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GM Finds Creative New Ways To "Stuff Channels", Get Backdoor Taxpayer Bailouts

Tyler Durden's picture




 

Zero Hedge readers know that we have long followed channel stuffing trends at GM, whose month-end dealer inventory hit a record (for the post-reorg company which is completely different from the pre-bankruptcy entity) of 713K cars stuck in various dealer "channels" at the end of March 2012, and since then has been stagnant at just about 700K, with the most recent June number coming at 701K, an increase of 6K over May. It would be great to assume that the company has given up on cheap ways to cheat investors and the taxpaying public into believing it is doing better. It would also be wrong. As it turns out, GM has merely turned to more backdoor methods of stuffing channels, and getting money from its biggest shareholders, which still happens to be Joe Sixpack (and "superpriority" labor unions of course) by way of the US Treasury, with 32% of the common stock.

The NLPC explains:

It looks like General Motors will be throwing everything in but the kitchen sink to help fluff its second quarter earnings numbers. Taxpayers continue to help with the cause as President Obama campaigns on the "success" of GM following the manipulated bankruptcy process that cost taxpayers $50 billion and another $45 billion of tax credits gifted to GM to help protect powerful UAW interests. We now learn that government purchases of GM vehicles rose a whopping 79% in June.

As a reminder, this is how GM's general channel stuffing looked like for all its vehicles:

However there is a rather important data subset here:

According to a Bloomberg report, "GM said inventory of its full-size pickups, which will be refreshed next year, climbed to 238,194 at the end of June, a 135 days supply, up from 116 days at the end of May." 135 days supply is huge, the accepted norm is a 60 day supply. The trick here is that GM records revenue when vehicles go into dealership inventories, not when actually sold to consumers.

This is how pickup truck channel stuffing looked in the period that the company has released the data, or since December 2011. Not pretty.

And while we all know by now that the tried and true mechanism to channel stuff is a staple when it comes to fooling the buyside as to its business efficacy, the fact that its biggest shareholder has become a key marginal client of GM should make one's head spin at the Ponziness of the transaction:

The government's increased spending on GM vehicle purchases presents yet another conflict of interest as Treasury refuses to sell taxpayers' stake in GM and Obama campaigns on the auto bailouts. It does not appear that any members of Congress (from either party) are questioning the increased spending. Also ignored was the Department of Energy's gifting of $2.7 million of taxpayer money to GM to reduce energy consumption in its door manufacturing process by 50%. The DOE seems to be one of the main conduits to funnel taxpayer funds to cronies of the Administration. The $2.7 million contribution to GM comes after additional millions of dollars were spent by the DOE on advisory fees paid to legal firms that helped smooth the way for the GM bankruptcy process (as reported here); another move that went unquestioned.

And there is more:

GM claimed that sales increases did not rely on incentive spending, which appeared to remain in check, but one analyst during GM's sales conference call questioned whether the company's "stair step" incentive spending was accurately depicted. This incentive spending kicks in after dealerships report final sales figures for the month and may be yet another deceptive way for GM to fudge its numbers. Not mentioned was GM card rewards programs that do not get counted as incentive spending.

Why is GM forced to succumb to such increasingly more deceptive practices? Why simple presidential election politics of course: when a failed company like GM is destined to symbolize the "success" of one's administration, there aren't many straws one can latch on to.

The upcoming earnings announcement by GM is, politically, the most important to date. The pressure is on Government Motors to appear financially strong as this may be the last earnings report before November elections and sets the stage for how "successful" GM is. One of GM's past tricks to help fudge earnings numbers has been to stuff truck inventory channels. Old habits die hard at GM. 

 

The article goes on to quote Kelley Blue Book's Alec Gutierrez who stated "They're (GM) likely going to have a relatively high days supply of trucks moving forward and they're already placing some pretty aggressive cash incentives on the hood. It's going to eat into their profit margins..."

