Big Dealers Pressure
Car Makers
To Cut Production
Higher Costs, Thin Margins
Are Forcing Major Sellers
To Keep Inventories Lean
By KAREN LUNDEGAARD
Staff Reporter of THE WALL STREET JOURNAL
October 29, 2004
Detroit's post-Sept. 11 strategy of filling dealer lots with cars and clearing them out with big discounts is losing support among the constituency that once profited the most: car dealers.
Some of the nation's biggest auto-retailing groups, citing higher interest costs and thinner margins, in their new-car businesses, say they no longer will crowd their lots with slow-selling cars and trucks to help Detroit's auto makers avoid production cuts.
General Motors Corp. and Ford Motor Co. are already making plans to cut overtime or lay off temporarily thousands of workers to avoid a repeat of this summer's inventory glut. Industry executives expect even more cuts.
For consumers, the upshot could be higher vehicle prices next year, at least for models that have been selling with big rebates in recent months. GM has been offering up to $6,000 rebates on most of its 2004 sport-utility vehicles such as the Chevrolet Tahoe and GMC Yukon during its October "TruckFest" promotion. In September, GM offered no-interest loans for as long as 72 months, up from 60 months previously.
Yesterday, in an unusually blunt public criticism of Detroit, Mike Jackson, the head of AutoNation Inc., said the No. 1 U.S. auto retailer has had "intense discussion" with the big domestic auto makers about the need to reduce overproduction of vehicles. Based in Fort Lauderdale, Fla., AutoNation has 287 dealerships and posted $19.4 billion in revenue last year.
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