US Auto Industry In Crisis Amid "Inventory Bubble"

Despite record U.S. auto sales last year, the number of vehicles on car-dealer lots remains near record highs, and, as J.D.Power analyst Thomas King warned this week, 2016 ended with an inventory "bubble" that will require less production or more incentives to clear.

With near record high inventories of 3.9 million vehicles...

 

U.S. auto inventory finished 2016 at about 66 days supply, up from 60 days a year earlier. Inventory would last 2.23 months at the November sales pace, according to the latest available data from the Census Bureau. The stock-to-sales ratio in 2016 is extremely elevated compared to historical norms...

More problematically, King warns, about one-third of inventory were older model-year vehicles, rather than more typical level of less than a quarter.

Of course this massive stockpile hits just as President Trump pressures the auto-industry to onshore more jobs and more production...

But as the industry automates, factories don’t create jobs like they used to, said Marina Whitman, a professor of business administration and public policy at the University of Michigan.

 

“The American auto industry last year produced more cars than it ever had before, but they did it with somewhere between one-third and one-half the number of workers that they had decades ago,” said Whitman, who was an adviser to President Richard Nixon and GM’s chief economist from 1978 to 1992.

 

“The last thing the auto industry needs is more capacity.” she said.

So - produce more to employ more people and please President Trump (only to dramatically worsen the inevitable collapse), or cut workforces and productin further (as we have already seen) and face the wrath of Trump's tweets?

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