GM Channel Stuffing Hits Record As Dealer Inventory Surges In June To All Time High 605,000 Units

Tyler Durden's picture

After the "Japanese renaissance" component of the global economic rebound thesis was effectively negated yesterday following the release of the worse than expected Tankan manufacturer index, today we get point blank evidence that the second leg of the economic recovery is now completely debunked, after GM, whose June car sales were up 10.2%, broadly missing expectations of an 18% pick up, but far more importantly, and as we have been pointing out for a year now, the bulk of GM production does not ultimately lead to any sales, but merely more and more channel stuffing in the form of month end dealer inventory which in June just hit 605,000. Point being: the Japanese supply shortage is a strawman that has nothing to do with actual demand which to the chagrin of the Koolaid drinkers is a critical component in determining clearing prices, and which is simply non-existent despite the government's eagerness to provide subprime loans to everyone (or no one as the case may be) who wishes to buy a GM vehicle.

Expect the broader media and Wall Street economists (and Joe LaVorgna) to completely ignore this data point as it roundly negates everything the propaganda machine has been spouting for months.

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Uncle Remus's picture

Looks like a Saab-Fiat-Jag mashup.

Seasmoke's picture

how about prices, i never hear that the damn prices are 3X too much

sabra1's picture

OT:

Zapatero Just Lost His Majority in the Spanish Parliament

TheMerryPrankster's picture

I found 17 cents in the couch cushions and the dog has a rash.

This affects me how?

Uncle Remus's picture

Depends on whether or not the dog got the rash from you. And you have a 17 thought budget now.

monopoly's picture

They truly believe all is well. This will end in a very bad way, just like before. Have no interest in Robots trades.

And Minn. shut down today. States getting worse every month. Buy PCLN> amazing.

BORT's picture

So if the Japan cars are not available due to decimation of their supply chain, then the US supply chain must have received an unexpected boost all the way through the parts base.  What happens to that US parts base when Japan starts importing sub assemblies for assembly in the US?

ThirdCoastSurfer's picture

How can there be such a large disparity between housing and employment on one end, and new car sales on the other? If you look at the MSRP of the cars and trucks that are selling, they easily run about 1/4 of the median cost of a home not including the cost to insure them. People not paying their mortgages and the like undoubtedly account for some of it, but owning a new car but not buying a new house seems to point to a larger structural change in the economy that seems not to have been addressed by those much smarter than I. Anyone care to offer an opinion?  

wisefool's picture

I am also interested in this. I am thinking it is pensioners and/or businesses who can write them off/depreciate.

The other possibility is that people are following the car rich+house poor trend. Common in many cultures and socioeconomic classes.

Those are just my W.A.G.s but I'd also like to know from the experts.

Cthonic's picture

It's all about who is willing (and able) to extend credit to whom.  More people qualify for auto loans, zero down, 120 days deferred payment than qualify for a new mortgage.

wisefool's picture

Is that because the asset (car) is easier to reposess than a home? If there are a glut of cars and a glut of houses, why would lendors want to reposess either? Seems like something artificial is modifying the supply/demand equation.

TheMerryPrankster's picture

The newer cars are much nicer to live in, the sound insulation allows you to park next to a train track and still get 40 winks. The older cars were much more spacious, especially the 60's buicks and cadillacs, but the fuel economy was so bad that it was difficult to beg enough money for Mcdonalds and gasoline.

The new leaner economy demands that consumers live in a more fuel efficient vehicle. Its just part of the new green economy thats transforming the landscape and our trendy lives.

Cthonic's picture

Lolz MerryPrankster, doors fit better too, so if one is camping out down by the river, less likely to get flooded.

When someone is cash poor and faced with maintaining an out-of-warranty vehicle versus buying a new one for no money down, the latter is a highly saleable proposition. If they have a job, they probably need the car to commute to it, and the payments account for a much smaller fraction of their discretionary income.  GM Acceptance Corp., now Ally, a bank holding company, has a bank, Ally Bank, that services asset backed securities comprised of auto loans:

http://www.ally.com/about/investor/products/auto-securitization/us/index...

Debt investors buy these ABS in a reach for yield.  Don't know for a fact if auto lending is financed by the leveraged loan market, but that's been heating up too, for the same reasons:

http://online.wsj.com/article/SB1000142405274870439470457549624208461161...

prole's picture

Comparing house to car: I have seen lack of response from a home mortgage lender when homeowner stops making mortgage payments. I have seen *very robust* response from "car mortgage" lender when car 'owner' stops making payments. The Beamer disappears! They do give you a chance to redeem it back if you can come up with full payment in a certain amount of time, and they are pleasant and fair about it. ymmv.

DOT's picture

Have all the bonds been released or converted ?

