Global Car-Maker Channel Stuffing Conspiracy 'Theory' Now Conspiracy 'Fact'

Tyler Durden's picture

From HFT to LIBOR manipulation and European bond legal-covenants, and now Auto-manufacturer channel-stuffing; all conspiracy 'theories' proved conspiracy 'facts' - as Gabby Douglas might say "Nailed It!" We have been vociferously pointing out the incredible levels of channel-stuffing occurring at GM in the US, then China, and most recently into Europe (must read here) and now the WSJ confirms the latter; as sales of BMW and Mercedes, helped by heavy discounts and contingencies to dealers, are being questioned.  Kenn Sparks, a BMW spokesman, said its July sales total includes vehicles that were purchased by its dealers for use as what are known as "demos"— cars used on lots for test drives. He declined to say how many reported sales were demos, saying BMW doesn't release the figure. "These vehicles may stay on the lot because they are used as demo models," he said. BMW's incentives appeared to help propel the car maker to a 1,900-vehicle lead over Mercedes-Benz (as surprisingly 7-Series sales tripled MoM, and 3-Series doubled).


Via WSJ:

It sold 1,696 of its 7 Series sedans in July, the highest monthly total so far this year, and triple the June total of 539. For the 3 Series coupe, which had demo discounts totaling $3,200, sales climbed to 2,555 cars, up from 1,222 in June and that vehicle's highest total for the year.


Dealers said they believe a few thousand BMW vehicles were sold as demos. The auto maker reported it sold 21,297 vehicles in July compared with 19,312 for Mercedes.


Fortunately there's no way to track it...

BMW's Mr. Sparks said BMW doesn't break out sales of demonstration vehicles.


Mr. Sparks said demo models should be clearly marked and sold as used cars. But managers who own or oversee more than a dozen BMW dealerships said they routinely offer the vehicles as new and that BMW's U.S. sales unit approves of the practice.


But dealers feel forced...

Several managers at BMW dealerships said they had no customers lined up to buy or lease the demo cars, but reported them as sold to lock in the discounts. "If I don't take them, then I'll be at a disadvantage to my competitors," one dealer executive said.


and the GM debacle is not a new thing...

In the past, GM, Ford Motor Co. and Chrysler would lease thousands of cars a month to rental-car companies for very little. They counted those vehicles as sold. Then after a few months, the car companies took the rental cars back and passed them on to dealers that sold them as used cars.


One well known case of sales inflation occurred in 1998, when GM's Cadillac brand and Ford's Lincoln division racing to claim the top spot in luxury-car sales. Cadillac was trailing but its sales suddenly surged in December and it took the crown. Months later an embarrassed GM acknowledged that the Cadillac unit had purchased vehicles itself from its dealers, boosting the reported total.

Though this just seems like a ridiculous unreality game of catch-up...

Last year, BMW edged out Mercedes as the top-selling U.S. luxury car. At the end of November, Mercedes was ahead of BMW for the year. When it came time to report December sales totals, each company balked for 24 hours, hoping to force the other to go first.


Finally, Mercedes disclosed that it had sold 25,701 cars in December, and 245,192 for the year. Shortly thereafter, BMW said it had sold 26,834 cars in the month, enough to push its full-year total to 247,907 and claim the luxury-car sales crown.


Mr. Sparks said he is unaware of any discounts that were aimed at driving demo sales last December.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
TruthInSunshine's picture

I just sit back and laugh at what some claim is "crazy talk" or "ludicrous tin foil," whether first mention here or elsewhere, especially after that which was previously alleged to be "crazy" is subsequently validated.

They Just Can't Stop It The(Games People Play) - The Spinners, bitchez


metastar's picture

When does Conspiracy 'Theory' become fact?

When the MSM says so???

TruthInSunshine's picture

In this context, when the sheep that trust in the MSM finally are instructed by that same MSM as to any degree of reality.

For those who don't like The Spinners:


If you don't like either group above (inlcuding me), I'm not sure who else has covered Games People Play or done a song of the same title. 


C'mon, Fugazi or Social

Ahmeexnal's picture

All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.


TruthInSunshine's picture



"First they ignore you, then they laugh at you, then they fight you, then you win, bitchez."


