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GM's Latest Flop: Dealers "Stuffed" With 725-Day Supply Of "Tesla Competitor" Cadillac ELR

Tyler Durden's picture




 

Ten days ago, some of the more confused fringes of the blogosphere took great offense at our repost of an article showing thousands of idle cars strewn around various ports, dealer lots, parkings, airports and any other flat surface in what is merely the world's largest ongoing manufacturing channel stuffing and working capital gimmick.

Amusingly, the most vocal critics were primarily offended by the photos which they said, correctly, were from several years ago. What the critics apparently did not do, as we will gladly demonstrate in a follow up article as soon as GM's dealer inventory numbers are released next week, was to do a quick parallel image search because all those same venues clogged to the brim with unsold cars, and whose addresses were explicitly laid out for anyone willing to do 30 seconds of work and plugging the address into Google earth for an updated aerial photo, are just as crowded today as they were in any point over the past 5 years.

The far bigger point, obviously, is that there are millions of cars clogging up the supply chain of automotive delivery - both then and now - which is precisely why we started off with the topic of GM's record channel stuffing...

... something we have been following keenly for the past three years, and of which lots parked with brand new cars around the world is merely a manifestation of the same underlying problem: namely massive inventory mismanagement, and an attempt to affect pricing through working capital goosing.

To this point we could have clarified that what is going on around the world with various car makers stuffing unsold cars in every possible nook and cranny - certainly including transit ports and continuing all the way down the supply chain and far from it - is nothing different than what Goldman and Glencore were doing with their cartel-like abuse of commodity warehousing (which has now attracted even the Fed's attention), which as we showed earlier this month were at or above 700 days delivery for aluminum respectively, in what is simply an attempt to induce artificial supply shortages by keeping intermediate product from its final destination. That we didn't is because our regular readers are familiar with this topic.

Sadly most others were not.

However, the one fair criticism is that to get a truly detailed picture of just how horrific the channel stuffing problem across the US auto manufacturers, one described quite effectively by Bloomberg in its recent article "Most Autos on U.S. Lots Since ’05 Has Ford Leading Cuts", what we should have done is show aerial picture of dealer lots of local car makers such as GM, Ford and (Italy's) Chrysler which are the fullest they have been in a decade. We hope to update our photo narrative with just that soon.

And in lieu of that, instead here is a verbal account of precisely what happens when domestic car-makers overestimate the purchasing power of the US, and clog channels to an epic extent. In this case, we refer to the recently launched GM Cadillac ELR, launched to much aplomb just five months ago as a competitor to the Tesla Model S for a $76,000 price point (above Tesla's $70,000), has been a complete disaster. And how is GM dealing with this latest sales disappointment (which struck even before all the recent recall scandals had hit)? Why by jamming dealers with an unprecedented 725-day supply, or exactly two years worth of cars!

So what is GM forced to do now? The same thing every vendor does when realizing they have overproduced a product and have too much in inventory - liquidate.

From MarketWatch:

The Cadillac ELR has been on sale for just five months, but General Motors is now offering dealers a $5,000 incentive to offer test drives in the Chevrolet Volt-based plug-in hybrid. To receive the incentive, dealers have until June 2 to designate ELRs in their current inventory as test vehicles, after which each test car has to log a minimum of 750 test-drive miles.

 

The incentives could be because 1,700 ELR coupes remained unsold in dealer inventories at the end of April. At current sales rates, that’s a 725-day supply, which is almost exactly two years’ worth of cars.

The discounts and incentives don't end there:

General Motors is also offering $3,000 in customer discounts toward the lease or purchase of an ELR, in addition to the 240-volt Level 2 home charging station with included installation that was offered to a number of early buyers this year. We noted in January that a Level 2 charger typically sells for north of $750 excluding installation, so a number of ELR buyers essentially received a $1,000 value with the purchase of an ELR.

