Carmageddon: After Abysmal April Sales, Auto Workers Prepare For "Extended" Summer Shutdowns

Tyler Durden's picture

Auto OEMs typically shut down plants once a year during the summer to retool for model changeovers and whatever general maintenance is required.  But this year summer shutdowns will be about much more than just retooling plants.  With inventory soaring on dealer lots, auto OEMs will likely have no choice but to extend their typically summer shut down schedule and it will take a 'yuge' toll on the 1,000s of auto workers that are considered "short term" employees and not eligible for unemployment benefits...the folks who pretty much single-handedly voted Trump into the White House.

As we noted yesterday (see "Auto Bloodbath: Every OEM Misses April Sales Estimates As Inventories Continue To Soar"), after an abysmal March print and growing speculation on wall street that auto sales are looking less like a "plateau" (Ford's label not ours) and more like a debt-fueled bubble on the verge of an epic collapse, auto investors were looking toward April auto sales for signs of hope.  Unfortunately, the "hope" trade failed to materialize as every single, major auto OEM missed their April sales estimates in fairly spectacular fashion. 

The total auto SAAR came in at 16.8mm for April, compared to hopes of 17.1mm, and the YoY change in unit sales was the worst since 2011.

Auto

 

Meanwhile, inventory days continued to soar to multi-year highs with GM leading the pack on "channel stuffing" with over 935,000 unsold cars sitting on dealer lots.

Auto Inventory

 

All of which has automotive analysts now predicting that the 'typical' summer shutdown cycle in 2017 will be anything but typical and could include 3-4 shutdowns for plants producing some of the worst performing models.  Per Bloomberg:

“We’re not seeing the same picture as the president,” said Michelle
Krebs, a senior analyst with Cox Automotive. “We are not seeing any new plants being built in the United States or increases in production. The fact is we have passed the sales peak and we’re now seeing decreases in production.”

 

Even if that happens, weeks of production suspension seem almost certain to be on tap for the industry, said Mark Wakefield, managing director and head of the automotive practice at AlixPartners. He said automakers have aggressive plans for temporarily shuttering assemblies that make slow-selling sedans and small models.

 

“For certain plants, we’ll see three or four summer shutdowns for the tougher-selling products,” Wakefield said. Right now, automakers “are a little less worried about inventories because they know they’ll be taking the plants down more.”

 

“People are starting to see that this is not necessarily a plateau,” Wakefield said. “It’s a meaningful reduction, and they’re starting to make plans around that.”

Of course, as J.D. Power recently pointed out, growing inventories on dealer lots come despite OEM's spending $16.4 billion on incentives through April, or roughly $3,800 per car, up 13% vs. last year.

“While industry retail sales pace remains high, it is being powered by elevated levels of incentive spending which pose a serious threat to the long-term health of the industry. The total value of incentives used to sell new vehicles has increased by $1.9 billion through the first four months of the year.”

 

Total incentive spending in the marketplace stands at $16.4 billion through April, up 13% from last year. On a per unit basis, spending for the average new vehicle through April was $3,814, up $460 from a year ago.  On trucks and SUVs, spending was $3,740, up $578, while on cars, spending was $3,938, up $308.

 

Despite record incentive levels, average days to turn continues to rise. Nearly 30% of vehicles sold in 2017 sat on dealer lots for over 90 days, up from 27% last year. “With flat retail demand and inventory at record levels, manufacturers will continue to face a difficult choice between maintaining elevated incentives or making production cuts,” Borrego said.

On the bright side, for Trump anyway, at least the auto jobs aren't going to Mexico.

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MagicHandPuppet's picture

Oh goodie.  Daddy needs a 2-year ol' Highlander on the Chichichicheeep!

BorisTheBlade's picture

As attractive as it may seem, entire supply overhang could take a long time to work through.

Yukon Cornholius's picture

Flying cars or bust! Driving on the ground is so 20th century.