 

GM's earnings announcement comes on August 2nd. The main headwinds will be weak European operations and growing pension liabilities. The headline number for earnings should be viewed skeptically and an eye kept on the share price reaction after the conference call. Expect Government Motors to put a positive spin on its financial health as the stakes are now at their highest. The long-term health of GM remains in question and the true financial picture may not surface until well after voters decide who will be running our country. Eventually we will see just how successful GM really is.

At the end of the day, all of this is noise. If China retaliates in kind to the recen escalation by Obama vis-a-vis alleged Chinese deceptive trade practices, the GM will soon be able to kiss half of its top line, and who knows how much of its margin and bottom line goodbye. Because when half of your sales go to the one country which America's non-existent (and unionized) manufacturing base loves to hate, the last thing you want is to bite the hand the pays the bills. Yet this is precisely what is going on as the politics of this country become so misguided that in the pursuit of a few extra votes, the administration is willing to sacrifice what little clout and momentum the recently bankrupted automaker may have generated.

In the meantime, looks for channel stuffing and direct government purchases to soar to unseen levels in the weeks and months heading into the presidential election as GM (and its 40% stock price drop since the IPO) will certainly be a key debate point between the Democrats and the GOP.

 

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Fri, 07/06/2012 - 12:57 | 2592380 fuu
fuu's picture

Paging Max Fischer, Max Fischer please pick up the white courtesy phone.

Fri, 07/06/2012 - 13:00 | 2592399 Jay Gould Esq.
Jay Gould Esq.'s picture

"Get Becky on the line. We have to set up another dog and pony show in Omaha. Make sure they supply the Cherry Coke. I don't do this stuff pro bono."

http://www.bloomberg.com/news/2012-07-06/berkshire-buys-gm-before-plunge...

Fri, 07/06/2012 - 13:03 | 2592410 dracos_ghost
dracos_ghost's picture

I guess it's going to be "corn-dog like" meat for the Omaha geek show.

Fri, 07/06/2012 - 13:17 | 2592452 idea_hamster
idea_hamster's picture

Well, now it's a securities class action.

Scott v. GM, 12-cv-05124, (SDNY June 29, 2012).

From the complaint:

In connection with the IPO, and in order to assuage concerns that GM was predicting revenue based on production rather than actual sales, GM falsely assured investors that it was actively managing its production by monitoring its dealer inventory levels. Additionally, GM assured investors that in 2011 it would improve inventory management, which would improve average transaction price.

These statements were false when made. In July 2011, reports began to surface that GM had engaged in an extraordinary inventory build-up. In particular, an article published by Bloomberg on July 5, 2011 revealed that GM may have been unloading excessive inventory on dealers, a practice known as "channel stuffing," in order to create the false impression that GM was recovering and sales and revenues were rising. The Bloomberg article stated that GM's truck inventory swelled to 122 days worth of average sales whereas, by comparison, GM's less profitable car inventory was limited to 60 to 70 days of average sales, Ford was maintaining only a 79 day inventory on comparable trucks, and GM's truck inventory during the years 2002-2010 had similarly averaged only 78 days of average sales. By November 2011, GM dealer inventories were 30% higher than they were on September 30, 2010 (the end of the last full quarter before the November 18,2010 IPO) and 62% higher than they were at the end of 2009.

Sat, 07/07/2012 - 01:12 | 2594224 Dr. Sandi
Dr. Sandi's picture

People stupid enough to buy GM stock should be in court fighting efforts to have them made wards of the state.

Instead, they're trying to get paid back for greedy stock buys that anybody with enough brain cells to open a bag of Cheetos knew were, and still are, a bad idea.

Fri, 07/06/2012 - 13:04 | 2592415 Temporalist
Temporalist's picture

"Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) acquired its largest stake in General Motors Co. (GM) before the automaker slumped 16 percent...

