{"id":138876,"date":"2019-08-13T13:42:50","date_gmt":"2019-08-13T17:42:50","guid":{"rendered":"https:\/\/www.thedetroitbureau.com\/?p=138876"},"modified":"2019-08-13T13:42:50","modified_gmt":"2019-08-13T17:42:50","slug":"automakers-struggle-to-bring-inventories-under-control","status":"publish","type":"post","link":"https:\/\/thedetroitbureau.com\/2019\/08\/automakers-struggle-to-bring-inventories-under-control\/","title":{"rendered":"Automakers Struggle to Bring Inventories Under Control"},"content":{"rendered":"
\"\"<\/a>
Automakers are scrambling to slough off excess inventory: a 71-day supply.<\/figcaption><\/figure>\n

U.S. dealers had nearly 3.8 million unsold vehicles in stock at the beginning of August, a 71-day supply that was the highest for the month in nearly three decades.<\/p>\n

With U.S. auto sales on the decline for only the second time since the Great Recession, automakers are facing some uncomfortable choices: they can raise incentives in hopes of spurring demand while also taking a hit on the bottom line, or they can trim production, a move with its own set of costs and challenges.<\/p>\n

It appears they are taking the middle ground, trimming some production while also boosting incentives, according to industry analysts. But that approach could be paying off by starting to bring inventories under control.<\/p>\n

(GM Trimming Back Production Levels; Other Automakers Expected to Follow Suit)<\/a><\/strong><\/em><\/p>\n

In all, dealers began the month with a total of 3,798,400 vehicles in stock, according to the Automotive News Data Center. While a 71-day supply is still a fair bit above the industry\u2019s traditional 60 to 65-day target, it\u2019s actually the lowest figure in 12 months, the trade publication reported.<\/p>\n

A closer look at the numbers reveals that there\u2019s actually a normal supply of sedans and other passenger cars, at 938,800 or 64-days. But there\u2019s a bubble of unsold trucks, the tally of 2,859,600 working out to a 73-day supply. Industry analysts have been warning that the overall U.S. market slowdown, combined with a flood of new light truck models, could create some headaches for the industry in the months ahead, despite the ongoing shift from passenger cars to SUVs, CUVs and pickups.<\/p>\n

\"\"<\/a>
Ford is cutting production on its Ford Edge and Flex as well as Lincoln MKT and Nautilus.<\/figcaption><\/figure>\n

Significantly, some of the most notable production cuts announced by the industry in recent weeks have targeted utility vehicles. Ford, for example, will be trimming back operations at its Oakville, Ontario plant next month. The factory produces four SUVs, the Ford Flex, Ford Edge, Lincoln MKT and Lincoln Nautilus models.<\/p>\n

About 200 workers will be idled, and Ford cautioned further cuts could follow. General Motors, meanwhile, will be dropping one of the three work crews at its San Luis Obispo, Mexico plant that produces the Equinox, GMC Terrain and Chevrolet Trax SUVs.<\/p>\n

\u201cWhile people are talking about fabulous SUV sales, the market is getting saturated with them and inventories are building while incentives are growing,\u201d said Michelle Krebs, executive analyst with Autotrader.com.<\/p>\n

(Auto Lenders Likely to End Interest Rate Cuts)<\/strong><\/em><\/a><\/p>\n

There have been cutbacks on the car side, of course. GM closed its Chevrolet Cruze plant in Lordstown, Ohio, and will follow with the closure of two other plants producing slow-selling sedans. Honda this month confirmed it is cutting production of its Accord and Civic models at its Marysville, Ohio plant.<\/p>\n

But manufacturers are hoping to hold off more drastic cuts. That\u2019s especially true for Detroit\u2019s Big Three that are in the midst of contract talks with the United Auto Workers union.<\/p>\n

So, while the production numbers are, on the whole, being pared back, incentives have been creeping up. The average giveback in July was $3,911 per vehicle, according to research by Cox Automotive, a 4% year-over-year climb. On some pickups, meanwhile, the numbers have reached $10,000 or more.<\/p>\n

The challenge is to be \u201cproactive,\u201d said Stephanie Brinley, a principal analyst with IHS Markit, and use a balance of incentives and production cuts to keep sales and inventories in balance, rather than waiting to be \u201creactive.\u201d<\/p>\n

\"\"<\/a>
GM also cut production of several SUV models..<\/figcaption><\/figure>\n

\u201cThis is an industry that remembers quite vividly what happened a decade ago,\u201d Brinley said. Leading into the Great Recession, they kept ratcheting up the givebacks \u201cto keep their plants running and production up. But they found there was a point where that eroded profitability to a point that couldn\u2019t be sustained.\u201d<\/p>\n

(U.S. Auto Sales Hold Steady in July)<\/strong><\/em><\/a><\/p>\n

The fact that inventories declined in August is a positive sign, according to analysts, but it\u2019s also a month that typically sees the numbers at their leanest because of plant closures due to model changeovers and vacations in June and July, Automotive News pointed out. So, the real test will come as the industry enters the 2020 model-year \u2013 all the more so as trade wars and other economic uncertainties threaten to further weaken the U.S. new car market.<\/p>\n","protected":false},"excerpt":{"rendered":"

U.S. dealers had nearly 3.8 million unsold vehicles in stock at the beginning of August, a 71-day supply that was the highest for the month in nearly three decades. To tackle the problem, automakers are using a mix of production cuts and increased incentives to whittle the backlog down. See more on the story at TheDetroitBureau.com.<\/p>\n","protected":false},"author":2,"featured_media":138891,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","footnotes":""},"categories":[7,8,5,13],"tags":[],"make":[56,58,63],"post-state":[],"category_old":[118,150,151,123,131,299,248,243,238,132,283,125,124,139,128,278,288,304,141],"acf":[],"_links":{"self":[{"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/posts\/138876"}],"collection":[{"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/comments?post=138876"}],"version-history":[{"count":0,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/posts\/138876\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/media\/138891"}],"wp:attachment":[{"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/media?parent=138876"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/categories?post=138876"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/tags?post=138876"},{"taxonomy":"make","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/make?post=138876"},{"taxonomy":"post-state","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/post-state?post=138876"},{"taxonomy":"category_old","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/category_old?post=138876"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}