Supply soars; is there a glut of vehicles?
As the auto industry's average days supply of unsold vehicles on Feb. 1 soared after unusually harsh January weather, so did calls for manufacturers to cut production.
The complainers ranged from dealers with clogged lots and growing carrying costs to analysts fearful of a return to bad habits of runaway production and huge incentives.
Carmakers started the month with an 88-day supply, up from 64 days a month earlier. And each of the Detroit 3 had more than a 100-day supply, well above the industry's rule-of-thumb ideal of 60 to 65 days.
Is there a vehicle glut? Let's look at both measures of vehicles in hand.
Industrywide inventory on Feb. 1 stood at 3.56 million units in a year most forecasters expect to finish with 16.0 million to 16.4 million U.S. sales. That's slightly more Feb. 1 inventory than in 2007 when sales reached 16.2 million and less than in 2006, when sales hit 16.6 million.
What about that days supply surge? Most of it is from calculating how long available stock would last at the previous month's sales rate. That measure always jumps this time of year. December is usually the best or second-best sales month, and January the worst.
So the Jan. 1 industry average of 64 days exactly matches the average of the previous decade, and the Feb. 1 stock is seven over the previous decade's average of 81 days.
Carmakers expect sales deferred because of bad weather to return as conditions clear. None has announced production cuts beyond tooling changes for new models.
But with North American production running so close to capacity, automakers could be reluctant to cut output of models they can't make up for later without overtime.
You can reach Jesse Snyder at email@example.com.