Bank on It: Glut of Unsold Cars Pushes Fiat Chrysler Into Bargain Mode
Earlier this fall, word arose that Fiat Chrysler had resurrected a practice from the bad old days of the company — a sales bank of unallocated vehicles churned out by over-productive factories and pushed on dealers with little use for them. The company claimed otherwise, saying that its new “predictive analytics” system was simply in the process of being refined to better guide the flow of certain models and configurations to dealers.
With 2019 nearly at an end, unordered inventory is once again on the rise, Bloomberg reports. And not by any small amount, either. In response, FCA is reportedly pulling out all the stops to get these vehicles into consumers’ hands before 2020.
The initial sales bank report claimed FCA had 40,000 unassigned vehicles in the U.S., which the automaker claimed it whittled down to 5,000. The analytics system was working, it claimed, bringing total inventory down by 140,000 vehicles in the third quarter.
However, that pool of unordered vehicles swelled to roughly 70,000 at the beginning of December, a source told Bloomberg, and internal marketing documents reveal the automaker is prepared to play Let’s Make a Deal to clear them out.
The company says the build-up is the result of a year-old system to streamline manufacturing by using data analytics to forecast demand, which can cause supply to wax and wane. But it’s also leading to internal strains, with some employees expressing frustration that the cars produced don’t match market preferences, according to the conference call and people with knowledge of the matter.
The magnitude of discounts Fiat Chrysler is resorting to in order to coax dealers to take on the vehicles sends a troubling signal for the automaker’s most important region. Spending on incentives impinges on earnings, and the company is almost entirely reliant on the money it’s making in North America. The situation also shows the challenges automakers face when adopting new technology to overhaul entrenched practices.
While the unordered vehicle pool has shrunk markedly since the start of the month, there’s little time left to clear the remaining pile before the end of the month. An internal marketing email from November showed FCA’s willingness to pursue employee pricing to move metal, as well as targeted incentives for certain models. A December 11th conference call with sales staff painted a picture of a company with the sales pedal to the floor; it showed an all-hands-on-deck situation, and many dealers expressed frustration with the idea of taking on inventory they didn’t want.
In some cases, it’s not that the model isn’t popular — just the configuration. One dealer was heard on the call complaining about the number of unassigned Ram HD Big Horn models with optional 20-inch wheels, a sales exec told Bloomberg. The dealer’s customers preferred stock 18-inchers.
In a bid to lower its bloated inventory, FCA reportedly put a limit on dealer orders this month. If you’ve got spare time over the holidays, and you’re in the market, you might check to see if FCA’s desperation can benefit your personal fortunes.
[Image: Fiat Chrysler Automobiles]
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