General Motors has denied a Wall Street Journal report that dealerships were cutting back on orders of the company’s 2005 models due to swollen inventories of unsold cars and trucks from the 2004 model year.
Reuters noted that a report in Friday editions of the newspaper said dealers were scaling back their orders because they are overloaded with 2004 vehicles, and are concerned that big discounts are losing their punch with consumers worried about the economy and slow US job growth.
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Though GM chairman and chief executive Rick Wagoner acknowledged that inventories of 2004 models were higher than he would like, he reportedly said GM had seen no big change in ordering activity from its dealers.
“I don’t really think we had a lot of problems with ’05 orders at all,” Wagoner told Reuters. “I can’t say we are encountering any more than the normal year-end changeover,” he said, referring to the need to pump up sales of older models before new vehicles go on sale in the autumn.
“We took a big chunk out of inventory last month. We’d like to continue and we need to particularly take down ’04s. But that’s going to play out over the next few months,” Wagoner said.
“If the economy comes back stronger then it will be an easier assignment,” he added. “But they’ll all eventually be sold. That’s my experience.”
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By GlobalDataReuters said Wagoner spoke as GM kicked off an annual celebration of Detroit’s automotive industry, an event known as the “Dream Cruise” that draws hundreds of thousands of classic car collectors from across the country.
Wagoner reportedly did note that GM’s third-quarter North American production was down 5% year-over-year, as it moved to cut inventories, and indicated that fourth quarter production will be lower as well.
Wagoner, however, said there would be “no radical changes” in fourth-quarter production, which is likely to be announced on September 1.
Wagoner also said the company remained on track to meet its full-year earnings target of $7 a share, Reuters said.
To get their year-end inventories in line with normal levels, Goldman Sachs auto analyst Gary Lapidus reportedly said in a research note on Friday, GM and Ford would both have to cut their fourth-production by double-digit figures.
But that would mean missing their earnings targets, and Lapidus said both companies may choose “to build inventory in ’04 and pay for it with production cuts later in ’05”, according to Reuters.
Wagoner reportedly said GM’s August US sales will be lower than the same month a year ago. But rather than attributing the drop to steady market share gains by GM’s Asian rivals, he said it was because the company faced a difficult comparison with its very strong month in 2003.
“It’s going to be a good sales month,” Wagoner said of August sales results, which will also be reported on September 1, Reuters added.
