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May 18, 2010 12:00 AM

Carmakers turn into inventory control freaks

Utech Staff
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    By Jesse Snyder, Automotive News

    Detroit -- By not overbuilding, US automakers started the month with the leanest 1 May inventory on record. That is if you disregard the multiple crises of 2008-09.

    Ever since the disruption of cash for clunkers last August, automakers have matched production closely to US sales. It has paid off in leaner, more balanced inventories.

    The 2.1 million units on hand 1 May equalled a 56-day supply, the lowest in 19 years of records for the month. The average has been a 69-day supply. For manufacturers and dealers, there were 562 900 fewer unsold units to finance than a year ago, even though April sales volume jumped 20 percent.

    "Since the end of 2009, there is a real sense of discipline with the balance of supply and demand," said Jeff Schuster, head of forecasting for J.D. Power and Associates. "The true test will be the continuation of this approach post-recovery."

    Except for Toyota, all major players have reduced incentives this year, raising per-vehicle margins.

    "There is no faster way to profitability than to cut incentives," said Dave Cole, chairman of the Center for Automotive Research. "And the pressure on domestics to build more vehicles to spread legacy costs over more units is gone."

    On 1 May, car and truck stocks were each at a 56-day supply -- it's the fourth time they have matched in the past seven months. Over the same period, stocks have been near or below the 60-day supply the industry traditionally considers ideal.

    It's a huge contrast to the inventory roller coaster in 2008 and most of 2009, when a sales collapse, fuel-price spike and bankruptcies created a spectacular glut and then cash for clunkers drained it. Industry supplies averaged 76 days in 2008 and 86 days in the first half of 2009.

    See a longer version of this story at www.autonews.com.
    "

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