JRobby's picture

Go on vacation! Camp, hunt & fish! (because you didn't save any $$ for rent & food)

Son of Loki's picture

Purple Escalades are still selling like hot cakes the dealer tells me. Entitlements, or the drug trade, must be "robust" he says.

jcaz's picture

They're not "layoffs"- they're "safe-space retreats", to help the workers re-center and energize their core.....

Besides, the Government never lays off their employees.

KnuckleDragger-X's picture

They are starting to put incentive on Corvettes, which has never been done. If they'll just incentivize the the 'Vette I want, I might be interested...

Shadow1275's picture

Hope this carries over to Harley Davidsons, been dying to get my hands on an Iron 883 on the Cheap

peopledontwanttruth's picture

They just laid off over 100 more in HARDley Davidson in York Pa, might get your wish soon.

Fester's picture

Soon, dont know which one yet.

 

Z06 with a Callaway supercharger

Porsche GT3

McLaren 570S

 

 

Stuck on Zero's picture

Go for the Dodge Hellcat.

Offthebeach's picture

Escalade in  Metalic Grape Drank.

Expectorant's picture

I'm on my 2nd to the last payment, of my fuel thrifty, albeit sporty handling (Ala "front wheel drive" Miata) 2014 Sky-Activ Mazda6 Touring, with a rare 6 speed manual transmission (slush boxes are for WIMPS :P) ..paid up, 1 year ahead of schedule. The beauty of it..credit union and not even a  cent of downpayment from my pockets. I just simply paid MORE than double, the monthly due payment. To "celebrate" the FREEDOM of payments..a new set of 19"s Michelin Pilot Super Sport summer tires (the "Godfather" of high performance tires..the most reordered tires, in recent memory) ..paid in full from Tire Rack.

The car just hit 40,000 miles yesterday (4 yrs old this month of May 2017)..at this mileage rate  am keeping it for another 6-8 yrs.

MagicHandPuppet's picture

I'll wait until there is blood in the streets, however long that takes.  My 10 year old lexus has a lot of life left in her (and keeps a relatively low profile).  Still, it's nice to think that some of this bubble mania can actually be a benefit to me for a change.

Haus-Targaryen's picture

I'm rockin an 11 year old Lexus.  Every time I think about replacing it with something else: "Does it run?"  Yes "Does it look good?" Yes "Does it get decent milage?" Yes "Does it fit in in the parking lot at work?" Yes "Is it paid off?" Yes 

I think we'll end up replacing my wife's 4 year old BMW before my 11 year old Lexus. 

Crazy how that works out.  I've started telling people who need good, "cheap" reliable transportation ... Go get yourself a 4 year old Lexus and drive it for the next 6-10 years. 

Seriously, the best cars made. 

kommissar's picture

i've got a 15 year old town car that i finally just replaced this week with a slightly newer one.  i'm a peddler so i put a lot of miles on a car, so i'd rather destroy a cheap one than an expensive one.  the newer one only has 47k on it, and i expect to be driving it for the next 10 years, like the last one.

Abbie Normal's picture

Or you could just buy the equivalent-model used Toyota and save even more.

Lexus = badge engineering at its finest

JRobby's picture

Used are already selling for a nice discount from KBB. That's going to get much worse.

BTW, KBB is a POS bag of pus.

peopledontwanttruth's picture

Thank goodness all those new plants will be built here in the USA as orchestrated by the President, it can add to the rest of the commerical real estate glut. IF they were ever going to build them in the first place.

Raffie's picture

Buy 1 get 1 free would motivate me to buy a new ride.

Or

%50 off and NO STATE SALES TAX...

Peterman333's picture

they start running bogos I'm in. I'll keep one in the garage, just rotate them switch the plate back and forth.

IridiumRebel's picture

December is your target. They will be at the very end of a long crappy year and you'll get the best deals, especially on used. That's my target.

Daddy wants a truck.

j0nx's picture

No incentives for Hondas and prices sky high. Not seeing any crash myself.

