Channel Stuffing At GM?

Tyler Durden's picture

Hidden deep in today's disappointing GM November sales release is a number that all GM longs may want to quickly forget, or else pay serious attention to. But first, earlier today, GM reported slightly disappointing sales numbers: the newly IPOed company sold 168,739 cars in November, a 11.4% increase to November 2009, which came in below expectations of a 13% rise. That's mostly noise. What isn't, however, is the linear rise in GM's auto inventory safely stashed away at dealers, i.e., unsold. The chart below demonstrates what some may argue is nothing less than a blatant case of channel stuffing. Is it really surprising that GM will resort to such pathetic schemes to boost its top line numbers? Of course not: the government's GDP report demonstrates that this is occurring everywhere in the US economy, courtesy of near record inventory accumulation which two years after the start of the depression refuses to let up, providing a hollow boost to economic numbers as the much anticipated pick up in end demand (sorry Goldman) courtesy of record deleveraging ( Jan, let's discuss the hundreds of billions of leverage lost in the shadow banking system on December 7 shall we?) continues to accelerate.

It is obvious that beginning in July, GM has started an aggressive channel stuffing program whereby it offload tens of thousands of cars (over 110,000 since July) on dealer lots, hoping these will get sold somehow, at some price, all the while dealers enjoy taxpayer subsidized floorplan leases which allows them to hold nearly infinite inventory. If and when the liquidation event takes place who cares? After all the company is now public and has managed to massage it artificial sales numbers sufficiently to fool investors that there is actual end demand for its cars.

So what would have happened if in October GM had held its dealer inventory flat (not declining, just flat): well, the top line number would have been 21,000 cars less sold. Which also means that total sales would have been not 169k but 148k, and instead of a 11.4% increase, GM would have reported a drop of 2.4% in November sales YoY, which would have made the life of GM DMM GETCO that more unbearable as the High Frequency Trader would soon end up with 100% of the stock float at $33.

And just to show that dealer inventory is actually not a bad thing, despite the spin that the company and Phil Lebeau may come up with, we present the Company's very own December 2009 sales report in which it itself boasted how efficient it was in having its dealer inventory at year end 2009 be the lowest on record: "U.S. Dealer Inventory Reaches 385,000 – Lowest Year-End Level on Record." So what happens when the inventory is the highest in years? One will likely not see a comparable statement in today's sales release. Sure enough, try hard as we might, there is no spin from GM's corporate spinsters that had anything good to say about today's 536,000 cars in dealer inventory.

Bottom line - if indeed GM is right, and manages to sell hundreds of thousands of cars in December, we will take back everything we said above. On the other hand if the number remains flat, or, heaven forbid, increases, it will be more than obvious that GM is now involved in nothing less than the most transparent channel stuffing scheme we have seen in years.

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spartan117's picture

The dealers will need a bailout as well.

whatsinaname's picture

TD, whats happening on Dec. 7th that pertains to shadow banking ?

SimpleSimon's picture

The only thing I know of for Dec 7th is a European call for a bank run - withdraw all your money.

StychoKiller's picture

Irish voters go to the polls, oh, and a lot of repeats on TeeVee about the Germans bombing Pearl Harbor! :>D

johngaltfla's picture

Tyler, I don't have the numbers yet; did you see the state/Fed/rental fleet sales % report yet? It was running 32-34% of total monthly sales for GM and Chrysler, but I haven't had time to dig those out of the data yet....

Cursive's picture

Yep, November numbers were bad here.

Ragnarok's picture

Ahhh, the good stuff.

RobotTrader's picture

Anyone check out Michelle-Caruso Cabrera's new hairdo today?

And she's wearing what looks like a straight-jacket to keep her boobs supressed.

Here are some pics from the good old days....

FunkyMonkeyBoy's picture

Well, you wouldn't look at the face would you. Looks like the wicked witch of the easts offspring. I don't normally critic the way people look, but these people are all servants of evil, so i'll make an exception.

plocequ1's picture

Oh Yea.. Come to Poppy Chulo. Poppy is waiting.

Buck Johnson's picture

She has to compete with Mandy Drury the hot blonde from Australia, thats why.  She used to be the hot chick after Bartiromo started to lose it now they bring in Mandy to spice it up.  Don't get me wrong I love Michelle, but I think that she knows those 36DDD's are what keeping her having shows and specials.  I feel sorry for Sue Herrera, for a woman that essentially started the network back in the early 90's she's still anchoring the desk and don't get to have her own programs or shows like the others.  You can say that she is possibly the manager, but if she was what the hell is she still flying an anchor desk.  Back in the 90's and early 2000's she had more air time, but not anymore.

I think they are going to push some people out.

Buck Johnson's picture

She has to compete with Mandy Drury the hot blonde from Australia, thats why.  She used to be the hot chick after Bartiromo started to lose it now they bring in Mandy to spice it up.  Don't get me wrong I love Michelle, but I think that she knows those 36DDD's are what keeping her having shows and specials.  I feel sorry for Sue Herrera, for a woman that essentially started the network back in the early 90's she's still anchoring the desk and don't get to have her own programs or shows like the others.  You can say that she is possibly the manager, but if she was what the hell is she still flying an anchor desk.  Back in the 90's and early 2000's she had more air time, but not anymore.

