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Auto dealers cutting inventory

DETROIT, Oct. 29 (UPI) -- Auto dealers say they will no longer carry huge inventories to help Detroit avoid production cuts, the Wall Street Journal reported Friday.

U.S. automakers developed a post-Sept. 11 strategy of filling dealer lots with cars and clearing them out with big discounts, a decision credited with helping to keep the nation's economy from falling into an even deeper slump following the terror attacks.

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But retailers, citing higher interest costs and slimmer margins in new-car sales, will no longer take large numbers of slow-selling models to accommodate Detroit's overproduction of vehicles. General Motors and Ford plan to cut overtime or impose temporary furloughs to avoid a production glut.

Earlier this year Detroit hoped an improving economy would allow it to reduce discounts, but auto-industry pricing, adjusted to inflation, are still falling and gasoline prices are high.

Mike Jackson, head of Auto Nation Inc., said he's aiming for a 50-day supply of vehicles at the company's 287 dealerships compared with its unsold-vehicle inventory of 75 in June. By the end of September, Auto Nation, the largest auto-retail group in the United States, had an average 53-vehicle supply.

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"If you look at how the inventory is coming down and at future production schedules, it shows there was a general agreement that inventory levels were too high and that we weren't going to be able to sell our way out of it," Jackson said.

Industry executives say the inventory-reduction will lead to production cuts even deeper than auto makers have stated publicly and may force more layoffs, especially at GM and Ford.

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