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Auto Makers' Channel Stuffing Highest Since 2005

Tyler Durden's picture





 

While the abundance of commercials for cars across all media this time of year is nothing new, the manufacturers (and even more so the dealers) are likely getting more desperate. As Bloomberg reports, inventory climbed to almost 3.4 million cars and light trucks entering November - at 76 days of supply, that was the highest for the month since 2005. This should come as no surprise as we previously noted GM's post-crisis highs in channel stuffing as hope remains high that the recent slowdown in sales does not continue. The question, of course, is, "will manufacturers be responsible and curb production to keep inventory in check, or are some going to resort to old, bad habits and churn it out and then throw incentives on them." We suspect we know the margin-crushing answer.

 

Via Wards Auto,

the levels harken back to early in last decade when steep price discounting was used to prop volumes,...

 

Excluding 2008 when the industry was heading into recession, LV inventory totaled 3.397 million at the end of October, highest for the month since 3.803 million in 2004. October’s 76-day supply, was the highest for the month since 77 in 2005.

 

By comparison, sales in 2013 mostly have run at highs dating to 2007, suggesting inventory is getting ahead of the curve.

GM just saw the biggest two month jump in inventory in the restructured company's history.

 

 

Via Bloomberg,

Carmakers have boosted production to meet demand that has left the industry on pace for the best sales year since 2007. Swelling supply raises the stakes for sales in November after deliveries missed estimates in October and slipped in September for the first time in 27 months. If buyers don’t absorb enough inventory, more automakers, including Toyota Motor Corp. (7203) and Honda Motor Co., may need to follow Ford Motor Co.’s lead by trimming production to avoid margin-slicing discounts.

 

“Inventory has been so tightly managed, and it has been because demand has been there and production hasn’t been able to keep up,” Jeff Schuster, an analyst with researcher LMC Automotive, said in a telephone interview. “If you change that scenario around, the question is, does the discipline that we’ve seen the industry operate with lately stick around?”

 

...

 

“As the market begins to slow down and begins to peak, it’s going to get tougher for everybody,” Joe Langley, the head of North American vehicle production analysis for IHS Automotive, said by telephone. “Are manufacturers going to be responsible and curb production and keep inventory in check, or are some going to resort to old, bad habits and churn it out and then throw incentives on them? That’s what’s going to be interesting, to see how that plays out.”

 

...

 

Wesley Lutz, a Chrysler dealer in Jackson, Michigan, said his store has about 120 days supply of vehicles in stock, roughly double what he usually likes to carry. Lutz cited his anticipation of strong winter and spring selling seasons and his ability to borrow at less than 2 percent to finance the inventory on his lot.

 

“I’m probably not managing my inventory as well as I do at 8 percent, but I’m willing to roll the dice and stock some inventory in December and January, because I think we’re going to have a great market in February,” Lutz said by telephone. “We’re borrowing money so cheaply.”

 

...

 

“If it’s an underwhelming month, we’ll need to look to see if there are any decisions to start to ratchet back” production this month or in January, LMC’s Schuster said. “It could end up being the first real test that the industry’s faced since the restructuring.”

Sadly, there it is - due to intervention-driven low rates, mal-investment occurs from the bottom-up - and now we have the most inventory in 8 years... car makers and dealers (perhaps more so) will be hoping hard this season... the 'field of dreams' economy continues

 

 


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Mon, 12/02/2013 - 09:42 | Link to Comment the not so migh...
the not so mighty maximiza's picture

not a good time to buy a car, my health insurance when up 500 per year for my family, and i am one of the lucky ones.

Mon, 12/02/2013 - 09:43 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Molly geez.....where did you score that deal?

Mon, 12/02/2013 - 09:44 | Link to Comment the not so migh...
the not so mighty maximiza's picture

company plan, i think it will be going up every year from here on out though,  i havent used the plan since 2000 for an emergency room visit, paying more for nothing

Mon, 12/02/2013 - 11:39 | Link to Comment smlbizman
smlbizman's picture

i wonder if larry coss of greentree finacial and al dunlap of sunbeam fame are advising these guys.....you better sharpen your pencils to know what these guys did...

Mon, 12/02/2013 - 10:46 | Link to Comment yogibear
yogibear's picture

It's up at least 50% from 2010. Go get pharmaceuticals  and their outrageous without insurance. 

Sorry Wall Street and banksters Americans are tapped out.

