Mainstream Media Finally Reports On GM's Channel Stuffing Scandal

Tyler Durden's picture


Yet another story we have been following for nearly two years (and here) has finally migrated over to the Mainstream Media as attempts to hush it down before it become painfully obvious and problematic, have failed miserably. The WSJ writes that "Detroit auto makers are piling up big stocks of passenger cars at dealers despite brisk new-vehicle sales in the U.S.—a problem that executives vowed to avoid since their painful downturn three years ago."

WSJ continues:

General Motors Co. GM -0.39% ended November with enough Malibu sedans and Camaro sports cars to last more than five months at the current rate of sales. Ford Motor Co. F -0.88% had more than four months' worth of Fiesta subcompacts and Chrysler Group LLC had a nearly six month stock of its 2013 Dodge Dart.

It's an abrupt reversal from a year ago. In 2011, U.S. auto makers' market shares, especially in compact cars, soared as gasoline prices jumped and Japanese auto makers struggled with back-to-back natural disasters. This year, production at Toyota Motor Corp. 7203.TO -0.28% and Honda Motor Co. 7267.TO -0.66% came roaring back. Both began offering deeper sales incentives, something they hadn't done for many years. That has the Detroit Three in a quandary: Do they cut production or match incentives?

"They [the Japanese auto makers] really had to get aggressive about getting their market share back and maybe that did catch some by surprise or even flat-footed," said automotive analyst Michelle Krebs. Toyota and Honda "have a lot of zero-percent financing" rates.

"Look at the ads, you see a lot of zero, zero, zero," she said. also estimates that 38% of Toyota-financed sales last month carried interest-free loan rates.


GM also miscalculated demand for its pickup trucks. The industry norm for U.S. auto makers is between 60 days and 70 days of sales in inventory. GM had 138 days worth of Chevrolet Silverados at the start of this month. In passenger cars, its Chevrolet Cruze inventory jumped to 64,390 vehicles or 96 days. One of the two plants that GM will idle this month produces the Cruze.


"We thought the economy would have been further along at this point but as we look into December and 2013, we will get a tailwind from housing which benefits not only autos but the entire economy," said GM spokesman Jim Cain. "The one thing we won't do is commit the sins of the past and lose our discipline around rental cars and incentives. Our competitors may be doing it, but we have come too far to go backward and do something that may hurt our brands."

In other words: the disconnect between reality and hope has struck once more, and sadly for the optimists and those who specialize in budgeting hockeysticks, reality wins once again.

The WSJ does add some incremental value by observing the substantial, margin collapsing rebates all carmakers are forced to provide just to get inventory out of the door:

Toyota's average incentive per vehicle rose to $2,075 in November from $1,717 in January, according to automotive tracking firm Zero percent interest rates aren't counted in TrueCar's incentives tally.


Honda, meanwhile, has increased its average incentive to $2,428 from $1,978 in February despite releasing new versions of its top selling cars in the past year. The largest incentives offered in the U.S. last month were from Japan's Nissan Motor Co., 7201.TO +0.39% whose Altima has become a top selling sedan. Its average jumped to $4,273 a vehicle last month from $2,764 in January.


That is not to say the U.S. auto makers aren't also using incentives. Ford now offers as much as $2,895 off its 2013 Focus sedan, which had only two months' of inventory to start the month. Fiat SpA's F.MI -0.51% Chrysler has offered up to $5,000 off its Ram pickups, which had 3.5 months of inventory to start the month. GM has recently offered between $2,900 and $3,500 in average incentives for its vehicles, according to

In conclusion:

Producing too many cars and trucks is a problem the U.S. auto makers have wrestled with since the late 1970s. To keep their factories humming, GM, Ford and Chrysler would build vehicles and stock them at pop-up parking lots created on vacant land throughout the Detroit area. When the stocks grew onerous, they would unleash heavy incentives that eroded profitability and brand image.


Today, all three face tough decisions on cutting production or profitability as inventories have soared. Ford, for instance, finished November with 18,336 unsold Fiestas, or 124 days worth of supply, compared with 96 days in October.


The Dart, Chrysler's most important new offering of the year and its first compact sedan since 2005, began December with a 173 day supply. Sales of the Dart slipped in November compared with the previous two months.

