The Morning ShiftAll your daily car news in one convenient place. Isn't your time more important?

Nationwide dealer inventory of pickup trucks is just a fraction of what it used to be just as sales slowly start to rise again. It’s chaos for suppliers as everybody sorts out when to end quarantine. All that and more in The Morning Shift for Monday, May 4, 2020.

Advertisement

1st Gear: Pickup Slack

Dealer inventory for pickup trucks is down to just a 30-day supply in some areas, a fraction of what it was a year ago. With production stalled due to the novel coronavirus outbreak, inventories have shrunk. As some states begin reopening from quarantine and sales pick up, some are worried there won’t be enough trucks.

Advertisement

From Automotive News:

With North American auto plants closed since mid-March to protect workers from contracting COVID-19, the most sought-after vehicles have become tough to find. Some dealers say they are starting to run short on full-size pickups as a result of the generous financing offers rolled out as the coronavirus pandemic torpedoed the economy.

Because of the industrywide shutdown, light-duty pickup inventory in the U.S. could fall to 400,000 by the end of this month and plunge to 260,000 by midyear, according to J.D. Power. That’s compared with an inventory of more than 700,000 in May and June of last year.

For GM, supply was already low following the 40-day United Auto Worker strike last year that limited some production.

And now as automakers offer more and more generous financing deals and sales start to pick back up, it’s going to be a race at the factories to get trucks out the door. I’m sure we’ll be alright.

Advertisement

2nd Gear: Worst May Be Over

Executives are confident that the worst may be over amid the coronavirus outbreak, and the good news is that April may not have been as bad as many expected.

Advertisement

From Auto News:

One positive trend outlined by J.D. Power, which had initially expected an 80 percent decline in April, showed a rebound in retail sales over the course of the month. Industry retail sales were down about 60 percent the last week in March compared with the pre-virus sales forecast but only by about 40 percent the last full week in April. J.D. Power estimates retail sales fell 46 percent last month.

Advertisement

Deferred payments and 84-month loan terms are believed to be responsible for motivating people to purchase a vehicle among these extremely harsh times. Definitely not going to regret that.

3rd Gear: Rock Paper Scissors Shoot

When entering into any rock, paper, scissors engagement, it’s incredibly important to get one thing straight; do we go as you say “scissors,” or do we go a beat after when you say “shoot?”

Advertisement

The supply chain for the auto industry is having this same discussion right now, as it tries to align everything for a clean restart after coronavirus lockdown.

More from Auto News:

Regardless of when normal comes, scattered restart dates are a major pain point. As one survey taker said: “Uncertainty is the biggest planning issue.”

Richard DeBoer, executive vice president of sales, marketing and pricing at Carter Logistics, said that for logistics providers, different restart dates create “a lot of abnormal shipping conditions.”

Scattered restart dates create “a lot of waste in the supply chain,” DeBoer added. “That financial loss either has to be paid for by the Tier 1s or someone along the supply chain because we can’t run trucks at 50 percent pay of what we were getting before.”

Advertisement

Many suppliers may see a gradual rise in business restarting, which may be ideal to work back up to pre-virus output, due to the “wave” of virus recovery around the world:

Despite short-term challenges, Thomas Miller, automotive market manager at Pepperl and Fuchs, says the recovery in China is promising for the business.

“We anticipate as the wave goes from Asia to Europe to North America, we all would follow suit,” said Miller, who responded to the survey. He said the forecasting information he has received from Detroit automakers indicated “the big programs that they have are still moving forward.”

“They’ve already contacted us to make sure we can adhere to their readiness plans,” he said.

Advertisement

This will be the moment when those quiet business operations and logistics folks become heroes in their boss’s eyes for about five minutes. I hope they enjoy the moment.

4th Gear: Coronathon

Those 84-month loan terms and deferred payments to get people to put on that face mask and go buy a car are far from over, as the industry will now aggressively try to make up for lost time and sales as society returns.

Advertisement

A key demographic: people who haven’t been able to return their lease as it ended during the shutdown.

From Reuters:

Scott Cooke, chief financial officer of Toyota’s U.S. captive finance arm, said the Japanese automaker does not have excess inventory on dealer lots, but is seeing a build-up of customers in lockdown states unable to return vehicles that have reached the end of their lease.

Cox Automotive economist Charlie Smoke said late last month that “competition for these off-lease customers will be fierce,” with automakers dangling discounts for their business.

Advertisement

Automakers are expected to offer steep discounts and generous financing for everyone else, a move which will likely destroy profit margins—bringing in sales numbers now but potentially leading to more problems down the road.

5th Gear: Exxon, Exxoff

Bloomberg has a big piece today absolutely tearing down Exxon for missing just about every boat in the oil industry over the last decade, dwindling down its power and reach to middling levels almost completely on its own—a far cry from the giant it once was.

Advertisement

From Bloomberg:

The coronavirus has laid bare a decade’s worth of miscalculations. Exxon missed the wild and lucrative early days of shale oil. An adventure in the oil sands of Canada swallowed billions of dollars with little to show for it. Political tensions doomed a megadeal in Russia. Exxon ended up spending so much on projects that it has to borrow to cover dividend payments.

Over a 10-year period, Exxon’s stock has declined 10.8% on a total return basis, which includes dividends. The company’s major rivals all posted positive returns in that period, except for BP Plc, which had the Deepwater Horizon spill in the Gulf of Mexico in 2010. The wider S&P 500 Index has returned nearly 200%.

The oil business is all about how much you produce, how low you get your costs, and how well you capture resources for the future. Exxon produces about 4 million barrels a day—essentially the same as 10 years ago, despite repeated vows to push the number higher. Meanwhile, the company’s debt has risen from effectively zero to $50 billion, and its profit last year was a bit more than half what it was a decade ago. Once the undisputed king of Wall Street, Exxon today is worth less than Home Depot Inc., which has less than half the revenue.

Advertisement

In this time, we’ve seen the oil market chase supply around to completely catastrophic levels—both environmentally and economically, as we’re now seeing. Exxon played it relatively safe during this time. That even Exxon is still in decline is likely a sign that the oil industry is in for yet more trouble in the next decade.

Reverse: First Freedom Ride

In 1946 the U.S. Supreme Court banned segregation in interstate bus travel. A year later the Congress of Racial Equality (CORE) and the Fellowship of Reconciliation tested the ruling by staging the Journey of Reconciliation, on which an interracial group of activists rode together on a bus through the upper South, though fearful of journeying to the Deep South.

Following this example and responding to the Supreme Court’s Boynton v. Virginia decision of 1960, which extended the earlier ruling to include bus terminals, restrooms, and other facilities associated with interstate travel, a group of seven African Americans and six whites left Washington, D.C., on May 4, 1961, on a Freedom Ride in two buses bound for New Orleans. 

Advertisement

Neutral: Are You Going To Buy Something?

The only thing I don’t think twice about buying is pepperoni Bagel Bite pizzas in the grocery store. Everything else is a big decision. I haven’t bought a car in over five years, and I don’t think those plans will be changing in the next couple of months—but for some of you that may be different?

Advertisement

Are you just thirsting to go buy a car right now? Is there a particular car or deal you’re looking for? At what point is a deal on a new car too good to pass up?

Share This Story

Get our newsletter