Paul Meisel

Auto Retailers Should Approach the Vendor as a Resource Center

This thought spurred my thinking: The tradition of having 60 or 75 days of inventory for customers to shop from originated in the days when A) most dealers were one store operations B) there were a higher percentage mix of small dealers compared with larger dealers C) there were no good information systems to know where a car that you didn't have, and a customer wanted, might be available.

Given the business changes, with more multi-location and large dealers, good information to allow you to leverage inventory between locations and to some extent with other dealers, wouldn't you expect the business to carry less inventory?

Further, since the OEM's now produce most of their product based on the order bank and schedule their supply base with real orders back to tier 2, if the OEMs could tie into sales at the dealer level in "real time" -- let's say daily six days a week -- some reasonable collaboration could cut the amount of capital tied up in inventory by 50%. For the North American industry that would be something close to $15 billion of capital released. That is about the market cap of Ford, isn't it?

Now how this windfall would be shared is another question.....

Highlights From Ford's Sales Conference Call: Inventories Not As Bad As They Seem?

I also admire George Pipas as a straight shooter and knowledgable man.

I think that your criticism of the in-transit stock level is a little mis-informed. About 90% of all vehicles move by rail. Rail transit of autos and auto parts is notoriously slow -- cars go from the plant to a rail yard, then another, then another, crossing the country. And then there is usually one to two day's worth of stock in the loading yard, so they can make up a train, and then one or two days at the unload yard, because they don't schedule trucks until the stock gets there.

This is true regardless of manufacturer. Cars coming through a distributor are treated differently; they don't start the clock until the car ships, so they save a little off the beginning end. But Ford and GM treat the car as "sold" the minute it leaves the line (they started doing this many years ago, for tax reasons -- cars sitting on the lot at the factory are not subject to local taxes because they are already sold, and so are interstate commerce).

The real answer is not in the transportation system, but in having product that sells so the dealer wants more instead of complaining how much he has. The rest is rearranging the deck chairs on the Titanic.

I disagree with the previous poster about propaganda. There may be a little spin but I have never heard George with numbers he couldn't back up. He's a real pro.