Excessive Channel Stuffing Forces GM To Halt Chevy Volt Production, Fire 1,300

Tyler Durden's picture

On Thursday, we were the first to expose GM's latest strong car sales data as nothing more than the latest in a long series of accounting gimmicks known as 'channel stuffing' when excess inventory is offloaded to a vendor channel, in this case GM dealers, while allowing the company to book revenue, and, of course, profits (most likely on a FIFO basis thus further making numbers a complete myth in a time of once again surging input costs). The problem with channel stuffing is it can only go on for so long before the intermediary collapses under its own weight due to so much excess inventory the only next possible step is wholesale dumpin, in the process destroying the brand. Sure enough, it took about 24 hours for this latest speculation to be proven right as GM announce it was "temporarily" halting production of its Volt electric car. Per The Hill: "We needed to maintain proper inventory and make sure that we continued to meet market demand," GM spokesman Chris Lee said in a telephone interview." Translated into English, this means that GM has flooded dealer floors with so many of the spontaneously combusting cars that it has managed to bring demand to zero.

But not before it took benefit for "selling" them over the past several months, in the process completely fooling the market and the adminstration sycophants into believing that the SAAR for US auto sales has risen to a whopping 15.1 million in February compared to 13.3 million year ago, and 14 million expected, when in reality all that has happened is that excess inventory has flooded the market and now sales, which can no longer be masaged via channel stuffing, are about to drop off a cliff. And adding insult to injury, the halt also means that thousands of GM workers will now be "temporarily" fired. One wonders how many millions of workers will be laid off when the SAAR decline to its fair value, somewhere about 2-3 million lower?

More from The Hill:

General Motors has temporarily suspended production of its Volt electric car, the company announced Friday.

 

GM, which is based in Detroit, announced to employees at one of its facilities that it was halting production of the beleaguered electric car for five weeks and temporarily laying off 1,300 employees.

 

Chevy has argued the debate about the Volt has become too political.

 

"We did not develop the Chevy Volt to be a political punching bag," General Motors CEO Daniel Akerson testified before Congress in the same January hearing. "We engineered the Volt to be a technological wonder."

 

Chevy has sought to give a boost to the public image of the Volt, releasing a commercial in January tying the Volt to the effort to reduce dependence on foreign oil.

 

"This isn’t just the car we wanted to build,” a narrator says in the commercial over footage of Volts being manufactured in Hamtramck, Mich. “This is the car America had to build.”

So GM was actually lying about its true sell through rate? That should not come as a surprise to ZH readers. But at least it is good to know that neither they, nor the government, could possibly lie about the safety of the car which has ostensibly been known to blow up in a puff of flames for no reason. Because luckily the government would never lie about something like that: after all, it only engages in "modest fibs."

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Yen Cross's picture

The Pinto, 2012 Edition. /sarc F    The 15m( figure), was all those FEMA Hummers via " fleet sales" , courtesy of the "Bureau of Land Management"!

nope-1004's picture

In response to the channel stuffing post on Thursday, Max Fischer (Clitoris Monday) said:

You guys have no idea what you're talking about.  That "channel stuffing" chart is totally irrelevant.  The sales figures the GM reported today are sales to customers, NOT GM sales to dealers, or GM "stuffing" dealers with inventory.  The reason for the increase in inventory is due to huge expectations for Spring sales.  

Max Fischer, Civis Mundi

 To which californiagirl replied:

Obviously you do not either.  Look at footnote 1 of the audited financial statements in their most recent 10K

Revenue Recognition

Automotive

"Automotive sales and revenue are primarily composed of revenue generated from the sale of vehicles. Vehicle sales are recorded when title and risks and rewards of ownership have passed, which is generally when a vehicle is released to the carrier responsible for transporting it to a dealer and when collectability is reasonably assured."

 

LMFAO!!!!!  Do the trolls really believe thier idiocy?  LOL.

Yen Cross's picture

 May I redirect you to Manheim.com Which I am a proud member of. Look at the used car sales stats. The market is saturated.

AbruptlyKawaii's picture

but but but Obarry said......