Mon, 12/02/2013 - 11:31 | Link to Comment Freddie
Freddie's picture

Look for those free discount drug cards.  They do help.  There are RX Relief is one and there is at least another.   I am fortunate that I have no perscrip meds or non-perscrip meds.  LOL!

Mon, 12/02/2013 - 11:41 | Link to Comment Freddie
Freddie's picture

Wesley Lutz, a Chrysler dealer in Jackson, Michigan, said his store has about 120 days supply of vehicles in stock, roughly double what he usually likes to carry. Lutz cited his anticipation of strong winter and spring selling seasons and his ability to borrow at less than 2 percent to finance the inventory on his lot.

LOL!  Who would want to have 1 days worth of inventory on Chryslers.  What pieces of shit.

Mon, 12/02/2013 - 09:43 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Wake me when they start simply giving away the trucks for some government "credit".  We could use a couple new flatbeds...

 

Mon, 12/02/2013 - 09:45 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

You can tell it's the getto.....cause everyone is driving a GM.

Mon, 12/02/2013 - 09:54 | Link to Comment I am Jobe
I am Jobe's picture

Never know. Might be next step to so called recovery 

 

Mon, 12/02/2013 - 10:32 | Link to Comment TheFourthStooge-ing
TheFourthStooge-ing's picture

Sell them to the Chinese and they can use them to fill the parking lots of their ghost cities. We've already got enough for our carcass cities.

Mon, 12/02/2013 - 10:38 | Link to Comment PT
PT's picture

See, we can afford to build houses but no-one can afford to buy them.  We can afford to build cars, but no-one can afford to buy them.  McDs burger flippers can afford to build burgers, but can't afford to buy them.   (err, forget the McDs example for a minute or we'll totally miss the point I am trying to make.)  

Blah, blah, blah, communism, misallocation of capital, blah blah blah... 

No.  Take the money out of the equation for a minute.  We build all this stuff therefore we can afford to build it.  What does it really mean when no-one can afford to buy it?

Mon, 12/02/2013 - 11:04 | Link to Comment Cortez
Cortez's picture

Exactly the problem.  The powers that be look to banks and corporations to ignite the economy.  They can't seem to see that free trade agreements have destroyed demand through loss of jobs and lower inflation adjusted wages.

Mon, 12/02/2013 - 11:44 | Link to Comment forwardho
forwardho's picture

 We barrowed in order to build the stuff in first place, It means we could'nt really afford it.

The fantasy will continue until overwelming imperical evidence can no longer be denied.

Mon, 12/02/2013 - 12:48 | Link to Comment PT
PT's picture

When I asked you to look for meaning while ignoring money, I meant ignore debt too.  But since you brought it up:

We have to print imaginary money and lend it to corporations so that they can hire people and build cars and houses that no-one can afford to buy.  If we didn't print and lend then all those houses and cars would not exist and all those trademen and factory workers would be unemployed.  But the fact is that the resources and labour were available to get the job done.  Depending on how many resources were imported, you could argue that we stole some resources by printing more imaginary money than other countries, but that still leaves the labour. 

The fact that we build stuff proves that we can afford to build it.  The labour is there.  Given the high unemployment levels, it's not like the country was suffering because the labour should have been doing something else.  Name something that needs to be produced.  The potential labour is still there, waiting for money so it can be allowed to produce. 

What if the money comes from someone's savings?  If we don't produce anything then those savings don't generate interest.  The only way those savings can generate a return is through production. (err, of course I am ignoring CB money printing providing imaginary capital gains in equities and real estate here.  The only way your retirement money is going to give you a banana is if someone actually goes out and grows a banana.)

Mon, 12/02/2013 - 13:18 | Link to Comment alangreedspank
alangreedspank's picture

It means everyone wants to use of state power to get as much as they can as worker, but unbeknownst to them, the gun ends up being pointed at the customers, in this case, them, the same people once they punch out the factory and go to the store.

Mon, 12/02/2013 - 09:43 | Link to Comment I am Jobe
I am Jobe's picture

I am driving my 13 year old car. Me buying another car is out of the question. I have started walking 4 miles a  day one way, Screw the car companies. 

Mon, 12/02/2013 - 10:31 | Link to Comment Headbanger
Headbanger's picture

My bad too for keeping my 12 year old car and no desire for a new one. Plus I can still play cassette tapes in it!

