When we summarized yesterday's disappointing monthly car sales report, which badly missing expectations showing the fourth consecutive month of declining auto sales - the first time this has happened since July 2009 - we noted what may be the biggest concern for the auto industry: inventory days continued to trend higher as OEMs push product on to dealer lots even though sale-through to end customers has seemingly stalled.
We highlighted GM, one of the few OEMs to actually disclose dealer inventories in monthly sales releases, which reported that April inventories increased to 100 days (935,758 vehicles) from 98 days at the end of March and just 71 days (681,402 vehicles) in April 2016. Indicatlvely, analysts say an overall inventory level of 60 to 70 days is healthy. 100 is not.
Of course, GM management was eager to deflect attention from this troubling statistic, and said that soaring inventories are normal and, somehow, "reflect strong sales", as per the press release: "As planned, GM’s inventories reflect strong sales, lower car production and strategic, launch-related growth in truck and crossover stocks."
Or maybe not, because around the time of our post, Automotive News reported Nick Bunkley pointed out something troubling: with 935,758 unsold GM units collecting dust in dealer lots, this was the highest inventory number in 9.5 years, the highest since Nov. 2007, and, as Bunkley reminds us, "one month before the recession officially began."
GM inventories now at 9.5-year high. 935,758 units (100-day supply) is most since Nov. 2007, 1 month before the recession officially began.— Nick Bunkley (@nickbunkley) May 2, 2017
Here is what GM's auto inventory since emergency from bankruptcy looks like.
Will this time the GM inventory cycle indicator be different? With widespread operating shutdowns planned in the coming weeks, it better be, or else something is far more broken with the US consumer than even the paltry 0.7% GDP would suggest.