Juggernaut x2's picture

The local Honda dealer used to have half of the lot dedicated to used cars- now it is only new Hondas and they are packed in like sardines- I'm sure they have a little wiggle room on price. 

nflux's picture

honda has already started idling their accord plant(their largest in NA) every other friday in addition to shutting down for 2 weeks straight this july. will likely see increased incentives if inventory is still high after that

Obadiah's picture

Those are hardly never on sale it seems.

 

Need a wholesale connection?  Located near Eastern Nebraska?  Maybe I can help

 

JRobby's picture

"hardly never" was then

"Oh Fuck!" is now

Shpedly's picture

Highlanders are never cheap and still sell like the proverbial hotcake.

SilverRoofer's picture

I don't really care most autoworker jobs are south of the border

Juggernaut x2's picture

Wow- $3700 rebate on a $70K GMC Sierra takes it down to the ultra-low price of $66.3K

corporatewhore's picture

I'm looking for an Escalade totally pimped out

ikhan's picture

The devil worshipping central banks are probably timing the popping of multiple bubbles right before the initiation of WWIII

Duc888's picture

 

 

Keep building 30K  stripper work trucks assholes, see where that gets you.

1stepcloser's picture

let me know when dealers offer 50+% off...

peopledontwanttruth's picture

When they borrow the Furniture Store liquidation sale signs, coming soon

Iconoclast421's picture

Bullish. Back in the early/mid 2000s the market doubled on flat to declining auto sales. Aint no thing.

Bill of Rights's picture

Soon to be a fire sale...literally.

matinee55's picture

never, with fiat / no audits they can burn them all & then order millions to be built. Who's checking anything anymore?

Rainman's picture

More than a million vehicle borrowers were behind on payments at the end of last year.

http://www.zerohedge.com/news/2017-02-16/auto-bubble-burst-begins-subprime-delinquencies-soar-2009-levels

crossroaddemon's picture

I just bought a used truck... you don't even wanna know what I paid. But I needed something that can pull a 30 foot gooseneck loaded with PA gear and it had to be a club cab as well. My old one was not gonna get me through another summer season.

KimAsa's picture

Those points on the x axis that show any meaningful profit-- those must reflect the gov bail-out. Then reality hits (again) once they crater back down.

Bill of Rights's picture

Note a lot of these loans are on paper...the auto dealership made their money its the BANKS that lose here...

MagicHandPuppet's picture

Which eventually translates to taxpayers in our rigged bailout system, sadly.

peopledontwanttruth's picture

its the BANKS that lose here

HERE FIXED IT FOR YOU

its the USA taxpayer that will lose here

j0nx's picture

You've been here how long and you think the banks will lose? Hmm...ok.

AgentScruffy's picture

Lately, due to my work, I've had the occassion to visit and walk the floor of a huge distribution center for a giant big box discount retailer. What struck me is how shockingly empty the place is. We walked and walked and walked and saw hardly any workers. (Over a period of days.) Some of the shelves with larger items (like big-screen TVs) were almost empty. 

Currently, the situation for them volume-wise, is the worst it's been in years. There were comments about how they were hoping/expecting things to pick up soon. I can't assess the likelihood of that.

crossroaddemon's picture

People are still paying for live entertainment, curiously enough. I'm already turning down work for the summer season. Now that my house is paid for I'm not accepting weekday gigs unless $x >= a very high fee.

AgentScruffy's picture

Musician? Are your clients well-to-do or average folks?

crossroaddemon's picture

I used to be a pro touring guitar player. These days I mostly do sound production... when you're working on a local/regional level it pays better than playing. I run a small production company. My clients generally are either the musicians themselves or event organizers. This year I'm getting hit like crazy with motorcycle rallies and corporate events. 

peopledontwanttruth's picture

My neighbor fixes batteries for electric fork lift trucks and is in warehouses everyday, bigger than I could have ever imagined by acres and really high.   He said there isn't one that the shelves are filled to the roof as far as you can see of everything and anything.   Wonder who is buying or shipping out door A to bring into door B?