Vette production...too much, too little, just right?
06-02-2008, 07:07 PM
#1
Team Owner
Thread Starter
Vette production...too much, too little, just right?
Over the last few months I have read a lot on this forum regarding the angst associated with Corvette inventories and production numbers. I have read posts from many anguishing over the nationwide Corvette inventories, those calling for 30%-40% decreases in production, those worried about it becoming a mass market car losing its exclusivity, and on and on. The more I read on this topic, the less sense it seems to make.
Let’s look at production and inventory first. In the 10 years ending with 2007 there were 350,917 Corvettes built, which is a nice neat number we can call 35K per year with the outliers being 1998 at 31084, and 2007 at 40561. Based on the numbers through 4/2, I would expect 2008 to come in near the past average of 35K or slightly above that number. I don’t know about you, but with those numbers being produced, I sure don’t see a glut of Corvettes on the road (too many garage queens I guess
). With inventories at 7000+ vehicles, is that really outrageous? I am no automotive marketing guy so I really don’t know if 2.5 months of inventory is too much. Maybe a better question for this economic climate is if that is worse than all the other GM brands. One piece of anecdotal evidence we might glean from all this is that the still leftover 2007 stock would seem to indicate that 40561 cars built in a year is too many. However, I don’t think there is any evidence that 35K/year is too many.
As far as cutting production 30%-40%, I would have to ask why. More important, however, is that Bowling Green could no sooner cut production 30%-40%, than they could increase production 30%-40%. To decrease that much they would have to shut down the plant for 3-4 months, and I’ll go out on a limb here and say that would be a big problem with the UAW contract, plus the shutdown/startup costs would be prohibitive. To increase production that much would require a major capital investment. The sweet spot for BG production is about 155-160 cars a day at best. To make the 40561 for 2007 I would guess they worked every minute of overtime allowed under the UAW contract. They probably learned a lesson with 2007 that they are not likely to repeat anytime soon.
So bottom line I don’t think GM has much choice other than to keep building 35K Corvettes a year to maximize efficiency and keep the cost as low as practical. This isn’t the first, and won’t be the last time a car company had to take it in the shorts until an economy turned around. Dealers are deeply discounting Vettes and surely not making as much money as they would like, but they are still making money. It is clear that GM has been increasing production since the introduction of the C5, and probably found its limit in 2007. However, I don’t see any real evidence that 35K-36K is not the right number despite the current economic problems.
Let’s look at production and inventory first. In the 10 years ending with 2007 there were 350,917 Corvettes built, which is a nice neat number we can call 35K per year with the outliers being 1998 at 31084, and 2007 at 40561. Based on the numbers through 4/2, I would expect 2008 to come in near the past average of 35K or slightly above that number. I don’t know about you, but with those numbers being produced, I sure don’t see a glut of Corvettes on the road (too many garage queens I guess
). With inventories at 7000+ vehicles, is that really outrageous? I am no automotive marketing guy so I really don’t know if 2.5 months of inventory is too much. Maybe a better question for this economic climate is if that is worse than all the other GM brands. One piece of anecdotal evidence we might glean from all this is that the still leftover 2007 stock would seem to indicate that 40561 cars built in a year is too many. However, I don’t think there is any evidence that 35K/year is too many.As far as cutting production 30%-40%, I would have to ask why. More important, however, is that Bowling Green could no sooner cut production 30%-40%, than they could increase production 30%-40%. To decrease that much they would have to shut down the plant for 3-4 months, and I’ll go out on a limb here and say that would be a big problem with the UAW contract, plus the shutdown/startup costs would be prohibitive. To increase production that much would require a major capital investment. The sweet spot for BG production is about 155-160 cars a day at best. To make the 40561 for 2007 I would guess they worked every minute of overtime allowed under the UAW contract. They probably learned a lesson with 2007 that they are not likely to repeat anytime soon.
So bottom line I don’t think GM has much choice other than to keep building 35K Corvettes a year to maximize efficiency and keep the cost as low as practical. This isn’t the first, and won’t be the last time a car company had to take it in the shorts until an economy turned around. Dealers are deeply discounting Vettes and surely not making as much money as they would like, but they are still making money. It is clear that GM has been increasing production since the introduction of the C5, and probably found its limit in 2007. However, I don’t see any real evidence that 35K-36K is not the right number despite the current economic problems.
06-02-2008, 07:17 PM
#3
Team Owner
Thread Starter