Chrysler prodded dealers to absorb glut of 40,000 unordered cars

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Thread: Chrysler prodded dealers to absorb glut of 40,000 unordered cars

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    Chrysler prodded dealers to absorb glut of 40,000 unordered cars

    https://www.detroitnews.com/story/bu...cars/40592583/



    Fiat Chrysler Automobiles NV has been manufacturing more cars and trucks than its U.S. dealers are willing to accept, at one point creating a nationwide glut of about 40,000 unordered vehicles and stoking tension with some of its retailers.

    Four dealers, two of whom spoke on the condition they not be named, said Fiat Chrysler has revived what’s known in industry circles as a “sales bank.” The practice is decades old and frowned upon by investors and analysts because it can obscure an automaker’s inventory figures. Dealers don’t like it because it can amp up the pressure companies place on them to stock vehicles they don’t want.

    Chrysler implemented sales banks in the run-up to the two times it needed rescues from the U.S. government, in 1980 and 2009. While the company is nowhere near that sort of trouble – it just reported record quarterly profit – the surging supply of unassigned vehicles coincided with a period when the company was pursuing mergers. After efforts to combine with France’s Renault SA fell through, it announced a tie-up with Peugeot owner PSA Group last month.


    Fiat Chrysler denies that it has restarted a sales bank. The company says it put a predictive analytics system in place early this year that aims to better align its supply chain and manufacturing plans with anticipated dealer orders.

    “We’re producing pre-specificationed vehicles against predicted demand so the right vehicles are available when dealers need them,” said Niel Golightly, Fiat Chrysler’s global chief communications officer. The modeling has proven accurate, he said, as Fiat Chrysler has ended quarters with as few as 1,000 vehicles that it’s ordered and been unable to sell to dealers.




    At the close of the third quarter, the number of unordered cars was down to roughly 5,000 vehicles. While that amounts to a rounding error for a company that sells more than half a million vehicles a quarter in the U.S., the process still left some dealers angered by pressure tactics they say can lead to bad behavior.

    Fiat Chrysler recently agreed to pay a $40 million penalty related to filing years of sales reports the U.S. Securities and Exchange Commission said were fraudulent. One way the company inflated figures, the SEC said in September, was by paying dealers to report fake sales.


    System Savings

    The predictive analytics strategy was put in place by North American Chief Operating Officer Mark Stewart, who joined in December from Amazon.com Inc. Implementing the system and increasing the required lead time for dealers to order cars saved the automaker about 400 million euros ($441 million) this year through the third quarter, according to Golightly. The company has reduced inventory by about 120,000 cars during that span, he said.

    Auto sales have been slowing industrywide this year, and the Italian-American automaker started building up the bank of unassigned cars this summer. Some dealers were looking to pare back inventory after being burned by rising interest rates that increased the cost of holding cars, and what some say was a lack of incentive support from the company to boost sales of older models.

    While Fiat Chrysler’s U.S. sales and market share were roughly flat last quarter, it struggled along with other automakers to move old model-year inventory off dealers’ lots. It took Fiat Chrysler dealers 101 days on average to sell each vehicle during the quarter, 24 more days than the industry average, according to market researcher Edmunds.

    Chief Executive Officer Mike Manley told analysts last month the company earned record quarterly operating profit despite paring back shipments to reduce inventory. North America generated the lion’s share of income.

    “Working with our dealer network to achieve and maintain discipline with stock levels continues to be one of our top priorities,” Manley said on the call, hours after a preliminary merger agreement with PSA was announced. “In North America, our dealer stock is now in line with demand.”

    Long History

    The sales bank concept dates back to at least the 1960s. After Chrysler secured federal loan guarantees in 1979, then-CEO Lee Iacocca swore off the practice as one the company would never resort to again. He summed it up in his top-selling autobiography as “nothing more than an excuse to keep the plants running when we didn’t have dealer orders for the cars.”

    But in 2006, Chrysler started stocking unassigned vehicles in lots around the U.S. and again strong-armed dealers to take them on. The U.S. government backstopped the company’s 2009 bankruptcy and arranged for Chrysler to emerge with Italy’s Fiat as a partner.

    David Kelleher, a Philadelphia-area Fiat Chrysler dealer, said that while the sales bank was a problem several months ago, he’s confident the company isn’t going to fall back into bad habits.

    “They’re not making this a practice. It’s a one-off,” said Kelleher, who sits on the the automaker’s council. “That’s in my rear-view mirror, and I’m pleased with the way Chrysler handled it.”

    Give-and-Take

    Just last week, Fiat Chrysler sales representatives told certain dealers it would allocate them vehicles for both November and December all at once, and that it may restrict orders for certain models, two dealers said. They viewed this as a bid by the company to work through inventory by prodding dealers to order cars that remain in the sales bank.

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    Re: Chrysler prodded dealers to absorb glut of 40,000 unordered cars

    Why does the title say only 'Chrysler'? There is no specificity on what brand vehicles were involved.

