Credit Suisse: GM's Purge and Binge Production
A member of our Best and Brightest sent us some interesting auto industry stats, compiled by Senior equity research analyst at the Credit Suisse Group (CSR). Et Voilà!
• Big 3 dealer stocks declined by about 79,000 units, or 4.9%, to 1.55 million vehicles in August from 1.63 million in July. The 4.9% decline is favorable relative to the increase of about 1% normally seen this time of year.
• The larger than normal declines were a result of a combination of sharply lower production and significant incentive events. By maker, GM inventory fell 1.7% from July to August, while Chrysler and Ford shed about 7% and 8% of their dealer stocks, respectively.
• The smaller sequential decline in GM’s stocks, despite a very sharp sequential increase in the automaker’s selling rate, was the result of a relatively aggressive production schedule. GM’s production was down 25% year-to-year in August, versus a 49% cut at Ford.
• At August-end we find Big 3 dealer stocks to be about 16% above normal, with cars 12% overstocked, and trucks 18% overstocked. An increase in our truck mix assumption, to 47% from our previous 44%, contributed to a jump in our calculation of passenger car days’ supply, and to a decrease in light truck days’ supply.
• By maker, we find GM stocks to be about 17% above normal, with cars 14% overstocked, and trucks 18% overstocked.
• We find Ford to be about 12% overstocked, with cars about 9% above normal, and trucks about 13% above normal.
• We find Chrysler to be about 21% overstocked, with cars about 10% above normal, and trucks about 24% overstocked.
• We saw significant improvement in full-size pickup Trouble Spots at each of the Big 3 in August. A drop in the days’ supply was driven by an incentive driven sales surge at GM, and by deep production cuts on the Ford F-Series and Dodge Ram.
• Based on current production schedules, we see the Big 3 ending September about 26% overstocked. We see both GM and Chrysler overstocked by about 30%, while Ford should have a more modest 15% overstocked level.
• By the end of the year (under current production plans) we think GM will still be about 30% overstocked, with the overstocked position concentrated on the car side. Ford could find itself modestly understocked by year end.
• The excess car inventory at GM is being driven by an aggressive production schedule that calls for a 21% year-over-year increase in car output. By contrast, Ford is cutting car output in the second half. We think GM’s production schedule is aggressive and needs to come down.
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