GM May Take Rebate Route as Auto Inventories Swell

With new cars and trucks stacking up on dealer lots, General Motors Corp. may have to cut production further or boost cash incentives to reduce swollen inventories, analysts said Wednesday.

GM had a 97-day supply of cars and trucks on dealer lots at the end of January, they said. That is higher than the industry average of 88 and considerably above the 60-day supply auto companies consider ideal.

GM’s inventory of cars only--106 days’ worth--was particularly high compared with the industry average of 92 at the end of January.

“I wouldn’t be surprised if GM comes up with some more rebates, particularly on passenger cars,” said David Healy, an analyst with Burnham Securities Inc.

GM officials could not be reached for comment.

Jack Kirnan, an analyst with Salomon Bros., said earlier this week in a research report that GM plans to cut North American passenger car production by 13%, or about 122,000 units, in the first quarter.

Kirnan added, however, that that was not enough to address GM’s car inventory imbalance, which he estimates at between 237,000 and 285,000 units.

“Moreover, unlike the past several quarters, where GM’s passenger car imbalance was largely centered in higher-margin products, the imbalance has now been extended to include Chevrolet,” Kirnan wrote.

On a 60-day moving-average basis, Chevrolet has 108 days’ worth of vehicles on dealer lots. That compares with 88 days for Pontiac, 103 for Oldsmobile, 102 for Buick, 75 for Cadillac and 51 for Saturn.

The inventory pileup comes at a time when GM is trying to emphasize value pricing and wants to move more of its divisions toward no-haggle pricing.

Ronald Zarrella, GM’s top marketing executive, said last week at the Chicago Auto Show that the auto maker’s experience with Saturn indicates that customers are more satisfied when they don’t have to dicker.

“It gets people off of price and focused on product and product attributes,” he said.

However, analysts say that strategy may prove difficult in a market where auto makers still have to “move the metal” to keep factories running.

Moreover, Healy said, buyers have grown accustomed to waiting for cash-back rebates before committing to a new car or truck purchase. “I think the auto companies have trained the car buyers to say, ‘If you don’t like the price, just wait a minute,’ ” he said.

Other auto makers had lower total supply at the end of January. Ford Motor Co. had 83 days’ worth for cars, 88 for trucks and 86 overall. Chrysler Corp. had a 97-day supply for cars, 72 for trucks and 80 overall.

Chrysler has been more aggressive than other Big Three auto makers with its rebates.