LOS ANGELES -- Jim Speck was eyeballing his Mitsubishi showroom and was unhappy. It was near the end of March, and he had too many cars. Sales were slow, and he was concerned about his inventory carrying costs, known as floorplanning.
But that was nothing compared with the surprise Speck got March 28, when he discovered Mitsubishi Motors North America had invoiced him for 27 additional cars - valued at about $550,000 - that weren't supposed to arrive for a month or more.
Faced with a glut of cars, Speck placed his store on "finance hold" -shutting down his floorplanning account with his finance company - to stop Mitsubishi from invoicing him any more vehicles.
That wasn't the final insult. Six weeks later, only eight of those 27 invoiced vehicles have arrived, but all are on his books.
"When we get invoiced, we're supposed to get the car within 72 hours," says Speck, a multifranchise dealer with a Mitsubishi store in Torrance, Calif. "I've called the region to ask where my vehicles are, and I've heard every story in the world."
Speck is not alone. Sources within Mitsubishi and its dealer body say that Mitsubishi in March unloaded nearly an extra month's worth of retail units into dealer inventories that were pulled ahead from future orders. Some dealers say they even had cars they had never ordered slipped in with the rest of a shipment.
The company denies there is a serious problem. But as many as 50 of Mitsubishi's 637 dealers have taken the radical step of placing themselves on finance hold to stop the unwanted flood of cars, a well-placed company source says. Other dealers have stopped ordering cars altogether.
Until dealers come off finance hold and start ordering vehicles again, Mitsubishi will have cars coming off the assembly line backing up in rail yards and ports, potentially leading to a costly logistical bottleneck.
Finance hold basically means a dealer's lender - either a financial institution or captive finance company - shuts the dealer's line of credit that the automaker drafts when it invoices a vehicle.
Greg O'Neill, COO of Mitsubishi Motors North America's sales division, says the automaker shipped about 19 percent more vehicles in March than the previous year, but he declined to give a number. O'Neill would neither confirm nor deny the number of dealers on finance hold.
"We do have dealers with too many cars in their inventory," O'Neill says. "In the last quarter, we were out-spent and out-shouted, so dealer inventories grew. We don't want any dealer on finance hold. That concerns us."
"We were trying to support a sales plan in a very competitive environment. Our retail plan just didn't materialize, and that was why there was that crunch."
According to figures Mitsubishi provided to Automotive News, the automaker had 81,600 units or an 86-day supply in its U.S. dealer inventory May 1, on a par with an 85-day supply on April 1. But three Mitsubishi sources say total "on the ground" inventories May 1 were more than a 120-day supply - about double what the industry considers an ideal number.