The Wall Street Journal
December 4, 2012
Detroit auto makers are piling up big stocks of passenger cars at dealers despite brisk new-vehicle sales in the U.S.—a problem that executives vowed to avoid since their painful downturn three years ago.
General Motors ended November with enough Malibu sedans and Camaro sports cars to last more than five months at the current rate of sales. Ford Motor Co. had more than four months' worth of Fiesta subcompacts and Chrysler Group LLC had a nearly six month stock of its 2013 Dodge Dart.
But Detroit auto makers didn't expect rivals recuperating from a tsunami and floods to go toe to toe. GM started December with 788,194 unsold cars and trucks, and warned it won't meet a target of finishing the month with a U.S. inventory of less than 670,000 new vehicles. GM executives said they were caught off guard by the heavy incentives offered by others and will idle two plants for an additional week in December. It may take more steps as needed.
GM also miscalculated demand for its pickup trucks. The industry norm for U.S. auto makers is between 60 days and 70 days of sales in inventory. GM had 138 days worth of Chevrolet Silverados at the start of this month. In passenger cars, its Chevrolet Cruze inventory jumped to 64,390 vehicles or 96 days. One of the two plants that GM will idle this month produces the Cruze.
"We thought the economy would have been further along at this point but as we look into December and 2013, we will get a tailwind from housing which benefits not only autos but the entire economy," said GM spokesman Jim Cain. "The one thing we won't do is commit the sins of the past and lose our discipline around rental cars and incentives. Our competitors may be doing it, but we have come too far to go backward and do something that may hurt our brands."
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