HE SAID HE SAVED THE CAR INDUSTRY BY HIMSELF, HE SAID THE ECONOMY IS BACK, HE SAID .........that gm added a 3rd shift.....and those 1300 laid off OBARRY SAVED THEIR JAWBZ .....he renegotiated their CONtracts too so now they get less bennies while they scramble ....especially if theyre not legacy .......tell me again what is the difference between willard and obarry? other than the obvious: both their religions start with an A for asshole!

nmewn's picture

"A few weeks later, Obama visited General Motor’s Detroit Hamtramck Facility where the Volt is built. He even got a chance to sit behind the wheel of a pre-production Volt and drive it 10 feet — but due to security concerns, didn’t get much further.

“The Secret Service wouldn’t let me drive it. But I liked sitting in it,” The President told the assembled audience. “It was nice. I’ll bet it drives real good.”

lol...they were afraid it would blow up.

http://newyork.cbslocal.com/2012/03/01/obama-ill-buy-a-chevy-volt-after-my-presidency-ends/

 

Manthong's picture

Yeah, well it pays big time to be an Obama Corpse, er, I mean Corps, channel stuffer.

What are we up to now, like over $13,000.00 in bonuses per union schlub in the past year or so?

                    Not to mention overpay for line work, generous health care and fully funded pensions.              

                    Civil wars have started for a lot less.

http://www.suntimes.com/business/7723000-420/gm-workers-to-get-5000-signing-bonus-in-deal.html

http://times247.com/articles/gm-bails-on-taxpayers-in-favor-of-big-worker-bonuses

trav7777's picture

At least Pintos were cheap

Yen Cross's picture

Cheap Barbeques for Tail Gate Parties.

A Nanny Moose's picture

Does that include the price of the semi at 70mph to get the conflagration started?

At least the Pinto required an external catalyst to catch on fire....most of the time. I once watched a light blue '74 wagon with simulated wood paneling and matching window dressings, spontaneously combust in my driveway. I think it was an act of self immolation.

Hulk's picture

My Dad's Woody caught fire a year before I was born...

AbruptlyKawaii's picture

is that bad or good i so confuzed....:/

Hulk's picture

Fortunately, it was a Ford Woody and not a woody woody...

LasVegasDave's picture

Build an electric car that can go 0-60 in four seconds,  can cruise 300 miles on a full tank, and can accelerate from 80-120 in a pinch and Ill buy it.

till then, I dont give a rats ass how much gasoline costs, no one's taking away my god given right of driving the open roads of the mountain west.

Bay Area Guy's picture

I would add to that the need to refill the "tank" (battery for those of you who don't get the analogy) in a rapid amount of time.  Pretty hard to drive an electric car from San Francisco to, say, Las Vegas in a day if you have to take three or four hours to "fill the tank".

FeralSerf's picture

Why not just an LENR power car that needs to be "filled up" every few years or so?

They're still on the drawing boards.

Max Fischer's picture

 

 

Concerning the Chevy Volt, Obama was very critical of it and voiced a lot of concern about its viability - much to the chagrin of GM.  Of course, no one here would know that because you redneck Luddites only listen to right-wing propaganda.

Obama:

While the Volt holds promise, it is currently projected to be much more expensive than its gasoline-fueled peers and will likely need substantial reductions in manufacturing cost in order to become commercially viable......

 http://www.whitehouse.gov/assets/documents/GM_Viability_Assessment.pdf

 Max Fischer, Civis Mundi

 

 

NumberNone's picture

If only he would have been so prescient with Solyndra. 

http://abcnews.go.com/Blotter/obama-solyndra-hindsight-2020/story?id=14656360

What a bunch of shite you are spreading.

malek's picture

Look, the troll still believes he knows what he's talking about!

Max Fischer's picture

 

 

It's truly hilarious how I can give you redneck Luddites the TRUTH, but if it doesn't taste like the doomer Kool Aid you get from Tyler, you're not interested.

You guys are thoroughly DRUNK on doomer propaganda. Hopeless lemmings, running to wherever Tyler points.   

Max Fischer, Civis Mundi

 

malek's picture

Hahaha, complete miss - try again, stupid!

So when are you taking over a GM dealership?
Put your money where your mouth is!

earnyermoney's picture

He may have had his doubts but he's all in now given his current statement this past week.

earnyermoney's picture

"... reduction in manufacturing cost..."

 

LOL. Those UAW suckers in Hamtramck will have their jobs outsourced to Foxconn.

withnmeans's picture

WOW, I just love the (Clitoris Monday) !!! Now that is good humor, I needed a laugh after all of this bad news we read everyday. Too bad Max Fischer doesn't grasp reality, one day maybe, one day soon.

