Filed under: Plants/Manufacturing, Chrysler, LLC., Dodge, Earnings/Financials, UAW/Unions
Chrysler bringing back Sales Bank... or not
Chrysler's "sales bank," the loathed program in which the automaker continues to manufacture and stock cars regardless of demand, is supposedly back through the end of the year. Chrysler LLC co-President Jim Press delivered the news to dealers on Friday during a nationally telecast conference call when he mentioned that district managers will be calling dealers trying to offload 12,000 units of unassigned inventory.
Dealers left the call gasping for air, recalled the summer of 2006, when Chrysler had nearly 650,000 units in the sales bank. At the time, there was a 91-day supply of vehicles. Today, with about 400,000 units in inventory, the automaker is sitting on a 117-day supply. While Chrysler claims repeatedly that they only make cars that dealers order, and have reduced production to match market share and plunging sales -- down nearly 28 percent this year -- stocks are still up. Why? According to a second report by Automotive News, Press clarifies his statements to the trade pub, saying that the vehicles being hoisted onto retailers were all ordered by dealers and later canceled due to dealerships that have closed, unsold vehicles from sales promotions, fleet customers that backed out or buyers that weren't able to secure financing. Despite the fact that dealers supposedly ordered these vehicles with the intention of selling them, we fail to see how pushing 12k in unsold product doesn't constitute a "sales bank" program.
[Source: Automotive News - Sub. Req.]
Reader Comments (Page 1 of 2)
Josiah 10:43AM (12/16/2008)
Pretty simple actually. Dealers ordered cars, economy nose-dived, dealers canceled orders. Since car production takes time (and isn't truly 'on-demand' like digital products) Chrysler now has extra inventory.
What's it going to do instead, destroy them? Might as well try to get some dealers to buy them on the cheap, and sell them on the cheap. Better than a complete loss.
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Will 11:03AM (12/16/2008)
I have been out of the car-slinging world for quite a while now but it used to be that when dealers ordered cars, they owned those cars...no givsies-backsies to the factory. The factory also made each dealer take a certain amount of additional inventory based on their sales area. Dealers, at least as far as Chrysler went, had a small amount of time where they could sell the cars before paying the factory for them but, as I said earlier, they became property of the dealer until sold and never went back to the factory. The only ways to move them was to sell them to a retail buyer or another dealer. I can see why the dealers are nervous, they are likely going to be strong-armed into taking stock they do not want. This strong-arming can come in the form of the factory telling the dealer that if they want a certain number of popular cars, they must also take a bunch of unpopular models as well.
AZZO45b 1:09PM (12/16/2008)
Its a tax write off either way... destroying them a better tax deal?
Dude 10:46AM (12/16/2008)
Say what?
My understanding of a "Sales Bank" is this:
- Produce cars regardless of actual sales, creating backlog of unsold vehicles.
My understanding of this situation is this:
- Cars that were ordered, built and later canceled, that never made it to a dealer.
Those two are not the same thing. I fail to see how Autoblog can't figure that out.
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Rob 10:50AM (12/16/2008)
This is what we'll see when Fedzilla bails out the UAW - lots of cars that nobody wants.
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The Luigiian 12:35PM (12/16/2008)
I fail to see how the bailout is going to change Detroit's entire product line into unsalable product overnight.
AZZO45b 1:13PM (12/16/2008)
Bailing out the UAW... that's f*cking nice! They are bailing out GM & Chrysler who employee a helluva lot more than UAW.
Move to Alabama... you'll feel right at home jag-off
Rob 1:26PM (12/16/2008)
If we were bailing out GM and Chrysler, we'd have a deal already. The UAW killed it!
AZZO45b 2:59PM (12/16/2008)
No, Republican senators needed the UAW as an EXCUSE to kill it. Southern Republicans think killing Detroit will bring them more manufacturing jobs.
They are too dumb to figure out the SUPPLIER network works with ALL of the car manufacturers & are many of them would be effected by the loss of GM or Chrysler. Many of these suppliers do NOT employ UAW workers.
Keep blaming the easy target though (the UAW)... it beats actually doing some research. No easy answers.
