By on February 11, 2014

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Inventories of unsold cars and light trucks have swollen to their highest levels since the recession while sales growth in the U.S. market has slowed significantly in the past five months. That combination could mean larger discounts and incentives and lower profit margins in 2014. According to Automotive News, all three domestic automakers started February with more than a 100-day supply of unsold vehicles. Industry-wide automakers had 88 days’ worth of vehicles at the start of February, the highest February inventories have been since 2009, when the industry was at its nadir.

As a portent of things to come, on Friday GM began a nearly month long Presidents Day promotion on Chevrolet, Buick and GMC vehicles, with some of GM’s biggest incentive offers in months.

In January, sales declined 3 percent and the seasonally adjusted annualized selling rate fell to 15.2 million, the lowest since April. Much of that decline was attributed by automakers to the severe winter weather that blanketed much of the country. Analyst, though, say that there are other factors besides the weather.

Morgan Stanley analyst Adam Jonas said that after four years of growth, the sales pace “appears to have stalled.”

“The industry stands at a crossroads,” Jonas told AN. “We really think the best of the U.S. auto replacement cycle is over. The incremental buyer is moving from someone who needs to replace their car to one who just wants to, making financial willingness to lend and credit availability more important than ever.”

Car companies are minimizing the impact of rising inventories and so far most are not giving in to increasing incentives.

GM’s inventory grew by about 32,000 units in January in a month that saw sales fall 12% from the previous year. That resulted in a 114-day supply of vehicles as of Feb. 1, the highest among major automakers, up significantly from 81 days a month earlier.

Ford Motor’s Feb. 1 supply was up to 107 days, after starting the year at 73 days, and Chrysler Group had a 105-day supply, up from 79 days. Chrysler’s inventory situation was helped by strong sales of the new Jeep Cherokee.

 

 

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51 Comments on “Domestic Automakers’ Inventories Soar Past 100 Days’ Supply...”


  • avatar
    thornmark

    Looks like the last bastion of plus-size profits may be history:

    Chevy Offers Huge Silverado Discounts After Poor Sales
    http://www.marketwatch.com/story/chevy-offers-huge-silverado-discounts-after-poor-sales-2014-02-08

    GM, Ford dealers boost discounts on big trucks
    http://www.reuters.com/article/2014/02/08/us-autos-gm-trucks-idUSBREA170VZ20140208

    2014 Chevrolet Silverado 1500 Discounts Are Part of GM’s Presidents Day Sale
    http://www.edmunds.com/car-news/2014-chevrolet-silverado-1500-discounts-are-part-of-gms-presidents-day-sale.html

    Not good when combined w/ this:
    GM and Ford Suffer More Sales Declines in Europe
    http://247wallst.com/autos/2014/01/16/gm-and-ford-suffer-more-sales-declines-in-europe/

    • 0 avatar
      Dan

      I wouldn’t read much into GM’s “huge” discounting. Their front and center offer of $31,500 for an extended cab with a V6 isn’t any kind of give away. Pretending that’s saving $7,000 is mostly an illustration of how uncompetitive GM’s 2014 pricing was to begin with.

      The people who had to have the new Chevy truck at any price have mostly been fleeced by now. GM’s pricing has to return to reality now – even this discounting isn’t all the way there.

  • avatar
    hreardon

    I’m interested to see how things play out over the next few months. I love how everyone blames “the weather” during a downturn in sales. No doubt it has a marginal impact, but I get the sense that a combination of stagnant wages, increasing prices and the replacement cycle being fulfilled are going to lead to slower sales growth.

    Not really rocket science.

    • 0 avatar
      hreardon

      My wife cautions me to not extrapolate my personal experiences to the world, but I noticed while doing taxes the other day that my take home pay has not increased since 2008.

      Now, this is because I’ve increased contributions to my IRA, we switched from fully covered healthcare to a high deductible HSA that requires contributions from me, my local tax rate has increased and my property taxes have increased 15%.

      Factor in inflation and I’d estimate my take home has shrunk about 15% in value.

      We’ve been trying to build a nice cash stockpile in our household and combined with the aforementioned that makes the thought of taking on a new car payment less than palatable.

      • 0 avatar
        sportsuburbangt

        I’m in the same boat.
        Looks like we are experiencing the fallout from all that hope and change.

        Someone has to pay for it.

        • 0 avatar

          What does a momentary hiccup due to weather have to do with “hope and change?”

          One might want to avoid jumping to irrational conclusions based on a single month’s results? Its hardly a trend when caused by severe weather.

          • 0 avatar
            hreardon

            Ruggles –

            It’s more fun to blame everything on Obama, didn’t you catch that meme five years ago?

            But seriously – that hope and change sure hasn’t resulted in my taking home any additional dollars.

            I don’t blame Obama directly, but I’m sure not a fan of his.

      • 0 avatar
        mwerre

        Just not you, I work for one of the best known tech companies in the USA that is unfortunately not related to social networking… lots of zero and half end of year raises… same deal with HSA.