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    Re: Chrysler prodded dealers to absorb glut of 40,000 unordered cars

    Quote Originally Posted by 09W View Post
    Why does the title say only 'Chrysler'? There is no specificity on what brand vehicles were involved.
    I mean Fiat-Chrysler Automobiles is more commonly known in the US as just Chrysler so...
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    Re: Chrysler prodded dealers to absorb glut of 40,000 unordered cars

    Quote Originally Posted by FenwickHockey65 View Post
    I mean Fiat-Chrysler Automobiles is more commonly known in the US as just Chrysler so...
    I think the point is:
    - is this Chrysler vehicles only?
    - is this RAM vehicles only?
    - is this Dodge vehicles only?
    - is this Jeep vehicles only?
    - is this Fiat vehicles only? (highly unlikely)
    - is this Alfa vehicles only? (highly unlikely)

    Or what is the mix...? Channel stuffing for products that will likely eventually sell (Jeep/RAM/Dodge) is less of a concern to investors than stuffing products that are slower sales (Chrysler/Fiat/Alfa).
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    Re: Chrysler prodded dealers to absorb glut of 40,000 unordered cars

    Quote Originally Posted by Z Fury View Post
    I think the point is:
    - is this Chrysler vehicles only?
    - is this RAM vehicles only?
    - is this Dodge vehicles only?
    - is this Jeep vehicles only?
    - is this Fiat vehicles only? (highly unlikely)
    - is this Alfa vehicles only? (highly unlikely)

    Or what is the mix...? Channel stuffing for products that will likely eventually sell (Jeep/RAM/Dodge) is less of a concern to investors than stuffing products that are slower sales (Chrysler/Fiat/Alfa).
    I want to know what is being overbuilt / underbuilt

    as they say LONGER wait for models ordered sounds to me like they have a capacity issue on some high demand and over capacity issues on other models

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    Re: Chrysler prodded dealers to absorb glut of 40,000 unordered cars

    Are they trying to imply that they're over-producing vehicles and forcing them on dealers to embellish their performance results while they're looking for a buyer? Cause that's how I interpreted this piece.
    GMI Site Rules: 11. "Trolling", or making posts with the sole intention of creating problems on the forums is obviously against the forum guidelines. We define trolling as a member that appears to have the sole purpose of posting just to spite the majority of the site or cause flame wars in threads they participate in. PLEASE respect differing opinions on the site at all times!

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    Re: Chrysler prodded dealers to absorb glut of 40,000 unordered cars

    If they think that's bad just wait till the glut of French cars that no one will want on top of this.
    Last edited by Mr.Buttons; 11-13-2019 at 02:02 PM.

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    Re: Chrysler prodded dealers to absorb glut of 40,000 unordered cars

    Didn’t GM ramp-up production prior to the UAW strike, encouraging dealers to “stock-up”?

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    Re: Chrysler prodded dealers to absorb glut of 40,000 unordered cars

    Quote Originally Posted by TruckMan View Post
    Are they trying to imply that they're over-producing vehicles and forcing them on dealers to embellish their performance results while they're looking for a buyer? Cause that's how I interpreted this piece.
    That's what it is saying FCA Prebuilds, and stores vehicles in hopes that Dealer's pull from that stock. If they don't then FCA crams them left overs down the Dealers throats.

    It would work, except the Computer Algorithm has never sold vehicles. Tends to lend to speeding up the line more than selling more product.

    Ford's SIMS program "Smart Inventory Management System) tend to Suggest ordering near Nonsalable builds. Like 3.3L V6 supercab with Trailer Tow mirrors. They are quick builds, but mostly left over parts that popular builds don't need.

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    Re: Chrysler prodded dealers to absorb glut of 40,000 unordered cars

    maybe they just want to have stock available for when they have to have labour discussions regarding post merger activity.

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    Re: Chrysler prodded dealers to absorb glut of 40,000 unordered cars

    Quote Originally Posted by Z Fury View Post
    I think the point is:
    - is this Chrysler vehicles only?
    - is this RAM vehicles only?
    - is this Dodge vehicles only?
    - is this Jeep vehicles only?
    - is this Fiat vehicles only? (highly unlikely)
    - is this Alfa vehicles only? (highly unlikely)
    I would think Fiat's and Alfa's to be the most likely. No one is buying them.

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    Re: Chrysler prodded dealers to absorb glut of 40,000 unordered cars

    Quote Originally Posted by richmond2000 View Post
    I want to know what is being overbuilt / underbuilt

    as they say LONGER wait for models ordered sounds to me like they have a capacity issue on some high demand and over capacity issues on other models
    it could be from the company forcing Journey's on Dealers that the dealers dont want. or the Company Forcing Loaded High demand vehicles like Wrangler Rubicon's instead of Decently optioned Sports on Dealers.

    OR having undesirable models forced upon and having to meet a Sales Goal for those cars to have special allocation for the Cars most Dealers see as high demand..

    "if you want a special allocation of *Insert new special Trim of Charger/Challenger* you must sell X amount of Caravans/Journey/Renegades."
    Last edited by 69gtsdart; 11-14-2019 at 08:21 AM.

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    I guess the next recession would have killed off FCA hadn’t they merged with PSA
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    Re: Chrysler prodded dealers to absorb glut of 40,000 unordered cars

    Quote Originally Posted by chinamonty View Post
    maybe they just want to have stock available for when they have to have labour discussions regarding post merger activity.
    That's my thought.

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    Re: Chrysler prodded dealers to absorb glut of 40,000 unordered cars

    The Big 3, FCA included, intentionally abandoned the domestic Car market, chasing bigger profits from Trucks and SUVs., at the urging of Wall Street and their Board. Marchionne talked won the quality and design of his entire American Car product lineup, and abandoned the Sebring Convertible, which was the No. 1 selling Convertible in the U.S. market.Not only did it sacrifice the market, it scared potential Customers away, as did GM with the last of the Saturns and Pontiacs. At hat point, Customers want an unbelievable deal on them, or have fears about the availability of Parts, among other concerns like long-term resale value. Notably, Toyota, Honda, BMW, Hyundai/KIA,Volkswagen,Nissan,Lexus, and others continue to make Cars in and for the U.S. market, while continuing to make SUVs and Pickups, for a Full lineup, even when their Pickups don’t sell well in the U.S. Short-sighted thinking on the part of U.S. Automakers again, but Wall Street and Investors with short-range thinking would rather they import Cars, if their market is revived. Now, FCA, and soon GM and Ford, have a glut of Cars on their lots, and want the Dealers to help sell them.

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