U.S. Dealer Inventories Swell to 8-Year High

Supplies of unsold cars and light trucks on dealership lots in the U.S. have ballooned to 3.4 million units, their highest level since 2005, says Bloomberg News.

The news service cites data from WardsAuto showing that inventories at the beginning of November represented a 76-day supply. A 60-day supply is considered normal.

Analysts tell Bloomberg that strong demand kept inventories tight earlier this year, mainly because vehicle production wasn't able to keep pace. But carmakers have since hiked output and the increase in inventories suggests they may have overshot the market.

If so, the industry may soon face a test of its resolve after the economic crisis to control its stockpiles and avoid profit-draining sales incentives, analysts caution.

They praise Ford Motor Co. for deciding to quickly trim output of its Focus and Fusion sedans and C-Max MPV this month after dealer inventories of those models surged to as much as 100 day's supply.