I almost feel a sense of deja vu, or some other type of crap where you think you've been somewhere or done something before.
Back in August Today, while Tom LaSorda was carrying a big bucket of water getting ready for the Chrysler Group's media party he provided some remarks at the United Way event on the Firehouse media blog about inventory levels, something we began reporting on back in August when these issues of excess inventory first surfaced. We reported that
"LaSorda says Chrysler is standing by the previous cuts announced earlier, which were inclusive of both the third and fourth quarter and amounted to a 10% cut in production...so, Chrysler's not 'cutting production' much more..."
There was an imbalance between production and the sales rate out in the retail field, and what current inventory that the dealers carried. 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. And then, of course, like I said before, we'll announce some things in the first quarter, and we're going to address this inventory production balance.
Question: Tom, one of the biggest issues for the company has been the high levels of inventories, specifically vehicles that have not been ordered by dealers. You've said those excess inventories would be dramatically decreased by the end of this year. How's the company progressing on that front?
Tom: Clearly we needed to address this issue, and by the end of the year, this inventory will be back to normal, historical levels. And by historical, I mean in the low five digits. And I'm comfortable with that particular level, and more importantly, so will our dealers. And of course, we've got to get the business back to managing production and balancing that with what's going on at the retail level in the marketplace. I'd like to add, I mean, when you look at dealer inventory levels, which we reported monthly and always have, we've reduced that level from the mid-year by over 100,000 units, with the goal of being in the low 500,000 range by year-end, and I said that before and that's kind of where we're going to be.
Q: Other manufacturers say they have a different system for dealing with the unassigned vehicles. Is this something Chrysler Group will review and change in the future?
Tom: There was an imbalance between production and the sales rate out in the retail field, and what current inventory that the dealers carried. 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. And then, of course, like I said before, we'll announce some things in the first quarter, and we're going to address this inventory production balance.
Q: In a connected issue, what about the overtime being done at several assembly plants this quarter? How do you justify that when you've been trying to reduce inventories?
Tom: Well, we're getting back to the basics there as well, and I've already eliminated a great deal of the overtime that was planned in December. Some of the plants, for example, the minivan plants both in St. Louis and Windsor. Even Windsor will have some more downtime between now and the end of the year. And a lot of that downtime will be used to be ready for the new, all-new, minivan that we're launching here next summer. So they do a lot of launch work, and pre-production work if you will, in advance of that. We've taken the Warren Truck assembly plant down for the balance of the year which, all these types of action obviously help out with balancing inventory with the retail sales pace, which will help us be in a much better position going into next year. And, of course, next year we'll have to look at it and do similar things to make sure we stay balanced.