        It was cold in January, who could have predicted it…

      • 0 avatar
        Lie2me

        Wait until your income starts going in the other direction, now there’s a revelation

      • 0 avatar
        KixStart

        “Now, this is because I’ve increased contributions to my IRA, we switched from fully covered healthcare to a high deductible HSA that requires contributions from me, my local tax rate has increased and my property taxes have increased 15%”

        But your gross pay went up?

        Take-home is kind of a mirage. You’re funding your IRA better (that’s your money and it’s your choice not to enjoy it now… probably a good idea) and your different health plan probably involves a lower premium than the old one (although the premiums will increase over time). Your total HC expense may even decrease, if you get lucky (extremely lucky).

    • 0 avatar
      RobertRyan

      @hreardon,
      Definitely more than the weather doing this. More like the US economy is running out of steam. A Downturn in China is filtering through.

  • avatar
    EquipmentJunkie

    Sure the tough winter weather played a part but I agree with hreardon that the perma-squeeze that the middle class is facing is the harsh reality that millions now face.

    • 0 avatar
      raph

      Agreed, wonder how long it will take the middle class to get its steam back? I was reading a BBC article the other day and article predicted six plus years before the effects on their middle class would be overcome or at least minimized.

      • 0 avatar
        hreardon

        Considering the (lack of) speed of this recovery and the lopsided way it is happening, my bigger concern is that we hit another downturn much sooner rather than later. If things continue the way they are we should see everyone ‘back to normal’ by around 2019 – but that’s a long way off with any number of wrenches that can, and will, be thrown into the proverbial works between now and then.

  • avatar
    jim brewer

    The recovery is almost indistinguishable from the recession. We have 3.8 million people between the ages of 16 and 24 who are neither in school nor employed. That’s a recipe for social dislocation, possibly social upheaval. Car sales are the least of it.

    • 0 avatar
      thornmark

      And many graduated with a mortgage on their futures known as college loans.

      The same people who exploded the price of homes with unprecedented loans did the same thing with the cost of education.

      It is not a coincidence that home prices and college prices grew well beyond the rate of inflation – it was debt fueled.

      And like housing, it will cause unintended, but predictable, consequences.

      • 0 avatar
        hreardon

        Student loan debt is the #1 drag on the finances of 22-35 year olds.

        The numbers that I see my younger relatives graduating with are absolutely staggering to me.

        • 0 avatar
          28-Cars-Later

          I believe it and my figures aren’t even completely unaffordable. They do represent however what would be a small car payment (as in a physically small car say $249/mo).

          • 0 avatar
            hreardon

            I have had my loans paid off for fifteen years. My wife is still paying hers off. Once hers are, we will finally have some money to actually do some fun stuff like buy a new (adult) sofa, replace the driveway, maybe take a vacation and ultimately, get a new car.

            It’s amazing what a drag debt can be.

          • 0 avatar
            28-Cars-Later

            “new (adult) sofa”

            lol.

        • 0 avatar
          nrd515

          A friend of mine sold his house and the huge chunk of farmland around it last year. He made a lot of money on it, since they bought it in 1982 or so and his dad was the lender on it at very low interest, the mortgage was very cheap, and taxes weren’t bad either, both mostly paid for by the farmer next door who leased the land for corn. First thing he did was pay off his kid’s student loans. He told them since he and mom got them out of debt, don’t expect any kind of shelling out for a big wedding. The girls both seem happy with that deal. The older one owed a lot of money on that masters at Cornell.

  • avatar

    “I told our staff if somebody shows up out on the lot in this weather, don’t let them leave because they obviously have a need.”

    Soo… Don Griffin is holding customers hostage until they make a sale? I guess that’s one way to move the metal. ;D

    • 0 avatar
      Lorenzo

      “don’t let them leave” can easily mean telling them, Here, stay in the warm showroom while we work things out for you. Have some more hot chocolate and another donut. We.can.work.things.out.for.you.”

    • 0 avatar
      DeadWeight

      Don Griffin hired Paul Rizzo as a car salesman :

      (Audio track; some language NSFW)

      http://ikeepsit100.com/2011/02/22/jerky-boys-paul-rizzo-car-salesman-job/

  • avatar
    05lgt

    I can see how Subaru might make hay when the mercury falls, but what’s pushing Nissan?

  • avatar
    28-Cars-Later

    Chevy Offers Huge Silverado Discounts After Poor Sales
    http://www.marketwatch.com/story/chevy-offers-huge-silverado-discounts-after-poor-sales-2014-02-08

    “The stunning set of discounts for the Silverado drops the price of its Double Cab All-Star Edition from $37,520 to $30,428 for President’s Day. This includes a $3,900 Presidents Day Cash Allowance and a $2,442 Presidents Day Discount.”

    This makes me think the new Colorado will be extremely attractive from a pricing standpoint. The article claims Silverado quad cabs are being put out for $30K.

    • 0 avatar
      DeadWeight

      My BIL bought a new 2013 4×4 for less than 31k and it has the 5.3 liter, crew cab, with a decent amount of options. I’m not positive but it had a MSRP of over 39k (Mayne over 40k).

      He got 10k off sticker OTD without hardly having to haggle.

