Number of words: 331

Chrysler built its cars on speculation. The company would forecast what car buyers and dealers would want” which colours, which options, which models. Then Chrysler would make the cars, hoping that their sales would match up with dealer orders before the car moved out of the end of the production line.
But the dealers were smart. ‘I am not sure I want them’, was the typical dealer comment. But Chrysler built the cars anyway, and then put them in a huge lot to wait until dealers wanted them. Dealers had not committed, so basically it was cars sitting in the parking lot limbo, waiting for demand to develop.
After about a month, management at Chrysler would say ‘Whoops’ (or something stronger) and then conclude it would be best to offer discounts to the dealers to move the cars. Then Chrysler folks would work their way down to the sales bank, gradually selling and clearing all those cars off the parking lots. 

In good times that would happen fairly quickly. In bad times, the mismatched cars, with the wrong colours and the wrong options, would sit there for months. Chrysler had paid workers and suppliers to build the cars, but the cash was not coming in from the dealers. Debt was climbing in the meantime. but all of this was masked, because the accountants just booked the cars as valuable inventory. 
In turn, the dealers generally had the wrong choice of cars to sell and they would also have to discount prices to move them to customers. It made the dealer especially happy though, because they were able to buy cars at very low prices, lower than any other dealer organisation in America. 

It made things look better for Chrysler, because the cars immediately shifted into inventory. The expense involved in producing them became part of inventory instead of being charged against the expenses of the company. 

Excerpted from Pg 81-82 of ‘Lessons from the heartland of American Business’ by Gerald Greenwald