I think they are going to push some people out.

http://www.businessinsider.com/source-michelle-caruso-cabrera-dumped-ale...

 

NoBull1994's picture

Build and they will come....  But not me.

Spalding_Smailes's picture

Exxon/Mobil was not a bad buy after all .... :-)

john_connor's picture

This country is an embarrassment.

bob_dabolina's picture

I will never participate in anything GM related for the rest of my life. I have instructed my progeny to carry on with that tradition after I pass.

I wouldn't take a GM car/stock/bond if they gave it to me for FREE.

RobotTrader's picture

I'm sure the chicks are going to go wild for this ride...

plocequ1's picture

Hehehehehehehehehehe.. Oh man. This is the fucking shit. Outstanding.. Uncle George says, " Yum Yum eeeeeat em up"

patience...'s picture

Ah the Volt, gonna save Gov Motors. The real volt looks a citation rather

than the above Volt.

tickhound's picture

ah the beauty of the bubble... even the car looks real.

 

 

erik's picture

who is bottom center woman?

cosmictrainwreck's picture

scrawny, ain't she? reminds me of an old girlfriend.... love tits on a thin girl

Cursive's picture

Audrinna Patridge (wife watches too much E!).

Black Friday's picture

You can tell by the spreads, this is definitly the bubble phase.

Blano's picture

It also looks like she's leaning backwards a bit.  Not that I'm complaining, of course.

Silverhog's picture

I must say, Michelle looks in pain in the first image. Looks like she got things under control now.

RobotTrader's picture

Believe it or not....

GM outperformed Tata Motors today....

 

Spalding_Smailes's picture

Tata is having a hard time getting financing for guys buying the ultra cheap car they push in India.

This will be cleaned up quickly the march upward will continue.

pragmatic hobo's picture

ok ... very distracting ...

 

but back to the subject, any mention of car companies dumping their inventory onto fleet purchases?

Silverhog's picture

So what was this post about stuffing something?

sabra1's picture

wouldn't be surprised if they also channel stuffed the unemployed to make the numbers look better!

imapopulistnow's picture

Government Motors builds 100,000 extra cars before the midterm elections....

papaswamp's picture

Apparently Redbox parent, Coinstar, has also been massaging numbers with a new type of sales data to make things look peachy.

http://seekingalpha.com/news/market_currents/post/62294

erik's picture

good catch.  increasing capacity by 100% through double installations, then comparing those numbers to the same location when it had one installation.  that is a borderline practice.

they need to break them out single kiosk vs single kiosk and double kiosk vs double kiosk, in order to get a real same store sales picture.

i smell bad things for CSTR temporarily if they are forced to do that.

schrock's picture

Not knowing the auto dealer/manufacturing business how does GM force inventory onto the dealers?

BORT's picture

They fired a lot of dealers in bankruptcy.  If you were a dealer and wanted to be, you may be happy to use taxpayer money to fill your lot

schrock's picture

But that's the thing, I remember they reversed their decision not to dump many of the dealers they originally intended to, maybe this was the reason, to hide inventory and distort sales numbers? I just don't understand the process in which manufacturers force inventory on to the dealers.

trav7777's picture

Well they fired a lot of dealers in republican districts and those who made contributions to the Bama's opposition.

New_Meat's picture

So kinda' Left and East coast gonna do government motors and the real country won't?

It is un-American to buy GM or Chrystler.

- Ned

Citxmech's picture

The way it works is that part of the dealer franchise agreement states that you have to buy some certain number of cars per year.  Needless to say this can cause friction when those cars don't sell...

docmac324's picture

One word: Toyota

BORT's picture

It appears that Ford is doing a similar inventory build thru September.  Anyone have October and November Numbers

From 10Q

 

September 30, 2010 and 2009, are shown below:
First Nine Months
Dealer−Owned Stocks (a)

in thousands                                       2009 2010   Over/(Under)
United States (b) 16.4% 15.0% 1.4 pts. 404 313    91

(a) Dealer−owned stocks represent our estimate of vehicles shipped to our customers (dealers) and not yet sold by the dealers to their retail
customers.

Common_Cents22's picture

I sold my business to a fortune 200 a few yrs ago.  They stuffed like crazy to make their quarterly numbers.   It's like crack because once you start you can hardly stop.  Of course, this went hand in hand with 8 restructurings in 6 years.  And the CEO is still there!  unreal.   Know what their capital allocation model was for business units?  first come first serve.  No joke.   

Spalding_Smailes's picture

How are GM sales outside the USA.... China ?

tahoebumsmith's picture

Sales in China are good!! For some reason all those little asses prefer a Buick? But that means nothing for America because they are all built in China out of Chinese parts and materials BY CHINESE WORKERS!  Talk to me about China's GM Sales when you see GM'S leaving the port in NJ heading for China.