--Mohandas Karamchand Gandhi

Pladizow's picture

The ladies love my channel stuffing!

Fluffybunny's picture

Auditors are crapping their pants over this though. Sheeeit, risk of material misstatements everywhere.

DCFusor's picture

In this case, channel stuffing is as old as the business, and anyone who knows jack knows that.

It also happens with a lot of other product, and has for a long time too.  How about looking at say, Cisco just before the .bust as just one other example?  There's nothing special about cars, any product that goes through disties has this go on.

Crap, this "tinfoil hat conspiricy revealed" crap is, well, crap.  This is total click-bait for the uninformed.

I've been reading articles in the various channels for gosh, probably since before Tyler ate solid food.

It's how the game is played...always, no news whatever here - sometimes it's worse than others, but it never goes away.

Anyone here ever hear about "floor planing" for retailers - another version of the same thing when misused, as it always is.


Jack Sheet's picture

Too right. There was a book published in the sixties called "The Money Game" by "Adam Smith". In a chapter entitled "But what do the numbers mean" there was the example of houses reported as sold and as earnings income when the buyer put up a 0.1% down payment.

buzzsaw99's picture

demos are often cars driven by salesmen for awhile.

fockewulf190's picture

Fahrvergnugend for the dealers driving around their parking lots, not so much for the punked shareholders. Sell 'em if you got 'em!

Cognitive Dissonance's picture

Monkey see (GM channel stuffing), monkey (BMW etc) do likewise.

""If I don't take them, then I'll be at a disadvantage to my competitors," one dealer executive said."

Can't stop dancing as long as everyone else remains on their feet. This is way better than the Cartoon Network.

Cranios's picture

Well what do you expect? GM is owned by labor unions and Obama the Great must be re-elected. Do you think Holder will allow GM to be prosecuted for this? NO WAY.

LoneStarHog's picture

Prosecuted in the Obozo/Holder Justice Department has been replaced with Prostituted.

LoneStarHog's picture

Today's Conspiracy Theory Is Tomorrow's News!

Raymond Reason's picture

I have long opined that NFL players were secretly conspiring during huddles, and it may yet prove to be so. 

john milton's picture

ten stars for ZHedgers

CheapBastard's picture

Dealerships here are packed (some might say, "stuffed") with cars, SUVs, pickups, and so on...some are building 3-story garages for all their inventory. Can you imagine the whopping cost of that inventory plus storage ?!


I'm a Cheap Bastard and won't buy another car for 10 years. I don't care what the neighbors say.

Bunga Bunga's picture

3-story garages for all their inventory .. you can call it shadow inventory.

the not so mighty maximiza's picture

You now know why the builders were optomistic. hahahahahahahahah

ParkAveFlasher's picture

Entire subdivisions of channel stuffing?  You nailed it. 

How long until they just prefab the houses and "sell" them into vast hangar-warehouses owned by affiliated but legally distinct distributor entities, thus presenting the illusion of sales.  Because if I move something to my left hand to my right hand, it "changes hands", right?

BTW - irony alert - local BMW offers from dealers all over my adspaces.  great deals but I don't go for the modern seperation between road and driver.  Give me a RWD and five speed getrag, no assists, and glass, oh baby, lots of glass. 

Mark Carney's picture

they have a solution for that


GM Financing to the rescue, lol

Brother Sebastian's picture

Mine last 20 or more years...what's wrong with  I prefer my bicycle.

11b40's picture

Yes, I'm cheap, too, and when I do buy another vehicle it will be like the ones I have bought for the past 25 or so years.....used with 24-48K miles on it.

You really must be unconcerned with saving money, or really dumb and impulsive to buy a brand new car.  Maybe there are some other reasons, but I can't think of any that would apply to most folks.

Buy used and drive them into the ground.  Almost any car sold new today is good for 200K+ miles with just basic maintenence....and I have driven 30-40,000 miles/year since 1976.  All since early '80's have been Cadillacs and Buicks.  Hardly any problems, but change oil every 3K.

