What Do China’s Economy and GM’s Sales Have in Common?

Both look great until you dig deeper into the data.

China
measures its GDP based on any kind of economic activity, not end sales. If
China chooses to build a skyscraper to the moon, it will count as economic
growth even if the whole thing collapses two days after completion.

In fact,
China has been using this ploy for years. As ZeroHedge has noted one of the
more staggering activities the People’s Republic has engaged in is actually blowing
up buildings and then constructing new buildings on the property in order to
maintain its economic “miracle.”

ZeroHedge
notes that the below building was actually blown up BEFORE it was competed in a
kind of GDP “two for one” deal.

In this
context, China’s GDP “miracle” needs to be taken with a LARGE grain of salt. Do
I actually know what REAL GDP is there? No. But I know for certain it’s not
what China claims.

What’s this
got to do with GM’s auto sales?

GM engages
in similarly confusing growth numbers.

As the
mainstream financial media trumpeted the other day, GM announced incredible
sales growth of 49% for February. Of course, they didn’t bother reporting on
the second half of the GM’s sales announcement. As Bill King noted in a recent King Report the full sentence from GM’s
press release was:

General
Motors total sales in the United States rose 49 percent in February, as

dealers
reported 207,028 deliveries for the
company’s four brands… Month-end dealer inventory in the United States stood at
about 517,000 units, which is … about 101,000 higher than February 2010.

If you dig
deeper into GM’s recent releases, you’ll find that GM’s YoY deliveries rose 45%
in February.

So total
sales rose 49% and deliveries rose 45%? Which one of these truly represents
ACTUAL money GM made? Either of them?

It’s hard to
tell, check out this little snippet from GM’s 10-K:

…we
generally recognize revenue upon the
release of the vehicle to the carrier responsible for transporting it to a dealer,
which is shortly after the completion of production. Vehicle sales data, which includes retail and fleet sales, does not
correlate directly to the revenue we recognize during the period.

So GM counts
a car as sold the moment it leaves a production facility on a shipping
truck, NOT when it’s actually sold to a consumer. So the more cars and trucks
GM makes… the greater its sales numbers.

Sounds a bit
like China’s GDP numbers doesn’t it?

At this
point I can’t help wondering if China and GM should form a strategic alliance
to attain truly “miraculous” growth. China could build dealerships, let GM fill
them with cars, then blow them up only to build a NEW dealer to which GM could
deliver a new load of cars, thus insuring record sales for GM and record GDP
for China.

Yeah, that’s
nuts, but it’s not that much more nuts than what these two are already doing.

Best
Regards,

Graham Summers

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Comments

[patience...]

"China could build dealerships, let GM fill them with cars, then blow them up only to build a NEW dealer to which GM could deliver a new load of cars"

Let Me!(Blow em' up) I'll do it for free.

[ivars]

Buying light truck is a wasted money in coming gasoline price environment of 2011-2012 even in China. Either You do not drive the truck, or Your running costs for gasoline prevent You from buying other things/making investments that reduce costs.

Here is what oil prices most likely will look like , punctuated (and thus fluctuating) by spreading instability in supply nations.

http://saposjoint.net/Forum/download/file.php?id=2609

http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&start=0

We are currently at the first peak during the beginning of March. There are many more to come, driving the price of Brent up to 180 in extreme in May 2012, and that is not the final high, I just have not charted end of 2012 and 2013, when 200 USD barrel of Brent will be norm.

[Jack Sheet]

Great post Graham, entertaining and educational. And thank God, this time no charts with shrinking wedges, double blow jobs, trendy canals and base formation.

Cheers

[KTV Escort]

not one of your better efforts Graham, but looking forward to your next post

http://chinapositive.blogspot.com/2011/01/shanghai-pudong-towers.html

[Amabo Kcarab]

GM is recognizing "sales" to it's dealers not to end customers.

Vehicles delivered to GM dealers are bought on credit using what is called a dealer "floor plan".

These vehicles sitting on the lot accrue interest by the dealer until sold.

Generally with GM, floor planned vehicles are financed through GM's new financing entity (Govt.) Chrysler financial. (Merger of GMAC and Chrysler financial).

Incentives from GM to it's dealers offset some of that inventory interest for these vehicles the dealer is forced to take delivery of to meet GM's new minimum inventory standards.

GM's financing arm then finances the vehicles to the end consumer in most cases, doing a double dip.

Smoke and mirrors my freinds.

[Ahmeexnal]

Helicopter Ben is an amateur: http://www.marketwatch.com/story/hong-kong-to-make-cash-payouts-to-resid...

HONG KONG (MarketWatch) -- Hong Kong will hand out 6,000 Hong Kong dollars($777) to all permanent residents aged 18 and older, the city's Financial Secretary John Tsang announced on Wednesday, bowing to public pressure to make major changes to a budget plan delivered a week earlier.

[oklaboy]

they have been doing this since Bamster took over. Gubmint Motors, like the Gubmint, has a different reality.  

[geno-econ]

Another example of power and importance of credit neccesary for movement of vehicles to dealer lots. If credit tightens or becomes unavailable someone has to take a hit ---either the dealer, the consumer who no longer can afford a car, the manufacturer no longer able to make a profit or the laid- off worker.  Ben is creating another monster and China has learned how to play the same game.

[slackrabbit]

Ahh the old recoginsing revenue before its even actually sold trick. Are they selling London's Tower bridge as well?...just curious as it would save me bus fare.

[Rogerwilco]

Over 75% of Chinese power is generated in coal-fired plants.

http://www.infomine.com/chartsanddata/chartbuilder.aspx?z=f&g=127663&dr=1y

[Bleeping Fed]

The rest is generated in business' backyard diesel generators-which they put in because China's electrical infrastructure is so unreliable.  Wonder why China uses so much oil?

[Rogerwilco]

Large assembly plants don't operate on backyard generators. China is rolling over, this is a replay of Q3 '08.

[falak pema]

Benocide's ponzi is way ahead of either GM or China for making money out of thin air. It keeps the S&P flying so there!

[covert]

seems like a newer version of roosevelt's new deal.

http://covert2.wordpress.com

[Guy Fawkes Mulder]

What Do The World Economy and GM’s Sales Have in Common?

PYRAMID SCHEME, BITCHEZ!