Auto Sprawl

If you want to see what economists mean by “inventory overhang,” take a look at the parking lots around any of the major auto ports. They are jammed with thousands of new car imports that have no place to go. The dealers can’t take them.

So many imported autos are piling up around major U.S. ports of entry that foreign automakers are leasing additional acreage to store them until they can be delivered to dealerships, when ownership shifts to the dealers. Some dealers can’t take delivery because they can’t get credit to finance their inventories.

“We’re experiencing a lot longer dwell times with our auto imports,” said Jim White, executive director of the Maryland Port Administration. He said 57,000 imported cars were parked at public and private terminals around the Port of Baltimore in mid-February, 10,000 more than normal.

“The higher-end luxury cars that used to move out very quickly in about four to seven days now take two or three weeks.”

The overflowing terminals are a stark sign of the beleaguered state of the automobile industry, and they are a headache for everyone from car dealers to auto carriers and supply chain specialists at major auto companies. Car lots will remain crowded, as there’s little hope sales will pick up in the first half of 2009.

As U.S. port terminals fill up, overseas car manufacturers are cutting back production, and shipping lines are idling vessels. NYK may double the number of car carriers it retires as Toyota Motor, Honda Motor and Nissan Motor slash production.

The Japanese ocean carrier may scrap and park as many as 20 car carriers, on top of the 20 it is already planning to scrap by March 2010, Mikitoshi Kai, head of investor relations at NYK, told Bloomberg in Tokyo last week.

“Every day we are asking auto manufacturers about their export plans for next year, but we have not yet received any figure,” Kai said.

NYK, the world’s largest car carrier, predicts Japan’s car exports will slump by more than 33 percent in the first quarter as the worst U.S. car market in 28 years forces Japanese manufacturers to reduce output. The country’s auto exports tumbled 34 percent in December, their biggest drop since recording began in 1972.

Tighter lending and rising unemployment in the United States, the world’s biggest auto market, led to a 37 percent decline in vehicle sales last month.