Chrysler Works to Get Darned Inventory Monkey Off Its Back

Chrysler Group is attempting to get the inventory monkey off its back, and is revealing — for the first time since a stash of unsold vehicles was exposed by Ward's in October — a ballpark-number report on its efforts.

Chrysler, which had seen its so-called “sales bank” of “unassigned vehicles” balloon to 100,000, says that number was reduced by more than 90% as of Dec. 31.

“Inventory, overall, is down a full 10%, or 58,000 units, over December (2005),” says Steven Landry, vice president-sales and field operations.

Chrysler's December deliveries rose 4.4%, vs. like-2005, while full-year sales declined 7%.

He adds: “Tom LaSorda (Chrysler president and CEO) said that we would bring our overall inventory of unassigned vehicles back to historic normal levels — in the low 5-digit figures.

“We are able to say that we've exceeded that goal and the number of unassigned vehicles is below 10,000 units at the end of 2006.

“We've actually brought two important goals into frame,” he adds. “One was to reduce the dealer inventory…and also reduce our unassigned inventory to below 10,000.”

Questions about excess inventory have dogged the auto maker since Ward's revealed Chrysler was not including the stockpile in its monthly sales reports. Until Landry's comments, Chrysler steadfastly refused to provide specific information about the status of its sales bank.

However, Ward's tracked the totals by contrasting production and sales data. Ward's estimates show Chrysler's sales bank began a steady decline from its mid-August peak, thanks to production cuts and some aggressive sales maneuvers.

By the end of August, Ward's estimated the total stood at 77,000. By Sept. 30, it had been reduced to just under 50,000.

The following month saw the sales bank decline by more than half to about 22,000. And by the end of November, the total approached Chrysler's target of 10,000.

The auto maker had been supplementing its production schedule with vehicles for which there were no dealer orders. These vehicles were then held in abeyance until an anticipated demand, resulting in a huge stockpile.

As gasoline prices soared, the market softened and traffic to Chrysler's truck-heavy showrooms was choked off. But the auto maker failed to dial back its production until the excess inventory — reported and unreported — swelled beyond manageable levels.

This contributed to a damaging third-quarter loss of $1.5 billion and the departure of global sales chief, Joe Eberhardt, whose relationship with dealers grew hostile.

LaSorda told Ward's previously he didn't want to enter 2007 “debating on inventory… That's something I'm not going to talk about.”

Chrysler has not said it will discontinue the practice of stockpiling vehicles on spec, a strategy eschewed by other auto makers. But it does say it will monitor future levels more closely.

A Chrysler spokesman says the company hopes Landry's landmark disclosure lays the issue to rest.