Curious why the US economy had a mini manufacturing and inventory stockpiling boom in late 2013? Precisely due to cases like the ELR:

General Motors told Automotive News that the Detroit-Hamtramck plant that builds the ELR has been producing a higher volume of cars since the beginning of the year, which could explain the nearly two-year stockpile; industry analysts keep pointing to the price, which is twice that of the Chevrolet Volt. The ELR starts at $75,995 including destination, but before the application of discounts and state and federal credits.

And here we get a paradox:

General Motors, by its own admission, did not intend the ELR to be a volume seller in the lineup.

In other words, a car that was not supposed to be a volume seller, had its production volume cranked up to the max just to stimulate economic activity by building up inventory. And then it hit a snag: "However, it appears that the price continues to keep a lot of customers away."

So yes, while those lots filled to the brim we showed were not of ELR models, they should have been. Unfortunately stock photos of this brand new car sitting untouched on dealer premises are unavailable, at least for now. They will be in due course, unless of course GM is forced to take far more drastic price writedowns and offer much more generous incentives to move the excess inventory - incentives which will bite right into GM's bottom line.

Which really is the bottom line, pun intended: if those thousands of cars held for "inventory stocking" purposes - and nobody knows just what specific intent management has to park thousands of cars idle in plots around the country, not us, not our critics, except that it is an explicit attempt to throttle the supply chain and artificially boost prices (think diamonds) - were to be forced into the broader market and sold at clearing prices, there would suddenly be no epic inventory glut. But far more importantly it would lead to a collapse in car prices as suddenly car supply exploded and dealers were forced to apply the same liquidation methods to all their models as they are doing to the ELR right now.

Finally, since the company under discussion in this post is GM, the same company whose quality control track record has been destroyed following a recall of 50% more cars so far in 2014 than it sold in 2013, expect to see many more stories about exploding channel stuffing for all of its brands, not just the car that was - erroneously - thought would become Government Motors' own Tesla killer.

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Tue, 05/27/2014 - 18:43 | 4799903 Spastica Rex
Spastica Rex's picture

Why by jamming dealers with an unprecedented 725-day supply, or exactly two years worth of cars!

365 * 2 = 730

Tue, 05/27/2014 - 18:46 | 4799914 Uber Vandal
Uber Vandal's picture

Must be that common core math

Tue, 05/27/2014 - 19:02 | 4799962 Pure Evil
Pure Evil's picture

Or just a test to see if anyone is actually reading the article.

Tue, 05/27/2014 - 19:09 | 4799977 knukles
knukles's picture

Wait....
Cadiddilliac has an electric upscale offering?
Whoda thunk?
OK, now what demographic is Cadillac?
Upscale trendy metro-sexual, tree hugging, rich, techie guys or some other demographic I'd best not touch with your 6' hot poker?

Huh?

No Shit, Sherlock....

Iwans da chromezindas  golda matches my toofs

Tue, 05/27/2014 - 19:12 | 4799990 Pure Evil
Pure Evil's picture

Most of the Cadillacs I see are driven by old geezers.

 

That other demographic has to wait about ten years for the used hand me downs.

Tue, 05/27/2014 - 19:48 | 4800083 Troll Magnet
Troll Magnet's picture

I'd rather drive that Caddy than that fagmobile Tesla.

Tue, 05/27/2014 - 19:52 | 4800095 El Vaquero
El Vaquero's picture

I'll stick to my '92 Jeep.  It's paid for and I can work on it.

Tue, 05/27/2014 - 20:55 | 4800274 SafelyGraze
SafelyGraze's picture

the solutions are as simple as they are obvious

- interdict googlemaps satellite images of vehicle depot areas

- arrest/imprison/fisa anyone who shows or links to such images

- put camouflage netting over the vehicle depot areas

- truck the vehicles to areas in detroit that are scheduled for demo

- fill fukushima with unneeded vehicles

- dump the vehicles into the ocean so no one can see them on satellite images

 

Tue, 05/27/2014 - 21:15 | 4800405 TheFourthStooge-ing
TheFourthStooge-ing's picture

Blame Putin.

