DETROIT Dec 5 Detroit automakers said on
Wednesday they will not revert to practices like pushing
consumer incentives to profit-eating levels even as they deal
with oversupply on some key models.
Heading into the 2008-2009 downturn in the auto industry and
the bankruptcies of General Motors and Chrysler, U.S. automakers
routinely overproduced in order to keep factories running and
then piled on consumer incentives to prop up sales.
This was a money-losing proposition General Motors Co
, Ford Motor Co and Chrysler Group LLC vow
not to repeat.
While each of the three major U.S. domestic automakers has
several models that are overstocked, most worrisome, analysts
say, is the 139 days of supply at the end of November for pickup
trucks at General Motors Co.
The preferred level in the auto industry is to have about 80
days of supply for full-sized pickup trucks like GM's Chevrolet
Silverado and GMC Sierra.
Ford Motor Co has 89 days of supply for its industry sales
leader F-Series pickup truck, which Erich Merkle, sales analyst
with Ford, says is right where the automaker wants to be heading
U.S. auto sales in December are often 20 percent higher than
in November, and December is one of the best-selling months for
pickup trucks as businesses purchase at the end of the year to
reap tax advantages, all three Detroit automakers said on
When GM announced November U.S. sales on Monday, analysts
expressed concern that GM would layer on incentives that lower
the price for consumers while cutting profit for the automakers
on pickup trucks, a major revenue and profit source.
According to Edmunds.com, November incentives on the
Silverado were $4,610 per vehicle sold, compared with $4,533 for
the Chrysler's RAM 1500 pickup truck and $4,166 for the F-150,
the most popular F-Series pickup from Ford.
Mark Reuss, North American president for GM, did not detail
the company's incentive plans for pickup trucks, but said he's
pleased with the company's discipline in holding the line on
incentives even though the Chevrolet Silverado has been the
oldest truck on the market for the past three years.
"We're trying to run this on a longer-term basis than just
matching (competition) in the market on a short-term basis,"
Reuss said Monday.
Analyst Jim Hall of 2953 Analytics said GM's pickup truck
inventories are high, but it's because GM is making smart
"The company's making a bet in a way that they would rather
have the revenue right now," said Hall. "The bad old ways would
have been high production, high stocks and high inventories.
They've broken that equation."
Ford has changed its ways on layering on the incentives
since it instituted a turnaround plan about five years ago, said
"We have every intention of running our business in a very
consistent fashion," he said. "We produce to demand and we're
very consistent with our incentive spend."
Reid Bigland, head of U.S. sales for Chrysler and also
chief of the Dodge brand, said his company also has become more
disciplined when it comes to incentive spending.
GM is preparing for production of a new version of the
Silverado in the second quarter of 2013, and is building up its
stocks of pickups to smooth out any production launch problems.
"The last thing we want to do is get caught short of
inventory in a growing market," said Jim Cain, GM spokesman.
"Then, you are just handing sales to the competitors."
GM on Monday admitted its truck inventories were too high,
and that it will miss its end-year target of having U.S.
inventory of no more than 220,000 pickup trucks, or about 85
days of supply.