Time to Clear Lots of ‘88s for ’89 Models : Auto Dealers Hoping to Avoid ‘Inventory Indigestion’
At auto dealerships across the United States, it is time for the annual ritual of “out with the old and in with the new.”
The problem of clearing out 1988 cars to make way for the 1989 models is not as difficult this year because sales are up about 7% from last year’s levels.
But many dealers are still stuck with a number of cars that are being dropped at the year-end, as well as what are called “carryover” cars--autos that did not sell well this year but are being continued into the next model year.
Auto makers say “dead cars” that are on their way into the automotive history books are not a major problem, although it can take months for the last ones to be sold.
“There is a group of people who frankly shop the end of the model year,” said Chrysler chief sales analyst Steve Torok. “They are people who are looking for a good deal, don’t intend to sell the car any time soon and are not looking for resale value.”
General Motors Corp. dealers still show limited inventories of the Chevrolet Chevette, discontinued two model years ago, while Ford Motor Co. dealers will have supplies of the two-seater EXP, dropped last year, for months to come.
Auto makers generally start to reduce production of dead cars long before the end of a model year. Plants are rarely at full production when the last such model rolls off the assembly line.
Sometimes the prospect of fading from the picture increases a car’s value. Analysts say it is likely that dealers will quickly sell out of the Pontiac Fiero, the plastic-bodied two-seater discontinued Aug. 16.
Dealers know that these dead cars will eventually disappear but do not have that assurance with carryovers.
“The problem is the big volume stuff that carries high inventories at model change. They’ve usually been dying for years,” said Ford analyst Ray Windecker.
This problem is compounded if an auto maker plans to replace the car with a restyled version, which makes it even harder for a dealer to get rid of the old cars, whose styling will be obsolete within weeks.
100-Day Levels Cited
Each auto maker offers programs to help dealers unload these leftover models, ranging from an additional 5% of the car’s price as profit at Chrysler to up-front cash incentives at GM and Ford.
At this point in the model year, auto makers want to have less than the normal optimum level of 60 days’ worth of cars on hand at their dealers. When that level approaches 100 days, that spells trouble.
Among the cars that this year threaten to be a problem are the Eagle Premier, of which Chrysler dealers have a 117-day supply; the Chevrolet Nova, of which there is a 114-day supply; the Buick Regal, with a 111-day supply, and the Ford Thunderbird, with a 97-day supply.
Torok acknowledged that Chrysler has too many Premiers on hand but said the auto maker is not concerned about its level of carryover cars companywide.
“If the economy and auto demand stay fairly strong, there is not likely to be inventory indigestion,” Torok said. “The earliest we would consider 1988 model carryover a serious problem would be in January or February.”