Not only that, but my company pays me @ $.52/mi. for the use of my vehicle.  If I drive 3K for the month, I give myself an expense check for $1560..... for a vehicle that has been paid for for years, and that I bought used for less than $15K.  Not only that, but the insurance rate goes down every year, as do the property taxes....but the mileage write-off just keeps on ticking.  Simple math.  Buy car for $15K.  Drive 30K business miles & car has bascially paid for itself.  Drive car another 100K miles = $50K paid to yourself in tax free cash flow.

Yes, you have gas, oild repairs, insurance, etc....but they are nominal relative to the write-off after a vehicle is paid off. 

I believe that more people are coming to realize that they can drive cars for much longer than the ones made in the 70's and early 80's, and that this has a continuing and growing effect on new car sales.


ronaldawg's picture

Wrong advice for most people.

1.  You don't change the oil every 3K miles - it is more like 7.5K miles.  Jerry Brown is going to be coming after you.

2.  Buying a used car means you have bought other peoples problems?  How do you know the previous owners didn't just give up on a Lemon?  24K-48K mileage is when the Lemons are traded in.

3.  New car means zero maintenance other than oil.  You just take it to the shop and they fix it (without charge).  Used car means this money comes directly out of your pocket - unless the car is still under warranty which probably means it had previous problems.  Most comprehensive warranties end at 36K.

4.  I personally don't want a used car that someone else has pissed and shit in (why else would they have traded it in?)

5.  New car smell.

6.  I like to take responsibility for my own mistakes.  Buying a new car means the responsibility is on me to keep the car in top shape - I don't have to trust that the previous owner did the maintenance.

7.  I don't think the poster really understands the tax consequences of a used car.  I would argue that you would make more in depreciation.

I agree with the last paragraph - Cars in the 1960s and 1970s were made to be obsolute in five years. 

11b40's picture

Between lease give-backs, which are generally well maintained, and Car-Fax reports, you can find an abundance of excellent used cars.  This is espcecially true if you buy from the dealer, who has his own reputation on the line, and very often knows the car's history. 

Never had a lemon....except a 1974 Audi LS100.

My partner of 25 years used to trade every 50K and kept up with gas, oild, insurance, etc. to doe his expenses.

Then, he started leasing doing it the same way.  He finally saw the light and started doing it my way when he realized just how much cash flow could be added after the car ws paid for.  There are limits on depreciation, but not on mileage deductions.

But, to each his own.  For me, a car is not much of an emotional purchase....just another tool.

Jeff Lebowski's picture

I agree, but with consideration of current pricing of used.

I went to buy a used car last year and the price of an identical vehicle, out of warranty, for approx 10-15% off price for new.

I have previously bought 24-48k used cars for precisely the previous rationale of depreciated value, however, cars are being priced to not make this the logical choice. I bought new.

gruden's picture

Agreed.  Over 10 years ago when we had our 2nd child and we wanted something bigger to drive, I first looked at used mini-vans.  I soon found that all the used minivans out there were only 5-10% less than new ones.  I couldn't get the salesmen to budge - they were convinced they could get what they were asking for them.  It made no sense to buy a used car. 

The next car was a driving to work gas-efficient car.  The used cars I looked at were too close to new car price.  So I bought new.

A new car is a poor deal if you sell it at 50k miles or less.  If you plan to drive it into the ground then I think you get your money's worth these days.  For me it's worthwhile to have the car in the shop as little as possible, so I'm willing to spend a little more on the front end to get a reliable car and spend less on repairs later.  A new car is an even better deal if you can buy it outright or put a large percentage down.

My Days Are Getting Fewer's picture

11 Bravo,


this is very good advice.  And, for more than 20 years, I have practiced what you have preached.  I buy high quality used cars with less than 20,000 miles and still under full warranty.  I pony up another $2,500 to the dealer at closing to get an extended warranty from the manufacturer for maximum time and mileage.  Once "out of warranty", I run the rigs until the wheels are about to fall off.  Then, donate to charity and buy a replacement rig for cash.  The key to success with this program is rigorous maintenance and repair, until such time that the rig no longer "repair-worthy".  I once drove a MB diesel for 17 years - the mechanics and engine were still good when I gave her away.  But, the cosmetics and body was shot.

11b40's picture

Yep....that's the trick.  Luxury for less.