Mon, 12/02/2013 - 11:08 | Link to Comment Cortez
Cortez's picture

I don't plan to get rid of my car until the cost of fixing it is greater than what the car is worth.  a new car looks nice for a month, the money in the bank from no buying a new car looks nice every month.

Mon, 12/02/2013 - 12:42 | Link to Comment PT
PT's picture

When the weekly cost of repairs exceeds the weekly cost of repayments, it is wise to trade up to something newer.  But feel free to say there is a better way.  For example, if you replace broken parts with superior parts that will last longer.

Mon, 12/02/2013 - 13:54 | Link to Comment indygo55
indygo55's picture

I have a 05 Scion and it runs great. Never gonna replace it. Replaced the rear wheel bearing assembly this weekend. The part cost $145 (for the good one, chinese knockoff for $90) and the dealer wanted $675 to do it. I quitely whispered "fuck off" and did the job in my garage in about 30 minutes. Really easy. Fuck the dealer. 

 

Mon, 12/02/2013 - 10:51 | Link to Comment ejmoosa
ejmoosa's picture

Been driving the same 1999 Expedition for 30% of my life now.

Sure, checked out the new ones.  What do they have that mine doesn't have?  A built in Ipod connector.

I can absolutely do without that.  I have some  two year old $9.99 earbuds that work just fine...

Mon, 12/02/2013 - 14:13 | Link to Comment Colonel Klink
Colonel Klink's picture

They make adapters for the stock stereo which adds a 3.5mm line that plugs into your music device (ipod, etc).  Added one to my '99 Vette for about $60. 

Mon, 12/02/2013 - 11:49 | Link to Comment Freddie
Freddie's picture

Starve the beast especially kill TV and Hollywood.  F them.  They support O all the way.

Mon, 12/02/2013 - 09:44 | Link to Comment Sudden Debt
Sudden Debt's picture

I told them to add more and bigger cupholders... but did they listen?.... NOOOOO!!!!

And than they don't sell any cars... you don't need to be a genius to get why....

Mon, 12/02/2013 - 09:47 | Link to Comment I am Jobe
I am Jobe's picture

You forgot a 23 inch flat screen tv in the mix. 

Mon, 12/02/2013 - 10:03 | Link to Comment Sudden Debt
Sudden Debt's picture

3D or just a simple LED television?

 

Mon, 12/02/2013 - 10:58 | Link to Comment PT
PT's picture

Cars have been too "girlie - looking" for the last 30 years.  They should build muscle cars and they should look like muscle cars.

Mon, 12/02/2013 - 12:37 | Link to Comment pursueliberty
pursueliberty's picture

Ford listened.  My F250 has 6 cup holders available for the driver and passenger, and two more in the back seat. 

 

It will fit eight big gulps for you non NYC peeps.  Diabetes sold seperately

Mon, 12/02/2013 - 13:47 | Link to Comment ncdirtdigger
ncdirtdigger's picture

What the hell? My new F150 only has two cup holders, they aren't big enough to hold much over a 7-11 coffee cup, and they are located on the floorboard. They are so far away, I may just be burning more calories reaching for my coffee than I am consuming. But it was my only choice. I am NOT buying any government backed, thieving, channel stuffer's truck, and I sure as hell am not driving some foreign truck with some slanteyed name on it.

Tue, 12/03/2013 - 19:16 | Link to Comment Abbie Normal
Abbie Normal's picture

Just because Ford didn't take a bailout doesn't mean they're not government-backed.  How many fleet sales were govt. purchases compared to the other car makers?

Mon, 12/02/2013 - 09:49 | Link to Comment augustusgloop
augustusgloop's picture

Drove by the Silao GM plant (Guanajuato) last week where they make escalades, suburbans, pickups--every square inch of grounds is packed with cars. I wonder how much the automakers have to pay the cartels keep cars from being hijacked on way off of plant. 

The cartels are now 70s style conglomerates, moving away from core narcotics products into oil, coal mining, gold mining, and even Avocado growing (Michoacan produces most of the world's avocados)--

http://www.borderlandbeat.com/2013/12/michoacan-blood-avacados.html

Mon, 12/02/2013 - 09:53 | Link to Comment I am Jobe
I am Jobe's picture

The Cartels understand diversification

Mon, 12/02/2013 - 11:56 | Link to Comment Freddie
Freddie's picture

The Cartels own the Senate and White Hut.  Friends of the Cl*ntons and Bu*hes too - see Mena.