Max Fischer's picture

 

 

I'll repeat again:  You guys have ABSOLUTELY NO CLUE what you're talking about.  NONE.  "Channel stuffing" has NOTHING to do with those sales figures released Thursday, and the 10K posted by CaliforniaGirl has NOTHING to do with it, either.  If you'll notice, my reply to CaliforniaGirl was omitted.  "Channel stuffing" has NOTHING to do with monthly sales figures.

Here's my response (from yesterday) to the footnote of GM's 10K. I'm 100% accurate, which is probably the reason it was conveniently omitted: 

------------------------

Revenue recognition is something entirely different.  

That has NOTHING to do with the industry-agreed upon sales figures which are released on the 1st of each month. 

The numbers released to the press on the 1st of each month are sales to end-customers.  This is a universal agreement among EVERY manufacturer - they only post deliveries to actual customers for the sake of fair comparisons.  If some manufacturers posted deliveries to end-customers while others posted the number of cars loaded onto transport trucks while others posted cars rolled off the assembly line, there would never be a fair comparison. So all manufactures agreed to post "deliveries to end-customers" on the 1st of each month.     

What GM does with their books and how the recognize revenue is an entirely different story. 

For proof of this, just read their press release from last month:

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

It clearly says, "General Motors dealers in the United States reported 178,896 total sales in January...."

It does NOT say, General Motors delivered 178,896 cars to dealers.....

It does NOT say, General Motor's dealers purchased 178,896 cars from GM factories....

It clearly states that these were cars sold to customers by dealers.  

Furthermore, in the footnotes of monthly sales, it will always give the number of "selling days" which excludes Sundays and sometimes will include an extra day like February 29th of this year.  This, again, proves that we are talking about dealership sales.  Those transport trucks and factories run 365 days a year, except when some are shut down like the Volt factory for 5 weeks in the coming days.*

Max Fischer, Civis Mundi

*You should h/t me, Tyler. I love how you use the information I give you just to write an article to GET UNDER MY NERVES with something YOU KNOW is misleading. 

nope-1004's picture

So sales are solid Max?  Then why is production being halted?  Why are 1300 family-supporting workers off the payroll?

It would appear that the GM production dept is at odds with the HR dept.  Max to the rescue!  LOL.

And if you believe that GM fluff piece, then I am willing to bet that you also believe JPM has tons of physical silver.

 

Max Fischer's picture

 

 

Sales of the Volt are UTTERLY INSIGNIFICANT. 

They only sell a few thousand A YEAR in the entire United States.  Total GM sales are over 2 MILLION.

This "channel stuffing" theme is ENTIRELY DISHONEST.  

I've really go to hand it to Tyler.  He's got his lemmings totally wrapped around his finger.  They believe ANYTHING.  When it comes to wing-nuts, Kool Aid trumps truth all day.

Max Fischer, Civis Mundi 

Mentaliusanything's picture

Even the release was not "Honest" - How long have do 1300 people have to wait before they earn again ?

 

 

 

General Motors has temporarily suspended production of its Volt electric car.

 

5 weeks minimum. With most living week to week, paycheck to paycheck that may as well be permanent.

 

Lies lies and damn statistics - New GM is the same as the old GM ... Give Money

AbruptlyKawaii's picture

dude maxipad ur bleeding shut the fuck up STFU! with ur latin cum with python or fuk off cl[]MSeaaych3

Umh's picture

"Sales of the Volt are UTTERLY INSIGNIFICANT."

We know that so why is anyone wasting time on this heavily subsidized unwanted vehicle.

Tyler Durden's picture

Are you truly an idiot or just a troll trying to get a raise?

