Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, June 9, 1990 TAG: 9006090049
SECTION: BUSINESS PAGE: A-5 EDITION: METRO
SOURCE: Newsday
DATELINE: LENGTH: Medium
Some who follow the auto industry professionally doubt that the end-of-the-model-year deals in August, September and October will be any better than the already considerable discounts available right now.
It's a matter of supply and demand - the production of cars vs. their sales. When unsold inventories rise, the deals usually get sweeter.
Inventories of models built by General Motors, Ford and Chrysler are lower than they were at this time last year and are, on average, at levels considered normal, thanks to extensive assembly-plant shutdowns earlier in the year.
One Big Three executive, who shared company estimates on the condition that their source not be disclosed, said that there are about 1.4 million Big Three cars in inventory now, 540,000 fewer than a year ago. There are about 88,000 fewer Big Three trucks, or about 1.1 million, according to the estimates.
But some industry watchers think current Big Three production levels and those planned for June, July and August are higher than is justified by a market propped up by some of the most generous cash rebates and option discounts in the industry's history.
"Everything is up and running now," said Cynthia Certo of Integrated Automotive Resources, a consulting firm in Wayne, Pa. "The problem is sales haven't been picking up."
She thinks inventories will rise, and, while many of those additional cars will be 1991 models, a surplus could increase the pressure on carmakers to get rid of their leftover '90s.
Others think supply and demand will stay in balance. "Sales are not very good," said David Healy of Barclays Bank, "but production isn't very high either." Adds Joseph Phillippi, auto analyst for Shearson Lehman Hutton Inc.: "I don't see the likelihood of massive fire sales unless [car] sales weaken substantially."
Actions last week by Ford and Chrysler seem to support that view. Ford announced that it plans a special rebate program between Sept. 28 and Dec. 31 for leftover '90s. It said some rebates could be less than those now offered, though it did not rule out the possibility of some being higher. Chrysler announced reduced rebates on five of its models, saying stronger sales had reduced inventories.
Experts are in closer agreement about the outlook for the two biggest-selling makes of Japanese cars: Toyota's and Honda's inventories are a little higher than normal, and the companies are offering discounts - though not cash rebates. But their sales are strong, and experts don't expect their inventories or their discounts to change much in coming months.
Experts also say that they don't expect inventories - or discounts to buyers - will change much if one or more of the Big Three is struck in September when their contracts with the United Auto Workers union expire. A long strike, considered unlikely, could cause shortages, however, and drive up prices.
But experts do suggest a few other factors to consider if you're thinking of buying a car in the next few months:
Sticker prices for '91 models probably won't be much higher than those on the '90s - maybe 2 percent or 3 percent, according to analysts. They say the weak market simply can't support anything higher. Last year, new-car prices rose about 5 percent.
A leftover will be worth less as a used car simply because it was a model-year older than a '91.
The leftover '90 you're thinking of buying might be replaced by a 1991 model you would consider worth the extra money and the wait. A few examples: Chrysler Corp.'s minivans have been restyled for '91. So have the Buick Electra and Oldsmobile Regency. The Nissan Sentra has been completely redesigned.
A few '91s are out already and won't be "leftovers" for more than a year. They include the Chevrolet Caprice and Ford Escort.
by CNB