At a quick glance, it would appear the industry has a fairly firm grip on the supply side of the equation heading into August, with some 4% fewer light vehicles in circulation than a year-ago and days' supply down to a seemingly manageable level.
But auto makers, suddenly overwhelmingly upside-down when it comes to car and truck inventories, find themselves in the very early stages of a major correction likely to take several months to complete.
Overall, U.S. LV inventories ended July at 2,986,553 units, equaling a relatively trim 69 days' supply, though up from a 57-day tally year-ago, Ward's data shows.
The Detroit Three finished the month at a slightly bloated 88 days' supply, up from 71 days in like-2007 despite a 12.6% cut in actual units on the ground.
Foreign auto makers, although tallying higher stocks than year-ago, remain lean. Asian-based firms held a 55-day supply of LVs and the Europeans had compiled a 47-day arsenal entering August.
But a look beyond the bottom line reveals the continued effects of a sudden about-face in consumer demand that has left the industry awash in fuel-guzzling pickups and SUVs, while scrambling to feed the pipeline for more-efficient small cars.
Light-duty trucks, which accounted for just 45% of LV sales in July, made up 63% of all LVs in stock at the end of the month. That translates into a 96-day supply that is up sharply from like-2007's 66 days.
“Truck inventories are onerous,” sums up George Magliano, a research director at Global Insight Inc.
SUVs are the most bloated, with a 122-day stock overall. Each of the groups within the SUV segment posted triple-digit days' supplies: Small (159), Middle (106), Large (131) and Luxury (110).
With more than 500,000 units on hand, fullsize pickup inventories are bulging as well, ballooning to 117 days' supply on July 31 from just 86 year-ago.
Also beginning to show the effects of what is thought to be a temporary demand slowdown is the cross/utility vehicle sector, where unit inventories have risen nearly 30% and days' supply has swelled to 79 from 49 in like-2007.
Among individual truck models, supply-side standouts include the Dodge Durango at 354 days, Dodge Nitro (224), Toyota FJ Cruiser (215) and Volkswagen Touareg (222).
But in all, half of the nearly 160 light-truck models on the market recorded triple-digit days' supplies at the end of July
“The house has to be cleaned,” Magliano says in a webcast to discuss the forecast firm's medium-term sales and production outlook. “We're in the midst of a correction cycle. But unfortunately, it's a moving target and the floor has dropped out on truck sales.
“We're going to have to see some sort of (incentive-induced) sell-off,” he adds. “And hopefully consumers will respond, even with high gas prices and declining residual values, and get those (trucks) out of the showroom.”
Global Insight expects inventories to get back into balance sometime in first-quarter 2009.
“And then things will stabilize on the production side,” says Haig Stoddard, Global Insight's manager-light vehicle production forecast. “Then we'll be done with most of the announced production cuts and plant closings. We'll be done with a lot of the chaos and uncertainty.”
Auto makers have scaled back third-quarter production to 87.8% of year-ago levels, according to Ward's data, and longer-term the Detroit Three have plans to slash their capacity more than 10% via plant closings and shift cuts between now and 2010.
On the car side, U.S. inventories were down 9.1% from year-ago to 1,113,149 units at the end of July, equaling a 46-day supply.
The Small Car sector ended the month in shortest supply, at just 35 days, with the Middle Car and Luxury Car segments at a more abundant 48 and 60 days, respectively. Large Car checked in at a bloated 79 days' supply.
