With Inventory Levels High, is a Summer Blow-Out Coming?

[Ming]

U.S. vehicle price war seen heating up in summer
By Poornima Gupta
http://today.reuters.com



DETROIT (Reuters) - Soft U.S. vehicle sales in May, declining consumer confidence in the face of rising gasoline prices, and a weak sales forecast for the summer may spark a new rebate war among U.S. automakers, according to analysts.

With the companies gearing up to launch vehicles for the 2007 model year, most of them need to clear space on dealer lots that are now filled with 2006 models.

Mike Jackson, chief executive of dealership group AutoNation Inc. expects a form of clearance sale this summer.

"It is the end of the model year," said Jackson, who runs the largest public U.S. dealership group. "I think it is entirely appropriate."

Ford Motor Co. whose U.S. sales fell 6 percent in May, upped the ante last week by offering interest-free loans on most of its vehicles and an extra $1,000 in cash for gas. This is in addition to rebates of up to $4,000 on certain models.

"For the last several months, spending strategies among the Big Three diverged, with GM pulling back while Ford and Chrysler pushed on," Merrill Lynch analyst John Murphy said in a recent note to clients. "We think the distinction may become more blurred this summer with the return to big incentives at all three companies."

So far, General Motors Corp. has shied away from raising incentives, even in the face of weaker retail sales. The automaker currently has a limited gas-money promotion, similar to the one offered by Ford, in Florida and California.

GM Chief Executive Rick Wagoner said recently that the automaker would stick to its strategy of simpler pricing, but left the door open for future sales promotions.

GM's sales analysis manager, Paul Ballew, did indicate that Ford's new rebate program has put pressure on the automaker.

"Certainly Ford has done some things here recently that increased the temperature," Ballew said when reviewing GM's May sales results last week. "It is certainly an aggressive play on their part."

GM's U.S. sales fell 16 percent in May, with retail sales off 15 percent. More worrisome was a 13 percent decline in truck sales, including declines in popular pickup trucks such as Chevrolet Suburban and GMC Sierra, each of which saw sales fall 12 percent.

"Inventory levels remain a concern with both Chrysler, at 77 days' sales, and GM, at 84 days' sales, up from last year," Deutsche Bank analyst Rod Lache said.

He said the increase is especially concerning at GM, given relatively high inventories of high-margin products such as the Avalanche, Silverado pickup truck, Tahoe and Yukon SUVs.

Article Source: http://today.reuters.com/stocks/Quot...clePage2&sz=13

[jbartley]

NO! This should NOT happen.

[Buick61]

For all the talk about bloated inventories at Chrysler, 77 days doesn't really seem to support that.

GM, too, isn't in dire straights.

Doesn't anyone else think that the idea that high gas prices scare off buyers of new cars is specious? It may alter the types of vehicles bought, but not necessarily the amount. Most car buyers already have a car, so they're already paying for gas. Trading in for a new car won't change that expense unless they get a vehicle with less efficiency.

[civilzues]

so when should i go get another car? I really need to know b/c I am going to be trading in a Grand Prix sooon(within 2 weeks if i can!). really looking to get ANOTHER G6 too...

[jbartley]

Originally Posted by Buick61

For all the talk about bloated inventories at Chrysler, 77 days doesn't really seem to support that.

GM, too, isn't in dire straights.

Doesn't anyone else think that the idea that high gas prices scare off buyers of new cars is specious? It may alter the types of vehicles bought, but not necessarily the amount. Most car buyers already have a car, so they're already paying for gas. Trading in for a new car won't change that expense unless they get a vehicle with less efficiency.

Yeah, 84 days isn't that bad. Are they talking average? or just a specific model? B/c the high end suv's are flying off lots, and the jeep commander has like a 175+ day supply.

And suburban was down b/c there isn't enough inventory of it to go around yet! I don't buy into this crappy article!

[give_it_all_]

There won't be any because Rick Wagoner said there will be no blow out sale this summer. He said there will be a sale, but no Employee Discount type thing.

[asim]

If there is a big sale, I will lose faith. We can't keep on relying on these sales...Toyota and other companies do SO well without them.

[Quickening]

Toyota as their sales too. Too me it is just built into American society, there is ALWAYS a sale around the corner. Look at the clothing/department store industry..there isn't a weekend things aren't on sale. Or red apple sales, some sort of sale. Why not with cars? I'm not saying its ok for GM to have a big blow out sale, because its not. But having a mild sale during hte summer isn't a bad idea.

[Cortazzo]

They said there will be regional promotions, but not anything nation wide. GM might just have to cede the crown of #1, but it has to meet supply with demand so it can actually make money again.

[mot76]

Just lower the prices in August, just in time when I have to turn in my GP. Hopefully, a better incentive will put a GTO in my garage.
After that, they may raise the prices again. Thank you.

[xPUMPx]

the fact that everyone knows the trucks are high margin is almost a slap in the face to all those who find them out of their budget.
If they would do the lower sticker prices and just stick with them i think people would see a more honest company and have a more optimistic outlook of the company.

[delmarjohn]

I pick up my new SRX wed ...I was hoping for a GM card bonus offer but none yet ...I have three days to pray for the icing on a great deal

[moman]

Yes, they will reverse course and have another employee pricing type event. It won't be named the same but will have the same effect. Just when you think there won't be any great deals, then BAAAM. happened in 2001, 2003, 2005, and will happen again.

[Mikkoo]

Originally Posted by delmarjohn

I pick up my new SRX wed ...I was hoping for a GM card bonus offer but none yet ...I have three days to pray for the icing on a great deal

And if you lived in Florida or California, wouldn't you have qualified for a gas card?

[delmarjohn]

yes ,so far a combination of bonus cash and cap cost reduction on top the price drop 7250,plus about 1500 of GM card ..the deal is sweet .but occasionally they have a GM card bonus that would be great ...you could get up to 3,000 on the GM card but our balance was weakened because we got aan STS in November also.....next year we will add a third THE NEW CTS............