FORCING CARS ON DEALERS.

Wanganui Chronicle, Volume 72, Issue 291, 7 December 1929, Page 12

FORCING CARS ON DEALERS.

PRACTICE CONDEMNED TOLEDO, Oct. 9. L. A. Miller, president of th G WillysOverland Company, to-day continued his light against the practice of automobile manufacturers in forcing cars on dealers regardless of the retail demand, Mr Miller, in a report carried in the Automotive Daily News, October 5, stated that his company was changing it s production policy to conform to the retail demand and in the future would not set dealer quotas without regard to the actual sales outlook. He amplified his statement to-day with the following announcement:— “The annual boosting of production schedules on the part of automobile manufacturers has resulted in the entire industry being faced with a serious problem, which not only threatens the welfare of automobile dealers, but, if a halt is not called, may affect the entire business and economic structure of th e industry.”

“The industry is face I with a serious problem,” said Mr Miller. “Year after year motor car manufacturers have set their production schedules at higher figures. The company that produced 200,000 cars last year set its mark at. 250,000 for the current year, since hist year’s sales totalled 350,000 the goal for the year was set at 400,000 and so on. Cans© of Used Oar Problem. “The ability of the public to absorb an indefinitely increasing number of cars is constantly over-estimated. As a result, from the first month of this year we have seen automobile plants running at record production. Dealers have had cars shipped to them in excess of the purchasing power of their communities, creating a problem of meeting loans from banks and finance companies. Long trades with the sel-

ling of ears at a net loss to the dealer is the result. And dealers find that whil e they have done an increased volume of business, their profits have dwindled or Josses have been sustained. The used car problem of to-day i s a direct result of this policy of overbuilding on the part of manufacturers. “And,” continued Mr Miller, “this has been done on the theory that increased volume meant decreased costs. Up to a certain point this is correct in so far as manufacturing economies are concerned. But the theory fails when the volum e is not maintained. Sales forces are expanded, plants equipped and tooled, materials bought, to carry out thes e increased production schedules. In those closing months every year manufacturers usually find a market unable to absorb the number of cars they intend to build. Output is curtailed, with th e result that at the end of the year a considerable lesser number of units have actually been built, on which the average overhead expense has taken a decided upward trend and materially affected the producer’s profits per car for the year.’’

i ‘That Willys-Overland, with the dealers’ interest in mind, intends to be the first big producer to apply corrective measures and to adopt a policy, which, h e predicted, would become the practice of the industry, was the assertion of the Willys-Overland president. “This year we will produce in the neighbourhood of 300,000 cars. We do not plan to increase this total next year. We believe it is the conservative number of cars our dealers can move without the need of forced selling, unprofitable trades, excessive used car stock, and with the turnover in their capital to assure a sound return on their investment at the end of the year. We will keep our productive capacity absolutely flexible so that as dealer outlets increase and result in increased retail demand, warrant expanding our output we can do it promptly and efficiently. We are confident that the result will be a large increase in our own profit. Sees Substantial Profit. * ‘With this policy each new car sale will net our dealers a substantial profit. They will be able to keep used car stocks at a minimum and turning over regularly and their net for the, year will b e substantial. ‘ ‘ The flood of new cars from the factories and the piling up of used car inventories, both of which shoulder an unbearable burden on the automobile retailer, can be stopped when all the manufacturers adopt a policy of producing m accordance with reasonable retail demands. “With such a policy universally adopted there will be no used car problem.”