TruthInSunshine's picture

One of the things I'm very confident about, based on my life experience, is that truly wealthy people (those who aren't basking in the glory of expensive shit they don't need bought with debt they can't repay) tend to drive relatively modest vehicles, and regardless as to whether they purchased them new or used, they maintain them, yet drive and keep them for a long, long time.

After all, the purchase, maintenance and use of a motor vehicle are all high expense items, and they relate to a rapidly depreciating asset, which is not exactly the kind of 'investment' that makes truly wealthy people truly wealthy in the first place.

Genuinely wealthy people only buy and maintain vehicles when they need to, and don't buy the types of vehicles the debt-enlaved do as a means of projecting status.

DCFusor's picture

I did exactly that for a few decades - buy a car someone sold in a panic because they thought that at 60-100k miles it was going to start shitting parts on the road.  Nope, things got better (mine were also mostly buicks and olds).  Cash for clunkers, plus the realization that nope, cars last a long time, shut down the one honest used car dealer I ever worked with for that, though.  Man, that was the best deal ever - I'd put 30k more on them, then sell them back to the same guy, add a couple k, and get a few years newer luxo-barge (some of which were surprisingly fast and good handling).

Then something else happened.  I became old, cranky, and impatient.  So I bought a new car.

I love it.  I don't care that it might not have been the greatest deal monetarily.  I just know I don't have to worry with a bumper to bumper 8 yr, 100k warranty - and I might not drive that many more miles before they take away my license.  In my case, there's absolutely no point taking money to the grave...I'm on the other side of the "do as well as you can in life" trip - done it already.

I AM having fun yet.  There's a time for everything if you manage it well.


DoChenRollingBearing's picture

I would like to see if the Asian car makers (especially Toyota and Hyundai) are doing this as well, whether here in the USA, Asia or even Europe as well.

Cognitive Dissonance's picture

Everyone's doing the Hokey Pokey.

The Hokey Pokey

You put your right hand in,
You put your right hand out,
You put your right hand in,
And you shake it all about,

You do the hokey pokey
and you turn yourself around
That what it's all about.

Video instructions below.

DCFusor's picture

DoChen, they're all doing it and always have, along with non-car manufs.  It's the old trick - manuf gets paid more or less right off (usually there is some kind of financing game going on in parallel) and now the distributers have a real incentive to move the crap.  And it's not just the car guys, it's anyone who has a distributer in their chain.  See it all the time in computer an telecom gear too, it's nothing new, it's only more sometimes than at other times.  Standard "We've always done it this way" kind of stuff.  There are even whole magazines devoted to "chanels" of various sorts and they are always talking about it since I began to read - a number of decades ago.

Tyler and other GM-haters are just trying to grab clicks by pretending this is something new and mainly GM.  Assholes.  Yeah, it's bad - so why not reveal all the other instances of it, via real journalism and honest work?  Nah, that would take, well, journalism and hard work.

I guess it would occur to none of the super-brains here that if you have a factory that can turn out X units a month, but sales happen all at one time of kinda have to do something to match the output rate with the sales rate - either build a bigger factory (and lose all competitiveness) that fires everyone except for one month a year - or find a way to build at a constant efficient rate and somehow store the excess in the low sales months for times when sales are high.  No one here, evidently, has ever run a manufacturing outfit - I have, but not GM of course.

TruthInSunshine's picture

Phucking priceless!!!

In other words, and I'm being GENEROUS TO YOU here, a company should be able to produce Y number of widgets, whether there's organic demand for them at any given price, and if they start stacking up on retailer lots, they can offer increasingly higher discounts to sell said widgets, up to and including FIRE SALES (where said units are even sold at deep losses; i.e. at a price that is less than cost of production)!!!

And I quote (I say that for affect...):

"I guess it would occur to none of the super-brains here that if you have a factory that can turn out X units a month, but sales happen all at one time of kinda have to do something to match the output rate with the sales rate -"


How about producing the number of vehicles there is demand for, and not booking non-sale transactions that have yet to materialize as already materialized sales?

You have a future in comedy, stands-with-hurt-butt (fictional character name from Dances With Wolves).



Kidrobot's picture

So you think inventory sits at near 100% of production untill fire sales? 

There's a premium in every sale of the upcomming model to cover any short falls you might take liquidating the out going model, and still make a profit!

