Inventory Shortages Cause Dealer Insomnia
In the past, car dealers struggled with being able to hold all of the inventory sent to them by manufacturers, like Ford Motor Co. However, now dealers complain that they cannot get enough.
Vice President of Galpin Ford in Los Angeles, Beau Boeckman, asked for 100 Ford Fusion sedans last month. He only received 7.
“I am begging for inventory across the board,” said Boeckmann, who runs Ford Motor Co.’s top-selling store in the U.S… “I couldn’t sleep a year ago because I thought, ‘we have a year’s supply of these cars!’ And now I’m worried about our inventory again because we don’t have enough.”
Ford, General Motors, and Chrysler Group are all trying to kick the habit of producing more cars than customers can buy, while dealers are complaining that they cannot get enough models to get sales back up to pre-recession levels. The practice preserves the automakers’ profit per vehicle, a good move by investors’ standards. However, at the same time, it cuts retailers’ volumes.
GM has responded to retailers’ requests by saying it will increase the output of some models. They are attempting to meet market demand without manufacturing too many models, a very fine line.
Chrysler cut production by half in 2009, while GM cut production by 44 percent during their bankruptcies and summer plant shutdowns. Ford, which was the only major U.S. automobile manufacturer to avoid bankruptcy, cut production by 16 percent.
Lowering production allows the automakers to curb the discounts they usually rely on to sell inventory, explained Tom Stallkamp, former president of Chrysler Corp.
Jeff Schuster, J.D. Power & Associates executive director of forecasting says, ““Buyers have always been able to find 10 versions of the same vehicle they want. Now we’re in an environment that they’re probably not going to get the exact one they want and they’re going to pay more because the incentives aren’t there.”
This trend had a hand in lower-than-expected sales over the past few months, he said. Deliveries of automobiles in the U.S. reached an annualized rate of 11.5 million in the month of July, based on information from Autodata Corp. of Woodcliff Lake, New Jersey. Auto sales in June also fell short of analysts’ estimates.
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Posted by Brett Nordin
on Dec 17 2010. Filed under Automotive.
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