 24K post-pre-Taurus Five Hundreds (a 169-day supply) going nowhere slowly.

In a declining market with hundreds of available models, Toyota is the only transplant that seems immune to the temper of the times; they've got low supplies of, well, everything and an industry leading 126 sales per dealer.

Meanwhile, Honda holds a three-month supply of Elements and Ridgelines. Nissan can't shift enough quirky Quests (144 days), Frontiers (122 days) and Maximas (113 days).

Even so, thanks to hot-selling Fits (25-day supply) and CR-Vs (19-day supply), Honda stores are cranking-out 87 sales per dealer. While Nissan thanks its lucky Altima (51 days) and Versa (52 days) for helping dealers achieve 68 sales per month.

Mitsubishi? Not so good. The automaker started February with 3400 Eclipse Spyders (a 275-day supply). Relatively speaking, the Dodge-built Raider pickup is a hit. At the end of December, Mitsu had a 165-day supply. By the start of February, inventory had dwindled to 149 days. Of course, that's still more than double the industry benchmark…

While manufacturers are quick to blame excess winter inventory on seasonal fluctuations, here's the bottom line: unions.

Common sense says that when sales drop, you cut production. Unfortunately, the automakers' contracts with the United Auto Workers (UAW) mandate that they must continue to pay their employees full whack even if The Big 2.5 cut back or stop production.

They're caught in a classic Catch-22. Should they pay workers to do (and produce) nothing, or keep the lines running in hopes they might sell a few more vehicles? Either way they're screwed.

Rather than force a showdown with the UAW, automakers are going hey diddle diddle, straight up the middle. They're paying the workers a big pile of cash up front to go away forever. Market share may be lost forever, but hey, they're gonna hit something and that's the way it goes.

Even with the buyouts, supply continues to outstrip demand, leading to drastic deals. Buyers looking for bargains wait for the desperation sales and the cars' reputations suffer accordingly. Brands become synonymous with "cheap"– regardless of product quality. Sales fall further as most consumers turn to undiscounted brands, figuring they must have higher quality. (There's your perception gap.) And the production lines keep moving.

One way or another, it's a death spiral that has to end.

CN: US car makers have huge inventories of non-selling cars, and continue to make more. Foreign car makers can keep up with the demand, and can do so with low inventory levels.
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Old 02-21-2007, 01:08 PM   #2
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Yay unions!
I remember seeing a report a while back on the cars with the longest time standing on a lot before being sold. IIRC, at the time it was a Chrysler Crossfire, which averaged something like 275 days before being sold.
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Old 02-21-2007, 01:11 PM   #3
WRXGuyInUSA
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I wonder if our domestic car companies would be in financial trouble, if they didn't have to use unions...
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Old 02-21-2007, 01:16 PM   #4
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Quote:
Originally Posted by elucas730 View Post
Yay unions!
I remember seeing a report a while back on the cars with the longest time standing on a lot before being sold. IIRC, at the time it was a Chrysler Crossfire, which averaged something like 275 days before being sold.
The Chevy SSR had 400 day supplies. They were forcing some dealers to take them with every 10 silverado's they took.


If you look in places like South Dakota you may still find 2003 SSR's new sitting on dealer backlots.
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Old 02-21-2007, 01:21 PM   #5
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Eventually the unions will take their heads out of their a**es and realize that their short term "you have to stick to your contract no matter what" attitudes will end up costing everyone their job or the american auto industry will greatly shrink in size. Basically the american auto industry is where it is because the management was dumb and the unions are greedy.
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Old 02-21-2007, 01:25 PM   #6
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Im not saying union factories should pay workers for not working. But I work for a non union factory and they are trying to find ways to withold a portion of our wages when we are working.
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Old 02-21-2007, 01:34 PM   #7
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As far as Domestic car salesman goes its not all bad. My Dad runs a Hummer Dealership in Grand Rapids, Mi and he cannot keep his H3's and H2's on the lot. He pours $15,000 in accesories into these things and they sell in days. Not everyone is in a rut
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Old 02-21-2007, 01:45 PM   #8
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I watch a weekly TV show called Detroit Auto News, hosted by John McElroy. Pretty good show about the auto industry/journalists.

One thing that really hit home was the fact that in other countries the auto makers are really revered by the public, but it is the opposite in the USA, we look down upon the auto makers and the UAW. We don't hold them in high esteem.
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