TruthInSunshine's picture

So auto manufacturers and dealers never lose money? Hmmm.


There's a premium in every sale of the upcomming model to cover any short falls you might take liquidating the out going model, and still make a profit!


You're talking about holdback cash and other incentives manufacturers dangle to dealers to move volume, I presume, but if you're implying these industry practices allow manufacturers or dealers to ensure profitability, you must not have been awake for the last several years (let alone decades).

DCFusor's picture

TIS, I usually like what you say, but evidently I touched one o ya buttons.  I'm right, I've been around and not just around mom and what I said is true - consider it comedy if you wish (and at your peril).  With unions (you know, the guys I fucked over shorting GM into bankruptcy for enough to buy a new car from them - no one else was holdlng long at that point) you can't just "Adjust" as you wish.  It's a major problem in a lot of businesses - semi fab being another.  A great org (GM ain't one, BTW) manages this better than otherwise, but it's the main ongoing challenge to match capacity with demand, and no one gets it right all the time.  You think cars depreciate quick?  Try semi-fab gear, or specialized mining or drilling stuff.


TruthInSunshine's picture

1st, my response to your prior comment on this subject in terms of tone was juvenile and inappropriate. For that, I apologize.

However, I do maintain that a) manufacturers are stacking vehicles high and deep on dealer lots (i.e. production is outpacing demand), and b) "channel stuffing" in the automotive industry is a different beast than trying to maintain production in other industries, as there would be, especially now, political repercussions of monumental proportions if the announcements of layoffs by U.S. automakers (cough**GM**Chrysler**cough) were made in this curious election year.

BC6's picture

+10 for Stands-With-Hurt-Butt, LOL

DoChenRollingBearing's picture

DCFusor, + 1

Very perceptive about virtually all manufacturers counting "sales" as soon as their distributors buy.  That is EXACTLY the way that the bearing manufacturers score their sales: to the OEMs (GM, Hyundai) and to the replacement parts market (us in Peru).  Your two remarks here shed a lot of light on this subject, I had not thought about all of this before...

TruthInSunshine's picture

DoChen, you're comparing apples and oranges, though.

OEMs play book games, too, but it's not a similar issue. OEMs typically will book component sales early or late, depending on how they want to dress up their revenue numbers for any particular quarter, and they'll even use rebates back to the buyer (issued after the point of sale is recognized) to delay downward adjustments to revenue.

Auto dealerships 'floorplan' their vehicle acquisitions from the manufacturer, so if there's heavy pressure from manufacturers for their franchise-dealers   to 'take' vehicles- and just assume manufacturers have more leverage than franchise-dealers (it's true)- the dealers are going to ultimately find 'creative' ways to book sales, in order to allow them to acquire more vehicles.

What is floor plan financing?

Floor plan financing is a revolving line of credit that allows the borrower to obtain financing for retail goods. These loans are made against a specific piece of collateral (i.e. an auto, RV, manufactured home, etc.). When each piece of collateral is sold by the dealer, the loan advance against that piece of collateral is repaid.


In short, Dealer Floor Plan financing allows dealers to borrow against retail inventory. The dealer then repays that debt as they sell their inventory and borrows against the line of credit to add new inventory.

DoChenRollingBearing's picture

+ 1  You picked a good name Truth!

I am learning stuff today, which is of course a good thing.

TruthInSunshine's picture

I learn new things every day, and I am wrong often, mahh brother.

TrainWreck1's picture

DCFailure, please regale us more tales of the people that come up to you oogling your Volt, (because you were too old for a boy-racer bitchin Camaro), and your manufacturing prowess, oh mighty non-bottleneck wizard.

DCFusor's picture

Another time TW.  I am in fact a retired CEO, and have started and run a couple sucessful businesses.

That's how I know what I said.

Interestingly, with the Camaro, it did pull in the chicks - gold diggers all, who liked to be seen with the car and stuff - who seriously wants their gold dug (and wasted)?  The Volt?  They want a ride.  I like that better.  The inside tech bling just seems to hypnotize them.

mrktwtch2's picture

the only channel i like to stuff is between my womans

Jack Sheet's picture

..and it's as wide as the English channel ?