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Wonder, will this help with "off the lot" pricing and negotiations

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Fiat Chrysler is allegedly building too many cars that dealers aren’t asking for, Chinese automakers have big growth plans, Jaguar Land Rover is reportedly looking for a dance partner, and more UAW contract news. All that and more in The Morning Shift for Wednesday, Nov. 13, 2019.

1st Gear: Even Dealers Don’t Want This Many
Fiat Chrysler is allegedly building significantly more cars than are being ordered by dealers, re-establishing what is known as a “sales bank” of unrequested inventory, and putting pressure on dealers to sell cars they didn’t order, Bloomberg reports.

https://jalopnik.com/fiat-chrysler-is-building-too-many-damn-cars-1839822669

Fiat Chrysler Automobiles NV has been manufacturing more cars and trucks than its U.S. dealers are willing to accept, at one point creating a nationwide stock of about 40,000 unordered vehicles and stoking tension with some of its retailers.

Four dealers, two of whom spoke on the condition they not be named, said Fiat Chrysler has revived what’s known in industry circles as a “sales bank.” The practice is decades old and frowned upon by investors and analysts because it can obscure an automaker’s inventory figures. Dealers don’t like it because it can amp up the pressure companies place on them to take delivery of vehicles they don’t want.

[...]

Auto sales have been slowing industrywide this year, and the Italian-American automaker started building up the bank of unassigned cars this summer. Some dealers were looking to pare back inventory after being burned by rising interest rates that increased the cost of holding cars, and what some say was a lack of incentive support from the company to boost sales of older models.



Bloomberg notes that this high supply of unordered vehicles started coming as Fiat Chrysler was pursuing merger opportunities. For its part, Fiat Chrysler apparently denies instituting a sales bank, instead pointing out a “predictive analytics system” that started early this year and whose goal it is to align manufacturing with “anticipated dealer orders,” Bloomberg writes. More from the news site:

“We’re producing pre-specificationed vehicles against predicted demand so the right vehicles are available when dealers need them,” said Niel Golightly, Fiat Chrysler’s global chief communications officer. The modeling has proven accurate, he said, as Fiat Chrysler has ended quarters with as few as 1,000 vehicles that it’s ordered and been unable to sell to dealers.

The story also notes that Fiat Chrysler CEO Mike Manley said on a call with analysts last month that the company was working with dealers to “maintain discipline with stock levels” and that in North America, “dealer stock is now in line with demand.”

I’ve reached out to Fiat Chrysler to learn more, and I’ll update this story when I hear back. Until then, here’s some fascinating history on “sales banks” at Chrysler, as told from former company boss Lee Iacocca:

I was horrified to discover that we didn’t have dealer orders to build these cars...This inventory was known as Chrysler’s sales bank, which was nothing more than an excuse to keep the plants running when we didn’t have dealer orders for the cars.

At regular intervals the Manufacturing Division would tell the Sales Division how many and what types of vehicles they were going to produce. Then it would be up to the Sales Division to try to sell them. This was completely ass backwards in my book. The company had recruited bright young college graduates who were sitting in hotel rooms day after day with their fingers stuck in a telephone, trying to peddle iron out of sales banks to the dealers.

[...]

Something had to be done about all those cars, so at the end of every month the zone offices used to “move the iron” by running a fire sale... And the dealers got used to it. They soon learned that if they waited until the last week of the month, somebody from the zone office would call them and try to package ten cars for a special price.

This comes from Iacocca’s self-titled autobiography, a book that I highly recommend all car fans read.

https://jalopnik.com/fiat-chrysler-is-building-too-many-damn-cars-1839822669
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