U.S. Car Makers Offer Big Deals to Clear Inventory
STEVE INSKEEP, host:
This is a Friday morning, which is the morning that we focus on your money during the Business Report. And today we'll find out why you won't have to spend quite as much money on a car.
This fall should be a very good time to buy a car or truck, because domestic automakers can't get rid of them no matter what they do. Employee pricing, low interest loans, special add-ons for free; dealers are likely to consider these options and more, as they cut deals on Fords, Chryslers and GM vehicles, because they have too much inventory.
Monica Langley follows the auto industry as a senior writer for the Wall Street Journal and she's on the line. Welcome to the program once again.
Ms. MONICA LANGLEY (Wall Street Journal): Good morning. How are you, Steve?
INSKEEP: Doing fine. Thanks so much. Just how big is the inventory problem here?
Ms. LANGLEY: It's big. The Detroit automakers made way too many cars for the number of customers wanting to buy them. So they are now having to cut production and expand incentives to clear the dealer lot. The biggest one right now is Chrysler.
Chrysler has admitted that earlier this year it overbuilt so much that this summer they had 100,000 unsold vehicles sitting in parking lots. So just this week Chrysler came out and said they are going to broaden their incentives because they have got to move those cars.
INSKEEP: Hundred thousand vehicles. So you could give an entire small city, just everybody it's own vehicle, just hand them off, and you'd still have...
Ms. LANGLEY: And then you could look to sell the 2007 model. This is the problem. Chrysler lots and showrooms now have - 50 percent of their inventory is 2006. And at this time of year you should only have 20 to 30 percent of your inventory 2006 and be ready to start selling the 2007. That brings in the excitement for the consumer.
INSKEEP: So how serious a financial problem is this for the automakers?
Ms. LANGLEY: I mean it's a problem. GM is saying that it is turning around, but what they're doing is they're really having to cut production; they're negotiating to try to get the unions to give concessions. But you know, where they're looking for the new growth is not in the U.S.; I mean all three Detroit automakers are still bleeding red in North America.
So for example, GM is looking to China as its biggest growth, and it's one of the leading sellers of cars in China.
INSKEEP: Now, what about the foreign automakers? Do they also have this inventory problem?
Ms. LANGLEY: No, they don't. Toyota and Honda are zipping along. Nissan is too. Nissan is introducing a new Altima, one of its bestselling sedans, and this new Versa, a compact car. And they have a seven day inventory on Versa, as opposed to some of the U.S. automakers having inventory of, you know, 100 days or something.
INSKEEP: Now, could this huge inventory problem actually have a drag on the U.S. economy?
Ms. LANGLEY: Well, clearly it could. I mean what is affecting the auto industry so much right now is the slowdown in housing. Automakers have found that their inventory moves more slowly when you see the construction and housing industry have a slowdown. So they worry now that consumers will hang on to their old vehicles longer and businesses will defer orders for their new trucks and pickup trucks.
So some of the regions in the U.S. will not do well because they're having to cut production. You especially see this in the upper Midwest - Michigan, Ohio, Indiana. They are definitely going to feel the pain from the Detroit cutbacks.
INSKEEP: You know, I saw a chart in a newspaper that competes with the Wall Street Journal to some degree, national...
Ms. LANGLEY: How dare you...
INSKEEP: USA Today - I was reading. They had this chart in there and it was the average age of the American vehicle fleet and it was going up. It had gone up substantially over the last several years. It's just what you're saying. People are hanging onto their cars longer.
Ms. LANGLEY: And you know what another thing is: they are holding onto their cars for maybe economic reasons, but consumers are also holding onto their cars because nothing has really excited them to get into the showroom.
INSKEEP: Monica Langley is a senior writer at the Wall Street Journal. Good to talk with you.
Ms. LANGLEY: You too. Thank you. Transcript provided by NPR, Copyright NPR.