And the punchline: all this is happening even as captive lending units, either standalone or government owned (ahem Ally, aka soon to be fully-GMAC once more) are lending money hand over fist to anything with a pulse as LTVs are back over 100% once more, and the average FiCo score of car loan borrowers is now arguably lower than where it was back in 2007.

In summary - wondering why GM is set for another inevitable bankruptcy and bail out? Here's why:

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Wed, 12/05/2012 - 09:15 | 3035097 CPL
CPL's picture

So more dealerships are going under, like auto malls weren't depressing enough to drive through nowadays.

Wed, 12/05/2012 - 09:47 | 3035195 Death and Gravity
Death and Gravity's picture

MSM only a year behind ZH. Gives me a cozy feeling to be part of this motley bunch.

Wed, 12/05/2012 - 09:52 | 3035211 CPL
CPL's picture


Wed, 12/05/2012 - 10:12 | 3035265 Big Slick
Big Slick's picture

Prepare to be boarded , matey!

(BTW - Jeep, Dodge, and Chevy banners on left, top, and right of my screen respectively!  At least ZH is profiting from auto's mistakes :)  Avast ye!)

Wed, 12/05/2012 - 11:54 | 3035660 TruthInSunshine
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Once again, Zero Hedge is  YEARS ahead of the Main & Quite Lame Stream Press-- the media "institution" and "pillar" of an enlightened society that has failed so miserably in even REMOTELY serving as an independent, objective observor and conveyor of FACTS or TRUTH, but that has instead become a DEEPLY CAPTURED PROXY PROPAGANDA arm of the government (is it any surprise, since 6 corporations own every network, cable station, newspaper, magazine, radio station or other form of "media" in the USAA?), which is itself DEEPLY CAPTURED by the KronyKapitalistKomrades of Finance/Banking/Wall Street (e.g. Warren "Let's Rape the Taxpayers Harder Via Bailouts amIright, Charlie Munger?" Buffet; e.g. The Honorable Jon "Vaporizer-- Poof It's Gone!" Corzine, etc.).

From High Frequency Trading, to the travails of one very much deficit/debt monetizing Federal Reserve (headed by Ben "The Federal Reserve Will Never Monetize the Debt" Bernanke), to  BLS (Bureau of Lies & Stories) chicanery & outright lies, to shadow banking liabilities, and everything in between that the Main & Lame Ass Stream Media is too incompetent and/or too corrupted to "bother" to report, there's always Zero Hedge.

Here's just one more very recent example of the ultimate FAIL...even outright FRAUD that is the U.S. Media:

Record, Blowout Black Friday/Grey Thursday Sales; Retailers In Heaven!!! Manna Raining Down!!!! Ooooops, maybe not...

Wed, 12/05/2012 - 09:16 | 3035098 GetZeeGold
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They moved most production to Chiina......they're making cars like rabbits. What are they supposed to do with all of them?

Wed, 12/05/2012 - 09:20 | 3035107 EscapeKey
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Implicitly, get the taxpayer to fork out for them?

Wed, 12/05/2012 - 10:18 | 3035282 Big Slick
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Speaking of sticking the taxpayer, isn't it about time ol' Barry rolls out another cash for clunkers program?  Those 4-year old Fords should be losing their new car smell right about now and we cannot have that.

This world has turned into a joke.

Wed, 12/05/2012 - 12:01 | 3035795 catacl1sm
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You must have missed the article about the ecoboost engines catching fire.

Wed, 12/05/2012 - 09:32 | 3035149 smlbizman
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i think you need to redefine mainstream media....mainstream would be tmz, entertainment tonight, talk soup...i would think the  wall street journal would be considered the same as broccoli to a fat fuck to todays american...

Wed, 12/05/2012 - 09:46 | 3035191 CynicLaureate
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The Daily Show.

Most people under 30 get their news from the Jon Stewart. 

Wed, 12/05/2012 - 09:49 | 3035205 GetZeeGold
GetZeeGold's picture



Meant to say propaganda.....fixed it for you.

Wed, 12/05/2012 - 09:58 | 3035229 yogibear
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No wonder they think globalism, consumerism and socialism will fix everything. 

