Dealers can’t get enough U.S. cars
Local barons see need for ‘Big Three’ to boost production
Boston car baron Herb Chambers said he had to “beg, borrow and steal” recently to scrounge up 200 Cadillacs for his Danvers dealership.
The “Big Three” U.S. automakers – General Motors, Ford and Chrysler – have downsized so much over the past year that manufacturers can’t keep up with today’s demand, Hub car dealers say.
“(The Big Three) just don’t have enough manufacturing capacity any more,” said South Shore auto dealer Dan Quirk, who estimates he could sell 60 to 90 more domestic vehicles per month if he had them. “Some of the automakers, particularly General Motors, closed a lot of their plants when the meltdown hit.”
According to WardsAuto.com, the average U.S. dealer had just a 75-day inventory of domestic cars and light trucks on hand during October, down from a 146-day supply in early 2009.
The sharply lower inventories represent a sea change for the Big Three, which once built so many cars that U.S. automakers needed fat rebates to get vehicles moving.
Experts say Detroit overproduced because generous union contracts signed in the 1990s required automakers to keep paying workers even if plants closed. That meant the Big Three had little to lose by keeping factories open and pumping out cars.
But everything changed in 2009, when American carmakers nearly went under following years of tumbling sales. GM and Chrysler, which both ended up in bankruptcy, downsized particularly radically to qualify for big government bailouts.
For instance, GM closed 13 plants, cut 26,000 workers and slashed unsold inventories from about 900,000 vehicles in 2007 to just 390,000 cars and light trucks earlier this year.
“When we emerged from bankruptcy in July 2009, we restructured our business and got our capacity in line with what demand was at that time,” GM spokesman Tom Henderson said. “That’s a situation few dealers are used to, but it’s actually good for business.”
Henderson admitted that GM hasn’t kept up in recent months with demand for certain popular models, such as the Chevrolet Equinox and GMC Terrain. But he said the automaker, which successfully launched a $20 billion initial public offering this past week, is slowly ramping up production.
“It’s a delicate balance between having too much inventory and having too little,” Henderson said. “The last thing we want to do is go back to the bad old days of bloated inventories and deep discounts.”
Industry expert Craig Carlson added that both U.S. and foreign automakers have outsourced parts production over the years, meaning firms can’t boost output unless every supplier can keep up.
“The Big Three can increase production, they just can’t do it instantaneously,” he said.
Bay State dealers say they understand Detroit’s dilemma and aren’t overly upset about today’s shortages, nor have they raised prices on cars.