Tue, 05/27/2014 - 22:16 | 4800592 Newsboy
Newsboy's picture

'87 Isuzu P'up diesel longbed with 82k miles is what I drive when I'm not riding my titanium commuter fixed-gear bike. 

I never get less than 30 MPG, no matter what load I'm carrying, but I never break 75 mph, either.  :-)

Tue, 05/27/2014 - 22:29 | 4800628 redpill
redpill's picture

I have a Tesla on order.  I'm not an environmental type. I didn't buy it for some political cause.  I bought one because it's fucking awesome.  Say what you will about Elon Musk.  I doubt I'd agree on a lot of his politics, but the fact is he brings it.  He supplies a space station and has successfully broken into an industry that no one in the US has penetrated for decades.  In a world dominated by megalomaniacs focused solely on their own power structure, this guy throws every last penny against the wall to create a new paradigm.  Love him or hate him, I wish we had more people willing to further their vision instead of being parasites on society.

Tue, 05/27/2014 - 23:00 | 4800703 NOZZLE
NOZZLE's picture

Sorry I can only vote up once

Wed, 05/28/2014 - 07:30 | 4801231 Headbanger
Headbanger's picture

GM should have made it more like an electric Vette.

And they can call it Corvair as it's "unsafe at any speed" when it can explode into flames like the Tesla.

Sun, 06/01/2014 - 18:09 | 4815224 Weapon
Weapon's picture

Funny thing is, if they did that it would still be safer then any gasoline car on the road.

Tue, 05/27/2014 - 22:28 | 4800626 Dave
Dave's picture

I'm surprised they haven't by now.

Wed, 05/28/2014 - 00:29 | 4800855 MedTechEntrepreneur
MedTechEntrepreneur's picture

Bazillions in excess inventory? Not to worry!  The Fed will buy them.  (probably already have)

Tue, 05/27/2014 - 21:22 | 4800424 mrpxsytin
mrpxsytin's picture

I think they will be shipped to the multiple number of warzones erupting all over the world and used as car bombs, portable gun carriers, and transport vehicles. Watching years of yotube clips on the Syrian war would suggest this theory is partly correct.

Tue, 05/27/2014 - 23:16 | 4800736 jez
jez's picture

But look on the bright side. With a two-year supply in the dealerships, that means you can buy a 2016 model right now! What an opportunity!

Wed, 05/28/2014 - 00:03 | 4800808 COSMOS
COSMOS's picture

I agree Troll, its a really nice looking car, and I didnt know about it until now.  The volt has gotten very good reviews, and having an engine onboard to charge the batteries is indispensable.  Who the heck wants to be swapping out batteries with the Tesla, talk about gettting a bad back, have you seen how heavy those things are.  

Tesla is a one trick pony and the sooner Elon Muskstain takes a hit the better.  The guy is one slimy dude.  Buys up patents and then acts like the is the biggest inventor in the world.  The dude had only one good idea his whole life and that was being a middle man with Paypal and carrying out credit card transactions for parties looking to make a sale and their buyers.  So he was basically a transaction machine for a piece of plastic.

Sun, 06/01/2014 - 18:06 | 4815220 Weapon
Weapon's picture

You are being silly, your not going to be swapping the batteries by hand. You use the superchargers to recharge that 0.1% of the time someone travels over 200 miles. Most of the charging is done at home. The volt needs an engine because it has a tiny battery.

And you seem to have your information confused. All Tesla patents were made by Tesla, none of the patents were bought from others.

Elon Musk has contributed a lot from Tesla Model S (the highest customer satisfaction of any car in history and won many car of the year awards) . To SpaceX where they launch rockets for NASA reliably at the fraction of the cost of the competition. To SolarCity where he came up with the idea of solar leasing which has created a boom for solar installations in the US.

He also never acted like he is "the biggest inventor in the world". 

Wed, 05/28/2014 - 17:23 | 4803085 Abbie Normal
Abbie Normal's picture

Saw a Tesla and a Leaf owner almost get into a fight for a charging station parking space.  Definitely first world problems.

