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Chrysler Sales Bank Will Shrink, But Not Disappear

Unsold surplus will reach “comfortable” level, says President and CEO Tom LaSorda.

Chrysler Group has softened its position on eliminating its surplus of unsold vehicles by year’s end.

“By the end of the year, this inventory will be back to normal, historical levels,” President and CEO Tom LaSorda says. “And by historical, I mean in the low five digits.”

According to Ward’s data, that number stood at about 10,000 on Nov. 30.

In a podcast on the auto maker’s blog for journalists and the analyst community, LaSorda says he’s “comfortable” with a surplus of that size. And so are dealers, he adds.

Previously, Steve Landry, vice president-sales and field operations, said Chrysler’s goal was to “get to zero by the end of the calendar year.”

The controversy came to light in October after Ward’s revealed Chrysler in August had a stash of about 100,000 vehicles – none of which had corresponding dealer orders. In defiance of industry custom, these units were built on spec and allowed to accumulate in a “sales bank.”

This unsettled industry observers because they believed the auto maker’s regularly reported dealer-ordered inventory represented all the vehicles Chrysler had on hand.

But LaSorda suggests this practice may change.

“There was an imbalance between production and the sales rate out in the retail field and what current inventory that the dealers carried,” he says. “Obviously, this is a process that we need to review and our total operations in a business review, including what’s going on at retail.”

LaSorda promises a first-quarter announcement to address “inventory-production balance.”

Additional production cuts are rumored to be at least part of the solution, though only some union leaders have been apprised of any extraordinary measures.

Chrysler’s assembly plant in Windsor, Ont., Canada, builds minivans and the Chrysler Pacifica cross/utility vehicle. Ken Lewenza, president of Canadian Auto Workers Local 444, which represents the site’s 5,500 hourly employees, says he was informed of just one additional inventory-related week of shutdown.

That period begins Jan. 15, Lewenza tells Ward’s. The remaining weeks, from Dec. 22 to Jan. 8, had already been scheduled to accommodate holidays and time needed to retool the plant for production of Chrysler’s redesigned minivans.

Other light-truck assembly plants are under the microscope. They include Warren, MI; Detroit’s Jefferson Avenue site; Newark, DE ;and two plants in Fenton, MO.

United Auto Workers officials and hourly employees at those locations tell Ward’s they have not been notified officially of any extended shutdowns.

But LaSorda says the auto maker already has canceled overtime in some of these locations.

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TAGS: Dealers Retail
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