Mon, 12/02/2013 - 09:55 | Link to Comment I am Jobe
I am Jobe's picture

Automakers should have a Black Sat Sale . SARC

Mon, 12/02/2013 - 09:59 | Link to Comment SheepDog-One
SheepDog-One's picture

Buy an 80" flat screen TV, get an Escalade for free!

Mon, 12/02/2013 - 09:58 | Link to Comment I am Jobe
I am Jobe's picture

AMZN will deliver with a drone. 

 

Mon, 12/02/2013 - 10:28 | Link to Comment Sudden Debt
Sudden Debt's picture

thank god for those uranium battery packs because I think it's about 6000 miles from Amazon headquarters to my place.

 

And once you see 1000 drons in the sky, drugdealers will have eyes like tennisballs once they can start running their drugs by drone to.

 

programm the path, send it over the sea, et voila! 5 million dollar coke by drone!

Mon, 12/02/2013 - 10:50 | Link to Comment yogibear
yogibear's picture

Nice  toys for the kids once the Amazon is sprayed  over and the electronics is altered.

Jeff Bozo going to give free toys for the hood.

Mon, 12/02/2013 - 10:00 | Link to Comment adr
adr's picture

Must be why I see the return of the $88 a month lease with $1500 down on $20k cars. A dealer will give you $1500 for just about any POS. 

I've never seen more ghetto mamas driving brand new cars. The new ghetto car is the Dodge Dart. The sales of that car were so poor, Chrysler needed to figure out a way to move inventory. A local dealer advertised Darts with $6k on the hood. Brand new Dart for $12k or $99 a month lease with zero down.

 

Mon, 12/02/2013 - 10:18 | Link to Comment azzhatter
azzhatter's picture

The only thing worse than the sales of the Dart are the reviews of the Dart. Car is a certified shitbox.

Mon, 12/02/2013 - 10:12 | Link to Comment CcalSD
CcalSD's picture

Good post!  Can't wait to see what "incentives" they come up with this month!

Mon, 12/02/2013 - 10:15 | Link to Comment buzzsaw99
buzzsaw99's picture

free car with every free bamaphone

Mon, 12/02/2013 - 10:30 | Link to Comment Sudden Debt
Sudden Debt's picture

Can I keep my old phone if I just take the free car?

Mon, 12/02/2013 - 10:40 | Link to Comment Platinum
Platinum's picture

How about a free phone, car, AND TV's?!!!1

 

https://www.youtube.com/watch?v=MKY7WyUU8Nc

Great use of money if I ever did see one!

Mon, 12/02/2013 - 11:31 | Link to Comment forwardho
forwardho's picture

Sir, that kind of independent altruism will get you labeled as an undesirable.

Mon, 12/02/2013 - 11:35 | Link to Comment buzzsaw99
buzzsaw99's picture

if you like your old phone you can keep it. NOT! bwa ah ah!

Mon, 12/02/2013 - 10:46 | Link to Comment El Hosel
El Hosel's picture

Channel stuffing in the morning...Thats hot.   http://imgur.com/r/nsfw/tZhGJcI

Mon, 12/02/2013 - 10:44 | Link to Comment Boondocker
Boondocker's picture

Why buy new when you can get a year old for half the price?

Mon, 12/02/2013 - 10:47 | Link to Comment azzhatter
azzhatter's picture

If you like your car you can keep your car

Mon, 12/02/2013 - 10:52 | Link to Comment Seasmoke
Seasmoke's picture

It must be time for those cash for clunker cars, to become the new clunkers. 

Mon, 12/02/2013 - 10:54 | Link to Comment HamRove
HamRove's picture

Thank god I don't watch T.V. anymore. Especially the car commercials. ugh.

Mon, 12/02/2013 - 10:55 | Link to Comment rationaldemocracy
rationaldemocracy's picture

The time has come to end presidential term limits, because continuing the restrictions on how long one can serve in the country's highest office is bad for the United States

Mon, 12/02/2013 - 11:10 | Link to Comment TheFourthStooge-ing
TheFourthStooge-ing's picture

.

The time has come to end presidential term limits

Better idea: end term limits for all politicians except democrats and republicans.

the country's highest office is bad for the United States

That is correct.

Mon, 12/02/2013 - 11:14 | Link to Comment YHC-FTSE
YHC-FTSE's picture

Kill two economic birds with one stone - How about a free house in Detroit with every car purchase? Credit purchases only, ebt cards accepted.  Gives the banks someone else to name for their bad loans, sticks another star on MBS subprime ratings, abandoned properties get maintained, and the motor industry can have record "sales". 

