Taking Stock
The bitter labor dispute between General Motors and the United Auto Workers that threatens to shut down production at the world’s largest auto maker has made Southern California GM dealers apprehensive about dwindling inventory as the busy summer buying season begins to heat up.
Though the 14-day face-off has not slowed business yet, sales could stumble as supplies of popular vehicles, such as the GMC Tahoe truck and the Suburban and Jimmy sport-utility vehicles, become scarce.
“It’s had no effect on us whatsoever,” said Jeff Sammet, general manager of Century Van Nuys GM Supercenter, one of the region’s largest GM dealerships. “That’s not to say that somewhere down the line we won’t be in trouble if things continue the way they are.”
GM and the auto workers union have been locked in a pitched battle for two weeks over UAW’s fears that the company’s push to modernize older plants will lead to layoffs. In protest, the union has launched strikes at two GM plants, idling 105,500 workers and shutting down more than 90% of GM’s assembly operations.
Dealers these days, however, typically carry a two-to-three week supply of vehicles on their lots, replenished periodically by replacement stock from regional distribution centers. The pipeline from factory to distribution center to dealership usually has a 45- to 60-day supply of cars and trucks in it, so for many, the strikes’ repercussions are still a way off.
“I told my staff this morning that there’s no impact yet,” said Don Partch, general manager of Nabers Cadillac-Oldsmobile in Costa Mesa. “We were in good shape with our inventory when the strike started, and we’re still getting deliveries from Cadillac’s central distribution center, so I think we’ll stay in good shape for a few more weeks.”
With an inventory of roughly 400 vehicles covering all GM lines but Cadillac, Sammet says he has enough stock to last up to two months. “I don’t think there’s any need to panic,” he said. “When we run out of cars, we’ll worry about it.”
The strikes, for some, have even been a boon.
Dealer Trey Selman of Selman Chevrolet in Orange said the walkouts have actually boosted short-run sales of several GM lines as buyers move up purchase decisions to avoid potential shortages in inventory. Among the most popular buys, Selman said, have been Tahoes and Suburbans.
GM sales in general have been up since April due to the auto maker’s efforts to boost market share through rebates and other promotions.
John Nieman, general manager of City Chevrolet-Volkswagen in San Diego, said his dealership has a three- to four-month supply of new cars and trucks, which should be sufficient to ride out the strike.
But the dealership is hedging its bets by increasing inventories of late-model used cars. That would provide the dealership an alternative source of revenue if it exhausts its new-car inventory.
Nieman said one impact of the strike is likely to be the quick disappearance of hefty rebates. As supply dwindles, there will be little need for manufacturers to entice buyers with incentives that are averaging $1,500 a vehicle now.
Weeks before the strikes, the sales push prompted Sonny Kapur, general manager of Bay Buick GMC in Torrance, to buy extra stock in anticipation of a summer sales rush. It appears Kapur’s foresight has already paid off, albeit for a different reason.
“I’m glad I did it,” Kapur said. “Otherwise I would be in the same boat as some of the other dealers.”
Frank Zicker, fleet manager for La Brea Chevrolet-Buick-Oldsmobile in Miracle Mile, is among the minority of dealers who are already starting to feel the pinch from the production slowdown.
“We’re running short, and we’re having trouble getting cars,” said Zicker, who with 105 vehicles has half the inventory he normally has. Already missing from the lot, he said, are the Tahoe trucks, and only three of the equally sought-after Suburbans remain. Three customers, in fact, have completed deals to buy new Tahoe trucks and are now waiting for delivery of their vehicles.
“They’re understandably not very happy,” Zicker said. “But no orders are being filled right now.” This week alone, the dealer said, he had to turn away six customers looking for Tahoes.
Zicker fears both GM and the union have settled in for a long fight and that, at the earliest, the dispute is still a month away from resolution. “It’s going to get worse before it gets better,” he said.
With that prognosis, he has already begun to worry about his 14-person sales team. With fewer cars on the lot, Zicker said, his staff will have fewer and fewer chances to make commission as the strikes persist. The dealership has no layoff plans, Zicker said, but word has already spread along the sales floor to prepare for hard times.
“We’re still a couple weeks away,” he said, “but they’re going to have to find other sources of income.”
Dealerships aside, another area that may be affected by the walkouts already is the supply of replacement parts used in crash repairs.
“We usually get sheet metal orders filled overnight,” said Baldwin Lopez, parts manager at Don Steves Chevrolet in La Habra. “But all of a sudden we’re being put on indefinite delay for some of the fenders and other parts we’ve ordered.”
Lopez said he believes the parts shortages are spotty and says that so far they only affect body panels. The supply of maintenance and engine repair parts, Lopez said, is rarely interrupted by a strike. “There is a lot of depth in the supply chain for those things,” he said.
Times staff writer Donald W. Nauss in Detroit contributed to this report.
