- The Washington Times - Friday, October 27, 2006

DETROIT (AP) — Bloated inventories of trucks and sport utility vehicles languishing on dealers’ lots make it increasingly likely that automakers will sweeten incentives to keep market share, analysts say.

Inventories of the truck-based vehicles are high, with some nearing a six-month supply, and analysts don’t expect October sales to make much of a dent in them when the numbers come out Wednesday.

At Dodge, Jeep and Chrysler dealers, that means one thing: “Pretty … good deals,” said Chrysler spokesman Jason Vines.

According to Ward’s AutoInfoBank, DaimlerChrysler’s Chrysler Group had an 82-day supply of cars and trucks as of Sept. 30, the largest in the industry, followed by General Motors at 76 days and Ford at 74. Toyota, in contrast, had only a 29-day supply.

Earlier this week, Chrysler touched off added scrutiny of the automakers’ inventories when it admitted to building thousands of vehicles but not reporting them as inventory. On Thursday, Mike Jackson, chief executive of AutoNation, the country’s largest auto dealer group, said the Big Three’s inventory statistics are deceptive because they don’t include cars produced for fleet sales.

Mr. Jackson said his inventory was so high that he would reduce orders to the Big Three by 30 percent in the fourth quarter, which means bad news for the domestics.

All of this inventory talk adds up to a truck supply that exceeds demand, and that’s good for the consumer, said Jack Nerad, market analyst for Kelley Blue Book, an industry price-tracking and analysis company.

“I think something’s got to be done about these inventory levels, so we’re going to see something in the fairly short term to move some of this iron,” Mr. Nerad said. “What exactly it’s going to be I think they’re working on right now.”

GM, he said, is in a better shape than Ford and Chrysler because it has newer truck-based products.

Chrysler is in the worst shape, with a 158-day supply of its Dodge Dakota midsize pickup truck leading all high-volume vehicles, according to Ward’s.

“That’s way out of whack,” Mr. Nerad said.

Jesse Toprak of Edmunds.com, a research site for car buyers, said Chrysler is in the worst shape because it has a higher percentage of trucks in its product portfolio than other manufacturers.

The Dodge Durango SUV sits on dealer lots longer than almost any other vehicle, even though Chrysler is offering more than $8,000 in incentives, he said.

“How much more do you need to spend to get rid of these?” he asked. “There are not a whole lot of other alternatives to make these vehicles desirable once they’re on the lots.”

Mr. Toprak predicted Chrysler would be the only manufacturer to see a sales decline in October, with a 6.5 percent drop compared with October 2005. Ford, he said, should be up 4.1 percent, while GM should show an 18 percent increase due in large part to a slow October last year after a summer-long discount program.

Toyota will continue its roll with an 18.5 percent increase, while Honda should be up 2.5 percent, Mr. Toprak predicted.

Bob Schnorbus, chief economist with J.D. Power and Associates, said the industry may be waiting for GM to come off its resistance to incentives before a wholesale incentive war erupts on the overstocked trucks.

“The pressures are building to get rid of this stuff,” he said.

“In my mind, until GM gets aggressive, the customers are going to sit back and not worry about it. It’s the manufacturers’ problem.”

At this point, though, GM thinks it can handle its remaining inventory without huge incentives that cut into profits. Paul Ballew, the company’s executive director of global market and industry analysis, said GM already has some incentives targeted to slower-moving trucks, but it also has more flexibility to switch assembly lines from SUVs to its new line of pickups, which should sell better.

“We’re not planning on a big incentive war,” he said.

Neither is Ford, where only 25 percent of its inventory is in 2006 models, said George Pipas, U.S. sales analysis manager. That, coupled with previously announced production cuts, should bring inventory in line, he said.

“By the time we get through the end of the fourth quarter, if things proceed according to plan, we’re going to end the year with substantially less inventory than we had a year ago,” he said.

Chrysler also is confident it can bring down its inventory by the end of the year.

“We have every intention to get to basically zero,” Mr. Vines said.


Copyright © 2018 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.

 

Click to Read More and View Comments

Click to Hide