SAN FRANCISCO – Gary Dilts knows something about the unpleasantness of trying to sell a glut of vehicles in a market that’s not demanding them.
He also knows the risks of balking at that work assignment.
As the one-time head of sales for the former DaimlerChrysler AG’sunit, Dilts had the unenviable job of pushing dealers to order more and more unwanted vehicles the factories were cranking out.
He finally got fed up. He lost his job in 2006 when he reportedly questioned the wisdom of putting supply over demand.
Now a senior vice president for J.D. Power and Associates, Dilts preaches against the sins of flooding the market with excess inventory just to keep the factories going. There have been a lot of converts lately.
Domestic auto makers, including the reconstitutedLLC, have been scaling back vehicle production in an attempt to move from a "push" to a "pull" market.
More reforms are pending, Dilts says at a J.D. Power conference held here in conjunction with the National Automobile Dealers Assn. convention.
"In the next 24 months, we’ll see big changes in the way vehicles are ordered," he says. "You can’t let factories set their own agendas on what to build."
Otherwise, a lot of unsold vehicles pile up. "Putting vehicles out and expecting people to come isn’t working," Dilts says.
James Press, who joined Chrysler as co-president four months ago, backs up Dilts’ point.
Press tells the J.D. Power conference Chrysler got into trouble by setting itself up as a company capable of making 4 million vehicles a year when in fact "we were only retailing 1.5 million."
New owners Cerberus Capital Management LP "are not connected with handcuffs to the past," Press says.
Dilts says auto makers that overproduce and under study markets should "have a lot of blacktop for parking unsold cars on."
Proper market research before introducing a new vehicle is vital, he says. "You can’t just throw $1 billion down the street and hope it works. It must be much more scientific than that."
With 285 different vehicles available and another 33 due out soon, the U.S. market is crowded and competitive, with the industry suffering huge profit losses, Dilts says.
"Forty billion dollars have come out of profitability in the last four years," he says, noting dealers have taken some of those bottom-line hits. "It's a very tough business with a lot at stake."
While there are fears the nation may enter a recession, the auto industry has been in one for a year, maybe longer, Dilts says.