GM's "Channel Stuffing" Goes Mainstream

"General Motors Co. stocked Jim Ellis Chevrolet in Atlanta with plenty of Silverado full-size pickups in early 2011, part of a wager on a strong economic recovery. The strategy is backfiring. “We thought that this year would bring back the kind of economic activity that would translate into us selling more trucks,” Mark Frost, the dealership’s general manager, said in a phone interview. “It’s not happening.” Supply of Silverado has ballooned to 6 1/2 months worth at the dealership, a figure Frost, 52, calls “a little scary.” The Detroit-based automaker, 33 percent owned by the U.S. after its 2009 bankruptcy, has 280,000 Silverado and GMC Sierra pickups on dealers’ lots around the country. If sales continue at June’s rate, that would be enough to last until November." Thus begins a story just published by Business Week covering a topic that Zero Hedge has been pounding the table on since last December, and which just hit an all time record for fresh start Government Motors a few days ago - namely the firm's propensity to dump as much inventory as possible on dealer floors. Granted, many have been quick to mock, ridicule and ignore our glaringly obvious findings (especially since these come at a time when the light vehicle sales SAAR is back to a 10 month low, and likely to plunge once the long overdue inventory liquidation finally takes place), although now that the topic of General Motors' "strategy" of overfilling dealer inventory is front page news, it finally may get the overdue respect it deserves, especially since as Jefferies' Peter Nesvold cautions, this is nothing more than new GM reverting to the habits of the old one (the one that filed and needed taxpayer bailouts for a few hundred thousand union workers).

So because we have pretty much said all there is to say on the topic, here is Business Week's far more "credible" perspective on precisely the same issue:

After GM’s truck inventory swelled to 122 days worth of average sales, the company said 100 to 110 will be normal going forward for such a large and complex line of vehicles, compared with 60 to 70 days for most models. Peter Nesvold, a Jefferies & Co. analyst, isn’t convinced. Ford Motor Co., which makes similar trucks, is running at 79 days, and Nesvold says GM averaged 78 days on hand at year end from 2002 to 2010.

It’s unbelievable that after this huge taxpayer bailout and the bankruptcy that we’re right back to where we were,” Nesvold, who has a “hold” rating on the stock, said in a telephone interview. “There’s no credibility.” In a research note he asked: “Is GM falling into old, bad habits?”

GM's response:

“Unequivocally no,” Don Johnson, vice president of U.S. sales, said in a July 3 interview in response to the question. “We’re managing the business to match production with demand in the marketplace. Nothing in the last few months that we have done would indicate any different.”

Two plants in Michigan and Indiana are idle through July 15, and GM “may make some tweaks or additional adjustments if necessary,” Johnson said on a July 1 conference call. Truck output will slow in the second half of the year, he said.

The net effect of GM carrying higher truck supply is pulling ahead 2012 earnings into 2011, said Nesvold, who has a $36 price target on the stock.

“They feel a lot of pressure to put up some good numbers,” he said.

And because there is "pressure", Channel Stuffing is perfectly allowed, even though it sure raised a few eyebrows over at AOL some years ago:

“Truck sales are pretty subpar, and that’s really the only area that is getting my attention,” Paul Ballew, chief economist for Nationwide Mutual Insurance Co., said in a phone interview. “If you’re at GM or Ford, you’re certainly focused on that issue right now, and you should be.”

Full-size pickups are still the two top-selling vehicles in the U.S. Ford sold 264,079 F-Series in the year’s first half, a 9.9 percent increase, while customers bought 182,785 of GM’s Silverado, a gain of 9.6 percent.

The volumes are much lower than before the recession and the bankruptcies of GM and Chrysler Group LLC, the Auburn Hills, Michigan-based automaker, now controlled by Fiat SpA. In June 2005 alone, GM sold 109,359 Silverados when it offered employee discounts to all consumers. Ford followed suit and sold 126,905 F-Series pickups the next month.

GM’s target of 100 to 110 days supply of trucks at the end of this year and next year is higher than some competitors in part because Silverado and Sierra have fewer direct sales to fleet customers, Johnson said. Those orders spend almost no time in inventory, which can lower the days-supply figure.

But none of this matters: GM's response - it is transitory:

GM’s Johnson says he sees inventory of higher-mileage cars and lower-mileage trucks being “more in balance” by fourth quarter. The March 11 earthquake near Japan helped deplete industrywide inventory of high-mileage cars.

“General Motors has so many hot-selling vehicles that it’s kind of bipolar,” said Frost, who has been selling cars since 1987. “It’s a strange place in inventory overall.”


So much for transitory:

Oh, and wait, we forgot this:

GM gets back into the subprime loan business

That isn't as crazy as it sounds -- as long as the company stays disciplined and sticks to auto loans, rather than branching out into subprime mortgages again, analysts said Thursday. Indeed, some said the move is essential as GM prepares for an initial public offering that will cut the U.S. government's 61% stake in the company.

