Caution on Inventories

"Last month was as good a January as we have ever had, but we are not going to be buying as much for a while. Since our supplies are easier to get now, we are going to try to get our inventory closer to normal."

So said a big buyer of steel in Chicago last week, typifying the subtle change that has come over the buying policies of U.S. industry. Cautiously, manufacturers are beginning to whittle their inventories, living off the fat they built up in booming 1956. Now they are buying closer to production time, gearing production closer to sales, taking no chances on the possibility of overloading and bringing on an inventory recession such as hit business in 1953.

Where Demand Is High. Inventory-trimming is most evident in industries where both demand and supply are high--steel, automobiles. The average lead time for steel-sheet deliveries last week was down to 30 days, a great deal shorter than a few months ago, and buyers could take their time about ordering, notably in the auto industry.

Automakers, guarding against last year's overproduction, were also keeping their output close to sales, had 640,000 cars on hand v. 870,000 last year at this time. Demand was strong enough by last week for producers to roll out a 1957 record of more than 148,000 new cars, up about 16% from the same week last year. Ward's Reports said Detroit production will ride at a near record for the first quarter largely because sales-happy Ford and Chrysler will push output 30% ahead of last year. On the other hand, motormakers are paring their stockpiles of steel, aluminum, glass, rubber and paint to normal minimums. Their steel-buying has fallen below their production ever since last July, is now down to a 20-to 30-day supply. As Republic Steel Sales Manager L. S. Hamaker explained: "The auto industry has simply reverted to the old practice of letting suppliers worry about inventory. That means the steel-buying pattern is returning to normal; but it seems abnormal because we have not had it in the many years of steel shortages."

Where Sales Are Low. In the few industries with slow sales, inventories are being controlled by cutting production. General Electric will lay off about 2,500 TV-set workers for a week because stocks are higher than sales. Bates Manufacturing Co. will close a big synthetic textile mill at Androscoggin, Me. in April; Berkshire Hathaway is running nine combed-cotton mills at 60% to 80% capacity.

Oregon's State Unemployment Compensation Commission reported that one-third of the Douglas fir raw-lumber mills are closed, and more lumbermen are idle than at any time in three years. The mills' inventories are more than double their orders, and retail yards are buying from hand to mouth. Lumbermen are banking on a third-quarter rise. They figure money will loosen by summer, free funds for building more houses.

This file is automatically generated by a robot program, so reader's discretion is required.