Domestic Automakers Say Lower Inventories are Costing them Sales

According to a recent report by Automotive News, 73% of the 244 auto dealers surveyed, representing virtually every major brand, said they had too few vehicles in the inventories to meet customer demand.

Dealer and former chairman of the National Automobile Dealers Association, H. Carter Myers III said he is losing sales due to a lack of inventory and complained that automakers have “driven supplies too low” in their attempts to maximize their profit margins.

Ford, GM and Chrysler dealers are among the most vocal critics and say they could sell more vehicles if the automakers would make them available. Among dealers who took part in Automotive News’ informal online survey, 77% said they have lost sales as the result of the leaner inventories.

Spokesman Tom Henderson said GM dealers had a 57-day supply of vehicles on August 1, just slightly below the 60-day supply generally accepted as optimal throughout the industry. He also said that GM is committed never to return to the bloated inventories, high incentives and low resale values that took the company to the brink of collapse last year.

To meet demand, Henderson said GM is ramping up production of some of its most popular models including the Chevrolet Equinox and GMC Terrain crossover vehicles.

In fact, GM’s CAMI production facility located in Ingersoll, Ontario, is already working at full capacity and a previously unused part of the plant’s body shop has been refitted to allow workers to build more bodies. The vehicle bodies are then shipped to the automaker’s Oshawa, Ontario facilities, more than two hours away, for final painting and finishing. Henderson said dealers can expect to start seeing those vehicles this fall.

The Automotive News survey found that, like the automakers, dealers don’t want to return to pre-bankruptcy conditions. However some, like Chevrolet-Cadillac of Goldsboro, North Carolina owner Paul Benton, think a balance could, and should, be reached.

Benton said that before GM’s bankruptcy, he had about 30 Chevrolet Silverado Crew Cab pickups on his lot at any given time. He currently has only five in his inventory. He also said that his dealership did not have a single Equinox in stock. He estimates that, with adequate inventory, he could have sold 20% more vehicles over the past several months.

According to Benton, domestic automakers need to keep more vehicles on the ground than their foreign competitors because they have more models and offer more variations for consumers to choose from. He pointed to pickup trucks, with their variety of cab configurations, beds, engines and transmissions, as a prime example of the need for greater on-site inventory.

Although most automakers consider a 60-day supply to be ideal, Benton said an 80-day inventory is right for his dealership.

In comparison, most import makers have traditionally kept their U.S. inventories below the 60-day level. On August 1, Honda had a 49-day supply of new vehicles, while Toyota/Scion’s supply was just slightly higher, at 50-days.

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