Hear that? It's the sound of skyrocketing inventories
|Jason Stein is publisher and editor of Automotive News|
Record profits. Surging sales. And all is big and easy in the Big Easy. Or is it?
Not to throw cold water on a hot New Orleans NADA party, but talk to enough dealers on the show floor here this weekend and you'll hear hints of concern.
Enough with the comparisons to 2009. Those days are over. Now, some dealers say, let's be mindful of what could come.
Interest rates remain at historic lows, and will increase.
Loan terms are rising, in some cases in the mind-boggling 100-month range. (Housing bubble, anyone?)
Transaction prices are on the way up.
But look deeper and there's a larger concern most people won't talk about. At least not yet.
Inventory levels are moving up at a fierce clip. If you listened to AutoNation CEO Mike Jackson at the recent Automotive News World Congress in Detroit, you heard a story that's all too familiar: There are just too many cars in the market.
Forget the projections of 16.5 million units. The underlying issue is simple. Inventory has significantly increased from two years ago, as has the selling rate. But the pace of sales won't continue.
And if sales don't keep the same momentum, there will be two options: slow the factories or fire up the incentives.
Jackson said inventory levels must be contained to prevent a lapse into the destructive cycles of the past.
Dealers are sitting on retail inventory of about 3.5 million units -- or about $100 billion worth of unsold goods.
So, here's the warning shot across the Mississippi. The question: Is anyone listening?