General Motors and some of its competitors are keeping an eye on an oversupply of unsold inventory – especially cars, since U.S. consumers have turned so sharply to trucks.
“The actions we’ve taken will allow us to end the year with dealer inventory down compared to the end of 2016,” said GM CFO Chuck Stevens, in a conference call last week. Those actions include periods of downtime at selected plants.
“Just to dimension that, we had 850,000 units in dealer inventory at the end of 2016,” Stevens said. “We think that we’ll be in the zip code of somewhere around 800,000,” by year-end 2017, he said.
To put it another way, GM said it is shooting for a 70-day supply on average. Like it sounds, the days-supply is an estimate for how long existing stocks would last, at the current selling rate. The industry rule of thumb is that a 60-day supply is considered ideal.
For the whole U.S. industry, automakers had a 66-day supply of cars, and a 64-day supply of trucks as of Oct. 1, according to the Automotive News Data Center. GM had a 76-day supply as of Oct. 1, down from 87 days as of Sept. 1, Automotive News said. (Forbes.com contributor Jim Henry, a freelancer, also does reporting for Automotive News.)
Stevens said last week that getting the right car-truck balance is just as important as getting the overall number down, if not more so.
“We expect to have roughly an 80-day supply of trucks and SUVs which is normal for us; an appropriate level of crossovers – 60, 70 days of crossovers – and somewhere in the zip code of 50 days of passenger cars as we work through that,” he said. “I think that that is a good launch point as you think about 2018 to end the year with that kind of inventory level and that days-supply.”