Automakers should watch their bloated inventories even though 2014 seems like it will be a good year for car sales, AutoNation Chairman and CEO Mike Jackson told CNBC on Thursday.
The automakers have a “pretty bizarre” way of calculating inventories to justify these levels, he said in a “Squawk Box” interview. “But if you cut through the bogus calculations and look at dealer inventory for the Detroit 3, it’s over a 100-day supply. And it simply doesn’t need to be there.”
In response, Joe Hinrichs president of the Americas at Fordtold CNBC: “We have been cutting some production in the fourth quarter of last year and in the first quarter of this year on a couple of our product lines where we saw the inventory grow a little bit.”
But Hinrichs added, “The industry is a little different now. With our capacity running max out, we actually grow an inventory in the winter, come down in the spring and summer because we run our plants full all year round. In the old days when we had excess capacity, we’d take the plants down in the winter and work overtime in the spring/summer to supply to the demand.”
He added: “We’re watching it carefully, but I think we’re going to be OK.”