Rob 3:11PM (12/16/2008)
Republican Senators were trying to give GM and Chrysler a way out of the unsustainable contracts with the UAW (ie those that killed the goose that layed the golden eggs).
mikex 10:53AM (12/16/2008)
It's not just Chrysler with extra inventory. They all have unsold inventory even the great Toyata.
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Polly Prissy Pants 10:53AM (12/16/2008)
We're stackin' 'em deep and selling 'em cheap.
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Crackberry Addict 12:35PM (12/16/2008)
Cook Brother's in chicago has the same phrase! lol
Bob 10:57AM (12/16/2008)
Cool! Now I might be able to get a good deal on that Avenger I've had my eye on...
... :)
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Bill 11:00AM (12/16/2008)
I'll have to check Detroit Metro Airport parking lots to see how many Commanders get stored there. Then we'll know for sure that the sales bank is back.
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Karl 11:05AM (12/16/2008)
Chrysler is done, federal funds or not. Hold on to your hats, folks; it's going to get real ugly soon.
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Gstill 11:08AM (12/16/2008)
Well, Chrysler needs to eliminate some dealers. This may be a good way to do it. They might be hoping that dealers will close up shop rather than take a couple trailer loads of Durangos and Commanders.
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Jei 11:11AM (12/16/2008)
mikex is correct.
All the automakers have loads of unsold inventory. In Ohio, you can find old (now closed) strip-mall lots filled with dealer inventory. Honda, Infinity, M-B, Toyota, etc. These days, the dealers have been slick about the situation: they find and lease lots away from the dealership to store their cars. These lots are usually behind a building or are basically hidden from the normal shopping traffic. This way they can make their dealership look like it only has a limited selection of vehicles. Or they'll send porters to retrieve cars from the "satellite" lot if a customers preference matches up with something there.
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AZMike 11:23AM (12/16/2008)
let's start with a basic formula here that has seemed to exist for years:
domestics do something=stupid, ill advised, last gasps of failure.
import companies do the same thing=efficient, forward-thinking, innovative.
NEWS FLASH FOLKS:
here is how Japanese and Korean import (and import transplant) companies manufacture automobiles. the manufacturers build WHAT THEY WANT TO MAKE, and fill their storage lots. then the factory zone reps call their dealers, AND TELL THEM WHAT THEY WILL BE RECEIVING. about the only input the dealers have is (perhaps) what colors they will receive. being these are import companies, this is considered to be "efficient". of course, this isn't a "sales bank" is it? if you see a difference, let me know.
of course, this is assuming the factory and the dealer are on good terms. if they aren't, all sorts of fun things can happen, like the factory shoving oh, 200 2WD regular cab Tundra work trucks (V-8s with the $950 TRD performance exhaust system, rubber floors with carpet mats, stainless sill plates, and auto dimming mirrors; not joking, I've seen them) to a dealer in Minnesota, or 200 black 4WD regular cab Tundra work trucks on a dealer in Arizona. this would also be a great time to stuff a few hundred Prius models (with MSRPs in the $30K range), when sales of hybrids have totally collapsed. when you have an import franchise, you'll pay dearly.
special orders, which are very simple, standard things in a domestic dealership, are very difficult in an import dealer. I was talking to a good friend who runs a Nissan dealer, and asked about ordering a Titan puckup. in order for that to happen, the dealer would need to take a full allotment of what Nissan wanted to send them now, commit to the full allotment for the next month (which would grow by over 50% from this month's), and then they would talk. then, that special order would be at least five months away. all that for one special order.
Chrysler had first used the hated sales bank back in 1979, when the economy was in the crapper. this was one of the first things that Lee Iacocca eliminated. it reared it's ugly head in 2006, thanks to Daimler's short-sightedness.
I'm quite sure that Jim Press is telling the truth here. dealers have closed, and financing has totally dried up for fleet buyers, too. once vehicles have been scheduled for production, they're getting built.
one simple fact: if financing would unfeeeze, the auto industry would rebound very quickly.
AZMike
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Frank 11:36AM (12/16/2008)
Autoblog,
Now that the "Best and Brightest" including a former autodealer, have set you straight on this, could you change this story and drop "Sales Bank" from the title?
Thank you
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