Recently, the Big Three in Detroit have began to build up their stock of passenger cars again, despite what they said about never doing that again since the downturn that occurred in 2009. Ford, GM and Chrysler all have several months worth of supply in different models of their passenger cars, with Chrysler holding on to approximately 6 months worth of inventory on their 2013 Dodge Dart.
The 2013 Dodge Dart
In part, this build up of inventory is due to a robust resurgence of the Japanese automakers Toyota and Honda. Last year, both of these companies suffered set backs due to the natural disasters that took place in Japan. These companies, in an effort to gain back market share, have offered some of the best financing terms they ever have. This has resulted in a build up of American made cars.
This shows the inventory held by several different car companies
This inventory build up can be potentially very problematic. The big three currently have a very large decision to make, they can either cut production or they can offer their own sort of incentives to drive sales. This directly relates to transportation management because if Ford, GM and Chrysler begin to slow their production there will be repercussions through out shipping lanes. LTL companies that work with auto suppliers will be forced to raise their rates to recover the lack of business from the suppliers which means some companies might go out of business and it will put a strain on the transportation system. Another risk associated with inventory build up is obsolescence. This is especially relevant to the car industry where there is a new model released every year. If the American car companies are unable to sell off their inventory of 2013 cars before the 2014 model is scheduled to come out then they will take a massive hit to their profits.