3.9 million vehicles remain unsold

Automakers are thought to be storing cars in case of a labor strike.
KNIGHT RIDDER NEWSPAPERS
U.S. automakers are sitting on an overflow of unsold cars and trucks that appears to be the largest backlog in U.S. auto history.
The stockpiles, backing up on auto-dealer lots, at assembly plants and wherever else automakers can put them, could help consumers as automakers use pricier incentives to spur demand. Otherwise, a larger production cut at assembly plants could be in the offing to trim supply.
About 3.93 million unsold vehicles are sitting on dealer lots, in transit from the plants where they were made or at hushed-up overflow sites such as the Michigan State Fairgrounds. All told, about 630,000 more unsold cars and trucks are sitting around than a year ago. Since March, inventories have been at all-time highs.
There are several reasons for the jump. One is poorer-than-expected sales this year. Another is that Ford Motor Co. is building extra F-150 pickup trucks because its Norfolk, Va., and Kansas City, Mo., plants will be down for several weeks through July while launching the new F-series.
Upcoming negotiations
A third reason, but one the automakers won't concede: the coming UAW negotiations this summer. A backlog of unsold cars and trucks gives the automakers a buffer in case there's a labor strike, while also acting as a subtle, unspoken bargaining chip.
"I don't think there's any sinister plot by any of us to prepare for UAW talks," said Gary Dilts, Chrysler senior vice president for sales and marketing. "I think some of our colleagues just pushed hard at the end of March to optimize their first quarter."
Wall Street analysts think it's only natural for automakers to stock up on inventory, just in case.
"I think they absolutely are building up inventory for that reason. Not a lot, but a modest buffer," said Scott Hill, auto analyst for Sanford Bernstein in New York. "[General Motors] and Ford also have some launches to account for, but I think they like to have some inventory so the union knows they've got that bargaining chip in case there's the threat of a strike."
Production cuts
GM, Toyota and others are trying to lure buyers with special offers, but should May and the rest of the vaunted spring selling season fizzle, heavier-than-expected production cuts could be coming. Already, a 10 percent production cut is expected for the April-to-June quarter.
Any cut would directly hit -- and hurt -- the bottom line for automakers and their suppliers. It can also mean less overtime and some down time for hourly plant workers.
"Until we get a real decent economic recovery, I think sporadic production cuts will have to happen," said Michael Wall, an analyst at CSM Worldwide, a Farmington Hills, Mich., auto-analysis firm.
Among the vehicles at sky-high levels: the Buick Regal and the Ford Excursion and Nissan Pathfinder sport-utility vehicles. Enough are sitting around unsold to fill orders for 100 days or more. The preferred range is 60 to 75.
Automakers acknowledge their inventory is high, even for the spring, when they usually load up to prepare for strong sales months such as May and June.
Supplies
Merrill Lynch and Ward's Communication project the industry is carrying about 14 percent more unsold cars and trucks than usual. Ford and GM have the highest rates, but even Japanese automakers such as Toyota, which keep their inventories low, are at higher ranges than usual.
Ford has an 84-day supply of unsold vehicles, while GM is next at 82 days. DaimlerChrysler Corp. is in the normal range with 71 days, though its truck supply is high at 79 days.
"It's high but it's not unmanageable. We'd like to have about 1.2 million, but we've got about 1.25 million, so it's something we have to manage," said Paul Ballew, GM executive director of market and industry analysis.