Chrysler scales back inventories

DaimlerChrysler’s north American division said on Thursday that it was on track to bring vehicle inventories outside its dealer network back to normal levels.

Still, Tom LaSorda, Chrysler’s chief executive, announced production cutbacks over the next few weeks, and hinted that more may be on the way in 2007 as part of a sweeping review of the Detroit carmaker’s operations.

“We’ve got to get the business back to managing production and balancing that with what’s going on at the retail level in the marketplace”, Mr LaSorda said.

The unassigned inventories, also known as the “sales bank”, have been a serious headache for Chrysler this year, causing friction with its 3,400 dealers and contributing to a $1.5bn third-quarter operating loss.

Swollen inventories have been exacerbated by Chrysler’s heavy exposure to slow-selling sport-utility vehicles, pick-up trucks and minivans.

Mr LaSorda said he expected the sales bank to be “in the low five digits” by the end of the year. Chrysler, which has previously declined to disclose the level of unassigned inventories, has offered unusually generous discounts and other incentives to help move vehicles off dealership floors.

Disclosed inventories totaled 499,000 vehicles at the end of November, equal to 76 days’ supply. Although this was lower than General Motors or Ford, the figure excludes vehicles in the sales bank. Chrysler’s disclosed inventories reached a peak of 647,000 in July.

Seven groups of executives are examining various facets of Chrysler’s operations. Their findings are expected to be made public in late January or early February. “We’re going to address this inventory production balance”, Mr LaSorda said. An assembly plant in Newark, Delaware, which builds large Dodge Durango SUVs, is considered especially vulnerable.

Mr LaSorda said that holiday shutdowns at some plants would be extended and that he had eliminated “a great deal of the overtime that was planned in December”.

DaimlerChrysler also sought to placate dealers last week by reassigning Chrysler’s unpopular sales and marketing chief, Joe Eberhardt to its Mercedes-Benz unit.

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