If that's not enough, just give them away as, "Obamobiles". Use the same US made batteries they put in the Fisker/Tesla/Boeing, and we have the added entertainment of multiple conflagrations on the highways - msm news gets a boost, maybe even get to blame Assad for the batteries.  Win win all round. A tremendous boost for GDP. Where's my Nobel prize for economics?  

Mon, 12/02/2013 - 11:16 | Link to Comment Cortez
Cortez's picture

One of these days there will be a law passed that vehicles must be under 10 years old in order for a license plate to be issued.  Of course, it will be for "safety" reasons.

Mon, 12/02/2013 - 13:19 | Link to Comment kchrisc
kchrisc's picture

Surprised they haven't done it yet.

Thinking about it, I would bet a state will try to do just that next year.

Mon, 12/02/2013 - 11:18 | Link to Comment Mareka
Mareka's picture

Channel stuffing at all time high but prices are not coming down and the car companies are only offering minimal $500 - $1,000 incentives.  

Bought a new jeep in 2009 $20K out the door.  The same model is now $25K out the door...25% higher in 4 years with record surplus inventories!!  What's wrong with this picture???

Yet another way to screw the savers, Pour free printed money into sub-prime loans to supply sign & drive new cars to anyone willing to scribble their name on an application. 

End the Fed.

 

Mon, 12/02/2013 - 12:31 | Link to Comment pursueliberty
pursueliberty's picture

A lot of the price increases are due to same reason as many price increases.

 

Government interference.

 

 

Mon, 12/02/2013 - 11:39 | Link to Comment Blano
Blano's picture

“I’m probably not managing my inventory as well as I do at 8 percent, but I’m willing to roll the dice and stock some inventory in December and January, because I think we’re going to have a great market in February,” Lutz said by telephone. “We’re borrowing money so cheaply.”

Of course, because February is a GREAT time of the year to go strolling around car lots in Michigan with the kids in tow.

Mon, 12/02/2013 - 12:10 | Link to Comment schooltruth
schooltruth's picture

New car registrations continue to hit historic highs in our part of the country despite a very weak economy locally.  Principally driven by returning soldiers (we're near a military base) but even the average man seems to be over extending again.

All three major dealer chains are building new showrooms despite lots of excess existing real estate from the last meltdown.

Mon, 12/02/2013 - 12:14 | Link to Comment moneybots
moneybots's picture

"Auto Makers' Channel Stuffing Highest Since 2005"

 

When does the indigestion happen?  When does cash for clunkers, round two begin?

Mon, 12/02/2013 - 12:43 | Link to Comment NEOSERF
NEOSERF's picture

Chrysler got 2 bailouts so far, GM has 1 more "mulligan" and F has 2 to give...might as well check that box on your taxes now..."Would you like to donate $2....

Mon, 12/02/2013 - 13:02 | Link to Comment starman
starman's picture

just keep remembering GMs total domestic auto sales in 2007 were 4.2 million units

                                  GMs total domestic auto sales in 2013 were 2.3 million units

 

you do the math, its a recovery after all or not

Mon, 12/02/2013 - 13:04 | Link to Comment Blue Horshoe Lo...
Blue Horshoe Loves Annacott Steel's picture

Using goverment, Washington DC math, that equals +1.9 million sales in 2013!

Mon, 12/09/2013 - 11:21 | Link to Comment nagano dave
nagano dave's picture

Dealers are getting more desperate?  There are hundreds of thousands of vehicles scheduled for lease return.  Dealers, who have been starved for inventory for years, are likely stocking up when they can to be prepared for the onslaught.  There is still huge pent up demand to be met as the econojmy continues to recover. 

 

This piece is completely overblown.  The current days supply is not a big deal by any stretch.  The cost of incentives is baked in to the MSRP.  We have seen recent price hikes.  This is probably preparation for the inevitable interest rate increases that will occur, and the subventions the OEMs will need to provide to maintain volume momentum.  Yes, there will continue to be competition for market share.  The age old OEM axiom is, "Inventory Sells Cars."  AND there is always reason to doubt that the industry is disciplined.  After all, much of the discipline we've seen is a result of capactiy constraints.  But its MUCH to early to acccuse the OEMs of repeating previous sins.  For one thing, residual values are much more conservative than in the previous era, even if there is still strong money factor subvention.

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