GM's Channel Stuffing Catches Up With The Company: Dealer Backlogs Force Plant Shutdowns; Q3 GDP Cuts To Follow
A few days ago, JPM's Michael Feroli literally wrote off Q2 GDP: "Recent economic data have been dispiriting, and increasingly 2Q is being written off as a lost quarter in which no progress will be made in closing the output gap." The silver lining, however, according to Feroli was that Q3 GDP would jump on a surge in auto supplies and sales to fill the vacuum left in the post-Fukushima space: "Motor vehicle assemblies sank in April, particularly at the US plants of Japanese automakers, as supply lines for parts from Japan were interrupted. That, in turn, led to a steep drop in inventories of cars on dealer lots. As Japanese parts and supplies come back on line, automakers located in the US are planning to ramp up production to replenish lean inventories." Uhm, lean inventories? It seems Michael has not had a chance to actually see what inventories look like (unlike Zero Hedge readers). In fact as we demonstrated three weeks ago, GM dealer stuffing has hit an all time high, so we can attribute this oversight to Mr. Feroli's zeal to validate yet another projection hockeystick. Yet somehow we fail to see how this massively excess inventories situation will be amenable to prompt restocking. And now we are not the only ones. According to the AP, "General Motors plans to close two U.S. pickup truck plants for two weeks in July as sales of pickups begin to wane and trucks are backlogged on dealer lots, the Associated Press reported Tuesday, citing the auto maker." That sure doesn't sound to us like something that would happen to an industry that has just faced a "steep drop" in inventory.
As a reminder, here is what GM's record channel stuffed picture looks like:
We are happy to provide the JPM head economist with a free subscription to Zero Hedge if that will help in writing more accurate research reports. Because if he had actually seen this chart, he would know that as a result the Q3 GDP picture will be far worse than the consensus predicts.
GM said shutdowns at its Flint, Mich., and Fort Wayne, Ind., factories have been scheduled for months to do maintenance on equipment and help to outfit the Flint plant for a third shift that's coming in August.
Company spokesman Tom Wickham wouldn't comment on the growing pickup inventory, but he said workers at the plants were told about the closures during the first quarter.
The plants make both the heavy-duty and regular versions of the Chevrolet Silverado and GMC Sierra. Together they built about 420,000 pickups last year. The shutdowns will cut production by more than 16,000 trucks.
GM no longer has an automatic two-week summer factory shutdown so it can switch from one model year to the next. But the company said nine of its 12 U.S. assembly plants will shut down for a time this summer.
We give the Wall Street lemming crew two weeks to realize what has been painfully obvious to all our readers months ago. And when that happens, the resultant Q3 GDP cut will make the disconnect between the economy and the Never Never Russell 2000 even more ridiculous (and make the need for QEx even more poignant).
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