 

GM said Thursday that it agreed to buy subprime auto lender AmeriCredit Corp. for $3.5 billion in cash

 

The deal harks back to the previous decade, before the financial crisis, when GM owned GMAC, one of the largest lenders in the U.S. GMAC, now called Ally Financial, made auto loans that financed a lot of GM's car sales, but it also offered mortgages through its Residential Capital unit, which grew into a leading subprime mortgage player.

But yes, we will take your word that things are better, despite the facts and such. Now please crawl back into your parents' basement

tarsubil's picture

Just a little anecdote to compliment this story. Jim Ellis Chevrolet had a Camaro sit on their lot so long last year they sold it to a guy for below cost just to not lose any more money. I have to admit the car looked pretty sweet.

I have no idea how GM hasn't shit the bed yet.

Fedaykinx's picture

the mattress has a hole in it, obama's down there with a bedpan

rcintc's picture

Max.....Max....

You there?  

Any response to Tyler?

Oh yeah, that's right, I forgot the troll motto....Never let the facts get in the way of a good story.

jonjon831983's picture

Ally has been advertising high interest 2% savings accounts up in Canada for a long time.  Always have been skeptical since they're GMAC.

Fluffybunny's picture

But GM bailout was an shining light of Keynesian central planning working in practice. This cannot be happening...

Piranhanoia's picture

Except for the makers standard issue exploding gas tank made famous by the mustang,  the Pinto was a cheap, fuel efficient car that Cal Worthington sold the livin shit out of after he started customizing them into "tricky trucks". 

William113's picture

Oops, GM didn't really want this to get out today.

LONDON (Reuters) - Business secretary Vince Cable will meet General Motors Co bosses at the Geneva motor show later this week to urge the group not to axe its plant in Ellesmere Port, northwest England, according to a report in the Mail on Sunday.

The plant, which employs 2,100 staff and produces around 190,000 vehicles a year, has been under threat since GM revealed last month that its European Opel-Vauxhall unit lost 355 million pounds in 2011.

Cdad's picture

Okay, I think we can conclude that the Chevy Volt is not responsible for this chart:

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=A103600001&f=M

Hulk's picture

Absolutely stunning Cdad...

Cdad's picture

That chart of collapsing gasoline deliveries to retail outlets is, indeed, stunning.  We are literally in uncharted territory per gasoline demand destruction.  In fact, I have yet to hear a single alternative explanation for the last three months on this chart...NONE.  

That is because this one is purely economic, baby.  If you don't have a job, you do not need gasoline. 

trav7777's picture

welcome to everywhere else in the world where people walk.  now we will reap the rewards of our asinine suburbia lifestyle

NumberNone's picture

As with most things in the US, things didn't get here by accident. 

http://en.wikipedia.org/wiki/General_Motors_streetcar_conspiracy 

fajensen's picture

Here in Lund, we take the bicycle. One reason property prices have not collapsed here as they rightly should is that one either needs to live locally -or- spend more time commuting. Another reason is the danes leaving Copenhagan in droves for a much friendlier taxation regime.

Tijuana Donkey Show's picture

Thats why Americans have the huge stores of fat! Their becoming Chevy Volts, able to decrease our dependance on foriegn oil, but still able to cause a small grease fire while walking to Applebees...

 

Hulk's picture

Looks like we are back to women with big calves again...

smiler03's picture

The chart cdad has linked to was actually aired on ZH back on 10th Feb. You could have seen it here first! 

http://www.zerohedge.com/news/guest-post-why-gasoline-consumption-tanking

Yen Cross's picture

 Thanks Cdad. Excellent chart. Looks like demand destruction to me.

Cdad's picture

It gets better [I mean worse].  From the Ceridian Pulse of Commerce Index...which measures diesel fuel purchased by truckers.  From Feb 14, 2012:

 

"Pulse of Commerce Index Dropped 1.7 Percent in January;

Compared with January Last Year, the PCI® is Down 2.2 Percent

The Ceridian-UCLA Pulse of Commerce Index® (PCI®), issued today by the UCLA Anderson School of Management 

and Ceridian Corporation fell a surprising 1.7 percent in January.  That places the PCI 2.2 percent below year-ago 

levels with essentially no growth in the year-and-a-half since the summer of 2010."

 

http://www.ceridianindex.com/ <---turning down hard, and registering a print not seen since April, 2010

http://www.ceridianindex.com/userfiles/file/Index-Report-Jan-2012.pdf <-----good read on the coming recession...not far off at all.