  • avatar
    NotFast

    I do blame the weather. I’ve been meaning to look at a few cars, but the horrible Midwest winter (right/left punches of snow/cold) have kept me away.

  • avatar
    tresmonos

    Is this picture of KCAP? I am trying to place it.

  • avatar
    jim brewer

    Well, we can’t complain too much. Right or wrong, the public demanded that the politicians get a handle on deficits, and they delivered. In the meantime our infrastructure continues to crumble in the face of 3.5% interest rates. Qualified people do do the work are unemployed.

  • avatar
    Conslaw

    Robert Reich’s documentary, Inequality for All, pitches the case that income distribution has become so skewed in favor of the very wealthy (who don’t spend most of what they make) that there is not – and will not be – a strong economic recovery without strong programs aimed at increasing the income of “middle class” Americans (essentially wage-earners).

    That being said, I think that March will be a huge month for car and truck sales. Everybody who has a tax refund in his or her pocket and everybody whose car died over the winter will be out shopping for a new set of wheels.

    • 0 avatar
      Lorenzo

      The problem is that many people didn’t have the jobs needed for tax withholding. Also, my cousin noticed his pay stayed the same but the federal tax withheld actually went down. The rumor/excuse he heard was that the IRS was trying to reduce the amount of tax refunds paid out. If true, that could be a problem for a lot of people.

    • 0 avatar
      SCE to AUX

      Robert Reich is virtually a communist, so I’m sure his plan to increase the incomes of middle-class Americans has nothing to do with tax relief, repeal of government health care, etc., but rather with somehow transferring wealth away from the ‘rich’.

      But he seems a likeable guy, and I’d enjoy a beer with him, I think.

      As for the 100+ days of inventory, I blame the mfrs, not the weather. Hyundai doesn’t have this problem, and they’ve even capped production to prevent it.

    • 0 avatar
      thornmark

      Seems the incentives are going to the moon:

      “Ford Motor Co. (NYSE: F) must have a great deal of trouble selling its inventory of 2014 Fusions. It has started to offer among the most aggressive incentive packages in the industry so far this year.

      Under terms of new leases for the Fusion, Ford Credit Financing has a 0% APR for 60 months in some regions of the United States. “Cash back” for the Fusion ranges from $1,000 to $2,500.

      Lease offers for the 2014 Fusion SE are just as attractive — $0 down payment, $0 first month payment and $0 cash at signing.

      The Fusion deals are another in a line of incentives given by manufacturers to move cars that have not sold well, or have very large inventories, off of lots…”
      http://247wallst.com/autos/2014/02/21/ford-offers-fusion-with-zero-dollar-finance-package/

  • avatar
    geeber

    We may be in for some tough times due to simple demographics…

    http://nypost.com/2014/02/08/thanks-to-aging-population-its-all-downhill-from-here-for-usa/

  • avatar
    seth1065

    Agree student debt is keeping a class of buyers down , next up are all the homeowners who have home equity Loans that reset at the ten year mark , yep the high rate was 2004 for home equity loans. Also people will continue to keep older decent cars on the road bc they do not want a high car payment w so much bleak news out there , either a shaky economy or a shaky job. Not to mention health care cost and heating cost. Not good news for the new car dealers.

  • avatar
    gottacook

    I’ve just read on Romenesko.com (http://jimromenesko.com/2014/02/11/automotive-news-writer-catches-the-truth-about-cars-lifting-his-work) that this story originally did not credit Automotive News, that it’s now been revised to do so, and that TTAC sent an apology via Twitter: “We failed to ensure that the integrity of your work was maintained, and we are deeply sorry for this.”

    We don’t all use Twitter, and I never would have found out about this if I weren’t a daily Romenesko reader. An acknowledgment within this article that the correction has been made would be both appropriate and welcome.

    • 0 avatar
      Jack Baruth

      This is what happened.

      A half-baked draft was published because we thought it was ready. The draft didn’t contain the proper references. When the original writer complained, we apologized and re-linked.

      Other than a ritual shaming of somebody who was tired and who made a mistake — the kind of mistake that is common practice among 90% of the industry, with no apologies or credit given — what is it you’d say you are looking for here?

      • 0 avatar
        gottacook

        Not shaming, or even an apology; simply a note at the end that an alteration has been made since the original posting, as you might see at Salon or Slate – something like “This post was altered on 2/11/14 to acknowledge Automotive News as the data source.” The fact of the alteration (otherwise invisible) is more important to note than the content of the alteration, or so it seems to me. My best wishes for your continued recovery.

        • 0 avatar
          Jack Baruth

          That’s probably fair.

          Our WordPress installation leads to us having to fix a remarkable number of errors after publication — sometimes it just eats links. That was NOT the case this time but we handled it that way, and we shouldn’t have.

  • avatar
    NormSV650

    And I thought Honda didn’t do incentives cars and small CUVs?

    http://m.ibtimes.com/here-are-january-2014-big-8-us-auto-sales-numbers-gm-ford-chrysler-toyota-honda-nissan-kiahyundai

  • avatar
    Conslaw

    In the early days of TTAC, it seemed like half the stories came from Auto News. These days things are much more diverse.


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