Tue, 05/27/2014 - 19:58 | 4800109 NidStyles
NidStyles's picture

Wrong Caddies sir. The CTS-V are actually very popular in the circles he just mentioned. 

 

I deal with a lot of that crowd myself, and I see what they drive, it's mostly Vettes and CTS-V's with a few Chysler piles of garbage thrown in. Some have M series BMW's and whatnot as well.

 

Tue, 05/27/2014 - 20:09 | 4800146 alexcojones
alexcojones's picture

Old geezers?

Yes, I remember fins on Caddies. Land yachts we called them. Chrome boats.

Tue, 05/27/2014 - 21:11 | 4800398 TheFourthStooge-ing
TheFourthStooge-ing's picture

Some rocket designs were actually based on the 1959 Cadillac.

Wed, 05/28/2014 - 05:33 | 4801144 Pool Shark
Pool Shark's picture

 

 

Whose rockets? North Korea's?

 

Tue, 05/27/2014 - 21:39 | 4800481 Mr. Fix
Mr. Fix's picture

I drive my '71 Eldo Ragtop every day. For GM, it's been down hill ever since.

Tue, 05/27/2014 - 19:11 | 4799994 Gringo Viejo
Gringo Viejo's picture

Free Cars for the homeless. An idea whose time has come.

Tue, 05/27/2014 - 19:25 | 4800029 Mercuryquicksilver
Mercuryquicksilver's picture

Almost there. The government gave me $10K to buy a GM Spark. I sincerely appreciate all you ZH's subsidizing my commute.

Tue, 05/27/2014 - 19:48 | 4800078 NoDebt
NoDebt's picture

GM's new CEO must be thrilled she just jumped into the hot seat.  Recalls out the ass, bloated inventory, pissed off customers.  The government helped cover ALL that shit up for GM, just to unleash the hounds as soon as they sold off their last shares.  Pump and dump, government style.

I'm so glad we bailed them out.  What a bargain it was to save a few thousand union members' bennies.  

 

Tue, 05/27/2014 - 19:58 | 4800113 NidStyles
NidStyles's picture

Shame we can't bulldoze their homes we have to pay for the bulldozing of the homes they destroyed instead..

Tue, 05/27/2014 - 20:26 | 4800202 drendebe10
drendebe10's picture

Gummint Motors: makes nuttin I wanna own or drive....

Tue, 05/27/2014 - 21:43 | 4800498 Buck Johnson
Buck Johnson's picture

Mostly your right, this was a massive coverup and they found a sucker that was willing to take the job once the govt. sold their shares.  It wasn't to save a few thousand union members jobs, it was to save the manufacturing supply chain of the US from being destroyed along with banks and the 1.2 million union retires that would have been shifted onto the PBGC (pension benefit guarante corp) which didn't have the money.  You see GM had many suppliers who where waiting for payments for goods and services at 60, 90 or even 120 days or more.  And many of those suppliers much of their business comes from GM.  So if GM would have went into bankruptcy, it would have put a stop on paying those bills.  So now you being a supplier with most of your business and/or a major part being GM and it not only paying for the services and goods that it already used but possible future ones also, your looking at layoffs and possible bankruptcy yourself.  Then it goes down the line to the suppliers of the suppliers etc. etc. and you can see where I'm going.

You would have had medium to large manufacturing companies that would have defaulted on loans to banks because they where defaulted on their payments or had to go out of business.  It would have been disaster.  It wasn't about saving GM, it was about saving the US manufacturing supply chain.

Tue, 05/27/2014 - 22:08 | 4800565 whoisonfirst
whoisonfirst's picture

Aren't government induced bubbles grand? 

Tue, 05/27/2014 - 22:44 | 4800664 fasTTcar
fasTTcar's picture

You are correct.

And they should have let it burn.

