U.S. auto production in 1985 surged to its highest level in six years, the auto industry reported today, but analysts warned that output soon may have to be slashed to reduce a growing glut of unsold domestic cars.
The domestic auto makers (excluding the U.S. operations of Honda, which will report its figures next week) said today that they built a total of 8.04 million cars in 1985, up 5.3 percent from 1984's level of 7.63 million. Including an unofficial estimate for Honda's U.S. production of 145,000 units, total industry production reached 8.19 million in 1985, the first year since 1979 that the domestic industry has produced more than 8 million cars.
Thanks to skyrocketing demand for light pickups, U.S. truck production also soared during the year to 3.12 million units, up 9.9 percent from 1984's level of 3.02 million. Combined car and truck production in the United States rose to a total of 11.36 million units, up 6.6 percent from the 1984 production level of 10.65 million.
But industry analysts noted that the major U.S. auto makers, especially General Motors Corp., have been overly aggressive in their passenger-car production plans in recent months, and may have to cut back in early 1986 to reduce their inventories of unsold cars.
At the end of November, inventories of unsold domestic cars surged to more than 1.6 million units, equal to a 78-day supply; a 60-day supply is considered normal in the industry. At the time, GM had the highest inventories, with a 85-day supply of cars on hand, forcing the industry leader to offer discount consumer financing in late December to spur its lagging sales.
The imports also have been adding to the pressure on the domestics. Led by the Japanese, the importers gradually have been increasing their share of the market over the past few months, making the aggressive domestic production levels seem even more unrealistic, some analysts believe.
"Unless domestic sales come up pretty soon, the domestics will have to cut production pretty drastically," said Ted Sullivan, automotive analyst with Data Resources, an economic forecasting concern in Lexington, Mass. "We think total vehicle production in 1986 will have to be about 1 million units lower than it was in 1985, with most of the cuts coming in passenger cars."
In fact, GM already has begun to reduce its ambitious first-quarter production plans. A recent report in Ward's Automotive Reports, an industry trade journal, said that GM reduced its first-quarter production goal in late December by 39,000 units.
However, Chrysler Corp., which is trying to make up some of the production it lost due to last fall's nationwide strike, has raised its first-quarter target by 38,000 units, offsetting GM's cutbacks.
Ford Motor Co., which has much lower inventories than GM because of long production delays on several of its newly introduced models, also increased its first-quarter schedule by 5,000 units, according to Ward's.