General Motors' plan to idle its full-size pickup factory in Indiana next month suggests the automaker is trying to avoid returning to days of stockpiling vehicles on dealership lots, analysts said this week.
Halting production at Fort Wayne Assembly, which builds the light-duty Chevrolet Silverado and GMC Sierra pickups, for two weeks starting March 27 does not mean demand for the trucks is softening, industry analysts told Automotive News. Instead, they said, the automaker appears to be working to maintain higher prices and profitability even as it increases supply after two years of parts shortages curtailed production and inventory levels.
"I think that what we're really seeing in some ways is automakers sort of changing [their] approach a little bit and trying to keep inventory lower than they have in the past," said Stephanie Brinley, associate director, auto intelligence for S&P Global Mobility.
GM spokesperson Dan Flores said in a statement last week that the Fort Wayne plant's downtime is "an effort to maintain optimal inventory levels with our dealerships."
"Our production is up over the past month while demand remains fairly consistent, leading to an increase in inventory," Flores said. "Therefore, as we stated on our earnings call, we are going to proactively manage inventory levels, including plant downtime."
Maintaining a 90-day supply of vehicles is not the goal anymore, Brinley said. Instead, automakers are looking to increase days' supply from the steep lows the ongoing semiconductor shortage has produced, while not building so many that they're "swimming in cars."
"Automakers have learned that it's typically now better to let [the] Fort Wayne plant be down for two weeks and manage your inventory than it is to keep running flat-out and keep producing and put an incentive on the end," she said.
GM CFO Paul Jacobson told analysts on the automaker's fourth-quarter earnings call in January that GM ended 2022 with a roughly 50-day supply of dealership inventory, including in-transit vehicles. GM aims to have a 50- to 60-day supply at the end of 2023, which would be 20 to 30 days below mid-2019 levels, assuming logistics challenges continue to ease, he said.