Hal n back's picture

 

how does this article come into play--reports gm dealers reporting the 11% increase in sales. I am not familiar enuf with this but it seems contrary to the channel stuffing issues. Not sure who is right or wrong.

http://media.gm.com/content/media/us/en/gm/news.detail.html/content/Page...

youngman's picture

It looks like Ford and Chrysler had bigger % gains....catching up.....trucks were up big...sorry Obama..except for GM...hmmmmm

nodoctor's picture

Those who post that TD is misinformed and that there is more nuance when looking at auto sales and inventories have a valid point. There is some nuance regarding sales days per month, seasonal adjustments, etc. That being said, this nuance does not negate the directional accuracy of the macro trend, which I believe is TD's argument.

Let us do some arithmetic.

US GM dealers are sitting on 605000 units.
GM market share is currently running at about 21%.
The industry ideal is to have approx 2 months of inventory available.

So based on those assumptions

(605,000)*(100/21)*(12/2) = 17.285 million units

This means that GM has enough inventory to support a seasonally adjusted annual sales rate of approx 17.3M. This number is called SAAR and it is the industry sales rate. When the fake good times were rolling, US auto sales did hit the 16M - 17M mark. At the trough of the current desperation the SAAR went down into the 10's. Lately it has been running around 12M.

So that means, assuming a steady SAAR of 12M for 2011, GM has 44% more inventory than they need right now.

The numbers above are "dirty" because the industry does "seasonally adjust" their sales figures. The trend this points out however, is inescapable.

TheMerryPrankster's picture

You know when business is bad and you need traffic to move inventory you have a sale. That means its time for the old combo Federal Government Stimulus and Inventory Removal aka FGSIR.

1st buyer tax credit on homes. Buy a NEW home get a 22k tax break, buy a REGULAR old used home get 11k, buy a FORECLOSURE, get 6k, but no matter what kind of home you buy, we'll throw in a rebate good for 50% off the price of a new GM vehicle. That's right, buy a house get a car half off!!!. These deals can't last forever so get busy signing that paperwork before our sanity returns.

Uncle Sam's Insane Home/Car sale is on!!!

Be sure to ask how you can get a brand new Winnebago below dealer's cost, and please consider our buy a toaster, get a bank free deal. We've got to move this backlog to make room for next years models. May not include, dealer fees. Title, tax and insurance is the obligation of the buyer. This is a limited time offer.

Disclaimer, the Federal Reserve is not Federal and has no Reserves, we won't loan you money for food, just hookers and drugs.

Rodent Freikorps's picture

The government has become a rabid dog. No matter how much you loved that dog, you can't nurse something with rabies back to health.

If the Rs really loved it, they'd refuse to let the pain go on. Never ever raise the debt ceiling. Put it out of its pain as soon as possible.

andybev01's picture

Like a rock...bitchez!!

 

...a rock sinking swiftly to the bottom of a lake.

PulauHantu29's picture

Yes, and yet highways are packed with SUVs. Barry made a bad move. He should let gas rise to $5 a gallon and force people to think harder....be more frugal...spend less on trinkets.

Uncle Remus's picture

On my way back from the city I passed a high-end Prevost motor home pulling a Lincoln Navigator. I thought, no, that's not ostentatious, that's just America.

Well, someones America anyway.

SoNH80's picture

The "Silent Generation" (those that grew up in the 50's) seem to be very into huge mechanized fun machines, motor homes, big cars, hot rods, custom Harleys, whatever.  They are the Nicest Generation in many ways, but they gotta stroke their ids somehow, so Big Iron is the way they seem to do it.  They also are often flush with real estate/stock market ramp up cash (they began their working lives under good old Ike, and ended them under Billy C.), so for them, driving the length of I-81 or I-95 in a 99 foot motor home is no biggie.

AldousHuxley's picture

in california, illegal mexicans drive Cadillac Escalators.

1) their $100k home in the ghetto became $300k, they used home equity loan to by  the gangster car they always wanted

2) uneducated farm laborers don't realize that SUVs are cheap now because of fuel inefficiency. They don't calculate total cost of ownership (gas money), only cost to purchase.

3) they get free college so, saves $30k per year for 4 years per kid compared to US citizens. no need to save for college.

4) need the SUV for their 4 kids for more welfare and catholic agenda which encourages breeding amongst the poor (easily brainwashed, gov take pity) to funnel gov welfare dollars into church coffers.

sun tzu's picture

The amazing thing is that people like you think Barry or some other crooked politico controls gas prices. That 30 million barrels was like pissing in the ocean

TheMerryPrankster's picture

The difference between Stimulation and Simulation is just one letter, but its just that little "T" that makes all the difference in which hat the goverment wears today. Somedays they Stimulate the economy with a witches brew of bad plans, poorly thought out and badly implemented. Other days they just peform vocal masturbation with the TV talking heads about how great the economy is doing and how its wall to wall green shoots as far as the eye can see and the really bad stuff is all behind us now in this Simulated reality.

Stimulate and Simulate, the tools of the ruling class.

 

They call it fraud when the regular folks do it.

taca's picture

All of our handbags are priced between wholesale fashion jewelry with a money back guarantee if you are not 100% satisfied with your purchase. We also offer you FREE UPS Ground shipping on all orders over

prole's picture

Please give me the power to ban a poster for a hundred million years and I promise not to abuse it. I will use the ring only to save Gondor!