US Automakers Are Not Worried About Oversupply image

US automakers said that even if they deal with oversupply on some key models, they will not push consumer incentives to boost sales.

During the 2008-2009 downturn in the auto industry, when Chrysler and GM filed for bankruptcy, automakers began to overproduce in order to keep factories running and then relied on increased consumer incentives to sell the vehicles. Unfortunately for Chrysler, GM and Ford this was only a money-losing move which they vowed not to repeat.

Each of the Detroit automakers deal with oversupply on several key models, but analysts believe that the most worrisome is the 139 days of supply at the end of last month for GM’s pickup trucks, much higher than the preferred level of 80 days of supply for these vehicles. Some analysts expressed their concern that GM will increase incentives to lower the price while reducing profit for the automakers on pickup trucks. But the automakers are confident that sales will undoubtedly go up in December, a month which usually brings sales increase of 20% compared with November.

“The company’s making a bet in a way that they would rather have the revenue right now. The bad old ways would have been high production, high stocks and high inventories. They’ve broken that equation,” said Analyst Jim Hall of 2953 Analytics.