Wed, 12/05/2012 - 10:19 | 3035292 LouisDega
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My MSM is Sundance film channel and Turner classic movies. There was no mention of this GM stuffing. BTFD

Wed, 12/05/2012 - 10:06 | 3035243 GMadScientist
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Anything tainted by the Murdoch should not be considered fit for human consumption.

Wed, 12/05/2012 - 17:19 | 3037152 Gift Whores
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The cars or the rabbits?

Wed, 12/05/2012 - 09:19 | 3035104 EscapeKey
EscapeKey's picture

Gee I wonder if that's in any way connected to the government picking winners.

Wed, 12/05/2012 - 09:19 | 3035108 digitlman
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You mean weiners.

Wed, 12/05/2012 - 09:26 | 3035125 ihedgemyhedges
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Who picks the weiners now given that Barney Frank is out of Congress?

Wed, 12/05/2012 - 09:38 | 3035141 GetZeeGold
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Boehner just banned the conservatives from Congress.....the only thing left is a bunch of dicks.


Brace for impact.....cause here it comes.

Wed, 12/05/2012 - 17:21 | 3037165 Gift Whores
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Maybe someday that will matter.  A spender is a spender, no matter how small.

Wed, 12/05/2012 - 09:20 | 3035109 Lost Wages
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All my anarcho-primitivist dreams are coming true. Industrial Civilization is eating itself.

Wed, 12/05/2012 - 09:32 | 3035144 Freewheelin Franklin
Freewheelin Franklin's picture

Yes! We can all make hammocks and roll around in the mud with chickens at Twin Oaks.


I got a thing about chickens.

Wed, 12/05/2012 - 10:06 | 3035245 GMadScientist
GMadScientist's picture

How does the chicken "consent"?

Wed, 12/05/2012 - 10:17 | 3035300 Yes_Questions
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Wed, 12/05/2012 - 09:23 | 3035110 ZFiNX
ZFiNX's picture

They'll likely discount (see subsidize) the hell out of the cars. That will complete the stimulative circle-jerk. The dealers (see farmers) get subsidized and the public (see twinky-eaters) gets cheap cars. Alternatively, they could replicate the farmer subsidization and just buy the cars and withhold them from the market. This central-economic planning gets more twisted by the day.


Wait, wasn't the government going to replace their whole fleet with GM cars? Seems like a long euphemism for cornering the GM market.

Wed, 12/05/2012 - 09:24 | 3035113 Cdad
Cdad's picture

Some should really ask Phil LeBeau over at The BlowHorn [CNBC] just how he missed this story for the last two years.  Thank you, ZeroHedge, for taking over the task of properly reporting financial news.

The GM  brand is terminal, if you ask me.  President Zero and the cronies who bailed this thing out have made sure that is the case.  Any day that GM shares are not zero is a good day to sell them.

Wed, 12/05/2012 - 09:25 | 3035121 Screwball
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They didn't miss it.  It's on their "do not report" list.

Wed, 12/05/2012 - 11:20 | 3035609 Atlantis Consigliore
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where Framer? sell sell sell. ...Tresury flips 500 million shres to the FED ny as reserves for printing to buy us Treasury paper,.....sell sell sell. 

Wed, 12/05/2012 - 09:24 | 3035116 Coldsun
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They'll just make credit more accessible to sell more. Oh wait, GMAC (taxpayers) are already doing it?

Wed, 12/05/2012 - 09:26 | 3035119 Quinvarius
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Channel stuffing?  I prefer "well endowed channel".  Just don't follow up with "bend over America, I have a surprise for you".

Wed, 12/05/2012 - 09:26 | 3035120 Sudden Debt
Sudden Debt's picture

What amazes me most is how you can't run a profit on a good that EVERYBODY uses...

Is quite expensive...

contains about 100$ in metal

and a lot of plastic...

and we've been making them for over a hundred years now so not all needs to be reinvented every time you make a new one...

and Audi and VW are working on a 600 Mpg car... while American cars at what again? 60Mpg?

Wed, 12/05/2012 - 10:23 | 3035332 Imminent Crucible
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American cars at 60 miles per gallon? I think you meant to say "kilometers per gallon". 

