Auto Sales Slow, Inventories Rise, Shutdowns Loom
Car-tastrophe – GM, Fiat Chrysler Idle 7 Plants; Over 10,000 Workers Affected
Just weeks after Ford idled four plants “due to slowing sales”, GM and Fiat Chrysler announced today that they will idle seven plants across Canada and US as they work to reduce near-record high inventories amid weakening sales.
With an inventories-to-sales ratio above historical peaks (only beaten by huge spike in 2008 when sales stopped), the pain for automakers has only just begun…
For example, GM’s inventory of vehicles on dealer lots at the end of November stood at 874,162, up 26.5% from the same time a year ago. And so, as AP reports,
General Motors will temporarily close five factories next month as it tries to reduce a growing inventory of cars on dealer lots.
The factories will close anywhere from one to three weeks due to the ongoing U.S. market shift toward trucks and SUVs, spokeswoman Dayna Hart said Monday. Just over 10,000 workers will be idled.
The company’s Detroit-Hamtramck factory and Fairfax Assembly plant in Kansas City, Kansas, each will be shut down for three weeks, while a plant in Lansing, Michigan, will be down for two weeks. Factories in Lordstown, Ohio, and Bowling Green, Kentucky, each will be idled for one week.
The factories make most cars in the General Motors lineup including the Chevrolet Cruze, Camaro, Corvette, Malibu, Volt and Impala; the Cadillac CT6, CTS and ATS; and the Buick Lacrosse.
At the current sales pace, GM dealers have enough Malibus to last for 84 days and enough Camaros to last for 177 days, according to Ward’s Automotive.
Normally automakers like to have a 60-day supply on lots.
If that were not bad enough, Fiat Chrysler said it is adding four off days to the Jan. 2 observation of New Year’s at its minivan assembly plant in Windsor, Ontario, and its large-car facility in Brampton, Ontario.
The moves are to align production with demand, spokeswoman Jodi Tinson said in an e-mail.
The automaker has already stopped making the Dodge Dart and Chrysler 200 sedans.
A factory in Belvidere, Illinois, will make its last Jeep Compass and Patriot models this week, allowing retooling for Cherokee production, she said.
And these shutdowns follow Ford Motor Co., which said in October that it was cutting production at plants that make the Escape small SUV and F-150 pickup in the face of slowing sales.
Worst of all, while the rest of the US manufacturing sector has been in secular decline, the auto industry was perhaps the last shining light for battered US manufacturing during the past several years. However, if demand for cars continues to collapse, forcing supply to follow suit, it is only a matter of time before the US manufacturing recession returns with a vengeance, and at the worst possible time: when not even the US service sector can hinder the realization that the US economy is on the verge of contracting.
Finally, here are some auto-related charts courtesy of Goldman Sachs.