Here Come the Fire Sales
Even as Detroit races to turn-off the production spigot, dealer inventories are building to abandoned airfield levels. You want to talk trucks? In an industry where a 60-day inventory is ideal, every single GM truck has over a 100-day supply; some many more. While all three automakers swore they'd sworn off incentives (and blamed the move for reduced sales), that was then, this is now. Chrysler's Jim Press signals the fire sales to come. "It is inevitable from our standpoint because we have pricing pressure in terms of cost from steel and plastic," Press said during an interview with Dow Jones Newswires. "Incentives will be a key part but the focus will shift on those products that are facing the headwinds, such as trucks and SUVs, rather than those benefiting from the tailwind like cars." Chrysler? Cars? Tailwind? What tailwind? Anyway, the bottom line: "Chrysler's average incentive per vehicle sold in the U.S. in May was $3,714, the highest figure among the six top-selling auto makers for the month, according to Edmunds.com. Ford's average incentive totaled $3,326 followed by GM at $3,477. Nissan Motor Co.'s (NSANY) average U.S. incentive in May was $2,090, while Honda Motor Co. (HMC) was at $1,256 and Toyota was $1,045."
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I looked through the new car ads in the newspaper today, every single dealer and every manufacturer that offers fullsized SUVs and trucks is firesaling them now. Legends Cadillac has Escalades knocked nearly $20k off sticker. ABC Nissan is giving away Titans for $18k (a friend bought one at this price last week, thousands off MSRP buys plenty of fuel). Chevrolet dealers have extended cab Silverados for $17k. If you need a truck or want one, it's certainly a buyer's market right now.
There might not be much risk in buying a D3 car post-bankruptcy (theirs, not yours). Once the price has fallen to reflect additional depreciation from going Chapter 7/11, the huge "installed base" of GM, Ford and Chrysler products should insure the continued availability of parts from third-party suppliers. Indeed, the right to license "Certified to Meet GM Specifications" labels would be a valuable asset for a bankrupt GM without its own factories.
Very little of this malaise is taking place in my home base of Western Canada so this is interesting to watch.