And please don't bring up the Volt. The Chevy Volt is not a car. There's a very fractious debate going on here over what the Volt actually is. Some maintain that it is a $40,000 electric-assist shopping cart developed for use by Wal-Mart customers who are too heavy for the conventional battery carts. The other camp argues that it's a device to aid in starting garage fires.

I always just assumed the Volt was a ruse to make it look like the U.S. government is not a complete ecological catastrophe. In any case, it's clear that the U.S. car-buying public does not want to substitute a golf cart for their beloved USS Admiral Nimitz on wheels. Pretty soon I expect the Obama administration to issue an edict that one-third of all lvehicles sold in the U.S. must be a Volt---but the taxpayers will supply a $10,000 subsidy per Volt and zero down, zero percent financing.

That ought to put a dent in the vast fields of unsold Volts. Not.

Wed, 12/05/2012 - 11:48 | 3035742 Vince Clortho
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Funniest post so far today.  Well Done!

Wed, 12/05/2012 - 09:27 | 3035126 Shizzmoney
Shizzmoney's picture

This just in: Mice still like cheese.

Wed, 12/05/2012 - 09:28 | 3035128 moriarty
moriarty's picture


Wed, 12/05/2012 - 09:27 | 3035129 monopoly
monopoly's picture

It just never stops. Last night on ABC useless news they advised the housing market is "rocketing higher". Used Orlando as an example. What do they gain buy lying to us? They just lose credibility and we turn them off. Pathetic broadcasting.

Wed, 12/05/2012 - 09:34 | 3035152 in-Credible Banker
in-Credible Banker's picture

And it was the lead story!!!!!!!!  The crazy thing is (doing this from memory) that there was no empirical data used to support the idea of "rocketing higher"....just the anecdotal evidence of a couple of isolated streets in the hardest hit areas.  UNBELIEVABLE!!!

Wed, 12/05/2012 - 09:34 | 3035153 Freewheelin Franklin
Freewheelin Franklin's picture

It's not a lie if people believe them.

Wed, 12/05/2012 - 10:08 | 3035252 jcaz
jcaz's picture

ROFLMAO! As someone who lives in Orlando, I guess I missed the memo about the "rocketing higher" housing market-  all I see is "take your pick" of empty and shelved houses for sale-  most of which don't even bother to advertise anymore, for fear of showing up in the stats.......

But hey, ABC-  don't let the truth get in the way of your reporting.....

Wed, 12/05/2012 - 09:28 | 3035130 azzhatter
azzhatter's picture

Wait until Obamacare creates a nation of part time workers. How many going to buy new $30K+ cars? As always, will end badly

Wed, 12/05/2012 - 09:36 | 3035160 Mr. Lucky
Mr. Lucky's picture

Not to worry; soon we will have the ability to put car payments on an EBT card.


Wed, 12/05/2012 - 10:03 | 3035240 yogibear
yogibear's picture

Another round of cash for clunkers after sales dries up. With an unlimited credit card (no debt ceiling) anything is possible. 

Wed, 12/05/2012 - 09:28 | 3035133 uncle_vito
uncle_vito's picture

Maybe Detroit will have a hurricane and all these cars will flood.   They are insured, aren't they?

Wed, 12/05/2012 - 09:29 | 3035136 Sudden Debt
Sudden Debt's picture

They should hang out BIG signs on those lots that say:


Wed, 12/05/2012 - 09:29 | 3035137 Miss Expectations
Miss Expectations's picture

Dodge Dart?  Really?

They know not what they're doing.

Wed, 12/05/2012 - 10:17 | 3035295 WillyGroper
WillyGroper's picture

 I've been waiting with rabid anticipation for the resurrection of the AMC Gremlin. ;oD

Wed, 12/05/2012 - 10:26 | 3035346 Imminent Crucible
Imminent Crucible's picture

It's the Pacer that sets my heart on fire. Can I show you my collection of beautifully restored Yugos?

Wed, 12/05/2012 - 10:40 | 3035405 Common_Cents22
Common_Cents22's picture

The pontiac Aztec was aesthetically way before its time, it'll be viewed as sleek apple-ish design soon!

Wed, 12/05/2012 - 10:24 | 3035335 Spastica Rex
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Fiat Fart

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