Wed, 05/28/2014 - 01:42 | 4800950 bh2
bh2's picture

Bloody hell. GM assets would not have suddenly evaporated in a real bankruptcy. They would have been bought by existing auto companies competent to sort out the wheat from the chaff. Most of the marques would have survived, along with most of the jobs actually salvageable. There is no magic available from government to make capital assets more valuable than their actual productive value. The feds simply bid up the value of these assets on the taxpayer's credit card to save the loss of union pension funds which would have gone bye-bye in a bankruptcy.

Had the government done the "right thing" (if it was determined to "save" these companies), it would have been to purchase the stock when it was bottomed out and outright gifted the whole company to the autoworkers' union as new owners. The circle of financial virtue would have been complete at minimum cost to the taxpayer. And the union could then sort out who to hire to manage the company and their pensions on their behalf, just like any other owner.

Tue, 05/27/2014 - 22:28 | 4800625 patb
patb's picture

Cadillac has been trying for 7 years now to reposition from an old lady florida car to

a younger hipper sporty urban brand.

 

The CTS and ATS were part of that repositioning, and they were advertising to single women in their 30s

Wed, 05/28/2014 - 03:36 | 4801078 IronForge
IronForge's picture

GM should just sell or lease the Puppies at a discount.  They can afford to do what Tesla can't - take it in the chin while giving potential buyers the Volt/ELR combo.  ROTFL!!!

<SARC>
I'm sure Onstar would be a big selling point... on getting Roadside Assistance for Re-charging, Towing, and...Firefighting...
</SARC>

Tue, 05/27/2014 - 19:56 | 4800104 JLee2027
JLee2027's picture

Wait another 2 years and they'll be giving them away.

Tue, 05/27/2014 - 18:51 | 4799925 logicalman
logicalman's picture

Can't call someone out for .6% - especially for a headline

Tue, 05/27/2014 - 19:01 | 4799961 Matt
Matt's picture

The word "exactly" has a precise meaning, and was chosen incorrectly.

Tue, 05/27/2014 - 19:58 | 4800110 Wait What
Wait What's picture

in accounting we used 360 day years. TD was being generous.

Tue, 05/27/2014 - 20:07 | 4800138 Pinko
Pinko's picture

Accounting, work days, holidays. STFU on the rounding error, fucking nit-pickers. Exactly means we are working with rolling averages and 99% numbers. Exactly how tall are you on a full moon versus no moon in the sky?

Tue, 05/27/2014 - 20:09 | 4800145 logicalman
logicalman's picture

Exactly.

An interesting concept.

Taken literally, nothing is exact, as humans can't measure anything to an arbitrary precision.

Please define your terms.

Tue, 05/27/2014 - 20:18 | 4800167 El Vaquero
El Vaquero's picture

Discrete vs the real number line.  I can have exactly 4 batteries in my hand at one time.  It's discrete.  I cannot measure out exactly 1.277645 inches.  

Tue, 05/27/2014 - 20:30 | 4800234 Spastica Rex
Spastica Rex's picture

Arithmetic is so subtle.

Tue, 05/27/2014 - 19:15 | 4800007 caShOnlY
caShOnlY's picture

"we be jammin, mon"......  

Gen-fukking-Mo

 

Tue, 05/27/2014 - 21:02 | 4800366 TheFourthStooge-ing
TheFourthStooge-ing's picture

.

365 * 2 = 730

Well, yeah, that's the metric year (also known as the yearre).

Clealy the article was referring to the short year (still common in the US and Burma), which is exactly 362.5 days.

Just tryin' to help.

Tue, 05/27/2014 - 21:45 | 4800504 HyperinflatmyNutts
HyperinflatmyNutts's picture

The incentives could be because 1,700 ELR coupes remained unsold in dealer inventories at the end of April. At current sales rates, that’s a 725-day supply, which is almost exactly two years’ worth of cars.

Tue, 05/27/2014 - 18:42 | 4799904 quintago
quintago's picture

$75K for a glorified Prius. Case closed.

Tue, 05/27/2014 - 19:02 | 4799964 Matt
Matt's picture

No, worse: a glorified Chevy Volt.

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