Auto Sales Shrink, Inventories Grow -- WSJ
May 03 2017 - 3:02AM
Dow Jones News
By Adrienne Roberts and Mike Colias
Auto makers signaled their hot streak in the U.S. is rapidly
cooling, as demand last month turned surprisingly sluggish for the
trucks and SUVs that have fueled record profits for domestic
players.
General Motors Co. and Ford Motor Co. on Tuesday reported
declines in April of 5.8% and 7.1%, respectively, compared with the
same month last year. Fiat Chrysler Automobiles NV reported a 7%
decline, as sales at its Jeep brand continued to tumble.
Another troubling sign: It is taking dealers far longer to sell
off inventory, resulting in a glut of unsold cars and trucks. GM,
the No. 1 U.S. auto maker, has nearly 1 million vehicles sitting on
dealer lots.
Overall, auto makers sold 1.43 million vehicles in the U.S. in
April, down 4.7% from a year earlier, according to Autodata
Corp.
Detroit is hoping its traditionally strong summer sales season
will get it out of the rut. Car makers plan to offer plenty of
discounts, and rely on low gasoline prices and broad economic
strength.
The U.S. auto industry has been on a winning streak since
bailouts rescued GM and Chrysler in 2009. After seven straight
years of sales gains, including two consecutive record
performances, demand has cooled in 2017's first four months despite
soaring discounts.
Discounts are nearing an average of $4,000 per car or truck
sold, according to J.D. Power, denting the favorable impact that
selling a richer mix of pricier Ford F-150s or Cadillac Escalades
can deliver.
GM will be shutting down some factories later this year to ready
assembly lines for new models. Executives say a lack of new supply
in the second half, along with the prospect of job growth, wage
increases and cheap gasoline will help ease GM's bloated inventory.
GM, which has 17% market share, is carrying more than one-fifth of
the industry's inventory.
Working down high inventories can take a deep financial toll.
Ford., the No.2 seller in the U.S., faced a glut last spring and
took tough actions to work it down. The company, however, has
reported four consecutive quarterly earnings declines, and its
share price has suffered.
GM already has relatively low utilization of its North American
factories, according to WardsAuto.com. It has laid off thousands of
hourly employees due to a collapse of demand for fuel-sipping
passenger cars. Now, its core truck business is also showing
fatigue.
Fred Rentschler, a dealer in Slatington, Pa., said his family's
Chevrolet store has 120 models on the lot and another 50 being
delivered, nearly 20% more than the same time last year. "They're
coming through with inventory," he said. "We're just not selling
them as quickly."
Ford officials echo GM's optimism, with the company's sales
chief, Mark Laneve, saying "our big seasonal selling months are
still in front of us."
Mr. Rentschler said the current expectation for 2017 sales --
pegged at more than 17 million -- remains solid compared with the
industry's last downturn. "Coming out of bankruptcy, we were happy
when the industry did 10 or 11 million," the Chevrolet dealer
said.
A record 17.55 million vehicles were sold in 2016.
Mark Wakefield, global co-head of consultancy Alix Partners'
automotive practice, said he was encouraged that some auto makers
have pulled back on passenger-car production, such as Chevrolet
Malibu sedans or Ford's Focus compacts.
"You may start to see truck production cut and even more on the
car side, " Mr. Wakefield said. Industrywide inventory is "climbing
and it needs to be managed," he said.
The largest Japanese auto maker, Toyota Motor Corp., reported a
4.4% drop in April sales. Honda Motor Co.'s U.S. sales decreased 7%
for the month. Nissan Motor Co. -- among the only mass-market
players posting growth for 2017 -- reported its first sales decline
of the year, with April sales dropping 1.5%.
Write to Adrienne Roberts at Adrienne.Roberts@wsj.com and Mike
Colias at Mike.Colias@wsj.com
(END) Dow Jones Newswires
May 03, 2017 02:47 ET (06:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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