SUVs, trucks Dealers Facing Tight Supply

If you've got your eye on a new SUV, don't blink.It might be gone.

Even with the auto industry mired in depression – sales are down nationally 36.5 percent – big vehicles such as the Ford Expedition and Chevy Tahoe are in tight supply because of drastic production cuts that automakers imposed last year as sales began to plummet.

Now, a year after $4-a-gallon gas nearly killed SUVs, some dealers in this market are selling them for window-sticker prices. Moreover, most late-model used pickups and SUVs have regained all of the thousands of dollars in trade-in value they lost last summer, dealers say.

Dealers love for demand to exceed supply, but many are concerned that they could run short of profitable trucks if the economy improves in the second half of the year. Their supply of cars – particularly compacts – remains high, they say.

"When you go through the inventory, you find we've got an 18-day supply of Expedition ELs," said Sam Pack, who owns Five Star Ford in North Richland Hills, Sam Pack's Five Star Ford in Carrollton and Ford Country in Lewisville. "That's too low. It starts costing you sales."

"We're very short of Expeditions and [Lincoln] Navigators," said Randall Reed, owner of Prestige Ford-Lincoln-Mercury in Garland and Park Cities Ford-Lincoln-Mercury in Dallas. "We have been selling record numbers of [crossover] Flexes because of it, I think."

Some full-size pickups such as the Toyota Tundra are also hard to get. Truck and SUV production was initially slashed last summer when fuel prices began to skyrocket. As the economy continued to crumble, it was cut further.

The General Motors Assembly Plant in Arlington, for example – GM's only factory building full-size SUVs – is in the midst of a two-month shutdown. Last month, overall car and truck production in North America was 45.1 percent lower than in May 2008, according to Automotive News.

Changing times

Tight supplies could become the norm, some dealers say. GM and Chrysler LLC, which are in bankruptcy, have dramatically reduced production – as has Ford Motor Co.

With fewer factories, the domestic automakers may struggle to meet demand for some vehicles when the economy improves. And they may not view it as such a bad problem.

"GM wants them to come in and immediately hit the streets," said Tom Durant, who owns Classic Chevrolet in Grapevine, the largest Chevy dealership in the nation. "Prices will be firmer, and margins will be better. They don't want a bunch of vehicles that we have to keep on the lot for several weeks."

Drew Campbell, president of the New Car Dealers Association of Metropolitan Dallas, added: "It's a lot drier out there than people realize."

For example, the back three rows at Five Star Ford in Carrollton – the store's SUV sector – were empty recently because the dealership had sold all of its Expeditions and Explorers, said Brian Huth, general manager of the dealership.

"I told my guys it looked like we were going out of business," Huth said. "But I think dealers are going to have to learn to sell with less inventory on the lot."

Since then, he and his staff have hustled to buy more new and late-model SUVs from other dealers and at auctions. The dealership – which sold 176 cars and trucks last month – is contending as well with occasional shortages of compact Escape SUVs and a fairly tight supply of full-size F-150 pickups.

'Pretty tight'

Much of the shortage in Expeditions is related to Ford's decision to move production from Michigan to a truck factory in Kentucky, which took about three months, said Doug Scott, Ford's truck marketing manager. Although production has resumed, supplies remain limited because Expedition sales have been 20 percent higher than Ford had forecast.

"We knew we were going to run short," Scott said. "With what we were going through last year, we were scaling back production right up to the end of the year. Then we moved production of the Expedition."

Meanwhile, at Toyota of Richardson, Steve Grogean grapples with a limited supply of Tundra pickups and Sequoia SUVs. He thinks Toyota simply overreacted when sales began dropping by amounts the company had never seen before. Toyota recently announced that it's restoring some of its truck production.

"If business picks up as it usually does in the summer, things could get pretty tight in the next 45 to 60 days," said Grogean, vice president and general manager of the dealership.

For the past year, dealers accustomed to having one of everything on the lot have learned to function on smaller inventories, noted Paul Taylor, chief economist at the National Automobile Dealers Association.

"But when the market comes back, inventories will increase to a 60-day supply," he said.

Veteran dealer Ron Kutz isn't so sure. He thinks tighter inventories are probably good for the auto industry.

"In the '80s, we ran a Nissan store off a 30-day supply of vehicles," said Kutz, general manager of Grapevine Dodge-Chrysler-Jeep. "There's no way GM or Chrysler should have 120-day supplies. It just makes no sense financially."

CAR, TRUCK PRODUCTION

Production in North America through June 13, compared with the same period last year:

Cars

1,509,084
-49.4%

Trucks

1,745,752
-50.9%

Total

3,254,836
-50.2%