Berkshire accumulated about 8.47 million shares of GM through Feb. 3 at an average price of $24.35, according to National Association of Insurance Commissioners data compiled by Bloomberg. The automaker closed at $20.54 yesterday in New York."

 

Fri, 07/06/2012 - 13:06 | 2592425 ihedgemyhedges
ihedgemyhedges's picture

Every time I try to get creative in stuffing the channel, my wife says "What the hell are you doing back there???  STOP IT!!!"

Fri, 07/06/2012 - 13:16 | 2592448 veyron
veyron's picture

You need to try stuffing the backdoor more often

Fri, 07/06/2012 - 13:21 | 2592465 fuu
fuu's picture

Or not talking about her on the internet...

Fri, 07/06/2012 - 15:36 | 2593023 MachoMan
MachoMan's picture

pics or it didn't happen

Sat, 07/07/2012 - 01:13 | 2594226 Dr. Sandi
Dr. Sandi's picture

Thanks to Photoshop, it doesn't even have to happen to happen.

Fri, 07/06/2012 - 12:57 | 2592382 veyron
veyron's picture

GM is now selling on backpage

Fri, 07/06/2012 - 13:03 | 2592392 q99x2
q99x2's picture

What's wrong with the Government promoting one of its largest free enterprises? Or, what's right with that question?

BTW that new guy the FED hired is a lot slower than Brian Sack.

Fri, 07/06/2012 - 13:03 | 2592407 adr
adr's picture

But the media told me car sales were the best ever in June. They also claim sales are counted as vehicles actually sold to consumers. Why would the media lie?

I try to explain channell stuffing to people but they never seem to get it. They always say, "They can't count something as sold if it hasn't been sold." I tell them, yes they can.

I tell them, go look at the sticker on a car in the lot. Right on the top it says, Sold to dealer X. A Chevy dealer that wants 20 Sonics is forced to take 100 Silverado HDs if it wants the 20 Sonics.

Everyone of course does it, just to different degrees. Doesn't make it right.

Fri, 07/06/2012 - 13:19 | 2592460 azzhatter
azzhatter's picture

June is an important month to stuff for end of quarter results. 3rd quarter always sucks in automotive bus.

I saw a Silverado advertised yesterday with a $6K incentive, roughly 15% of sticker

Fri, 07/06/2012 - 13:04 | 2592412 n9lhm
n9lhm's picture

It would be interesting to see a comparison of other manufacturer's dealer's inventory levels vs. GM's.

Fri, 07/06/2012 - 13:30 | 2592493 AustriAnnie
AustriAnnie's picture

I'd love to see various manufacturers with not only inventory levels but also a ratio that shows, say, rate of flows into dealers over rate of flows from dealer to consumer.  If dealer info can be obtained, not sure how.

Would also like to see the changes in the # of dealerships for different manufacturers over the last 5 years.  The number of dealerships going out of business or declaring bankruptcy would show a clearer picture of car sales to consumers.  

Fri, 07/06/2012 - 13:04 | 2592414 bigdumbnugly
bigdumbnugly's picture

well there are channels out there that need stuffing.

i'm going down to the green energy rally tonight to see if i can do just that. 

Fri, 07/06/2012 - 13:06 | 2592427 TrainWreck1
TrainWreck1's picture

I would drive a Trabant before I would purchase another GM vehicle.

http://younxt.files.wordpress.com/2011/01/trabant-and-horse.jpg

Fri, 07/06/2012 - 13:13 | 2592441 i-dog
i-dog's picture

A one horsepower Trabi ... that's the sports model!

Fri, 07/06/2012 - 13:17 | 2592455 TrainWreck1
TrainWreck1's picture

When the TSA (Trabant Securitzenschmitzenschmatzen Apparatchik) tases the pony, it qualifies for the electric vehicle rebate.

Fri, 07/06/2012 - 13:16 | 2592450 Uncle Remus
Uncle Remus's picture

Until they have to eat the horse...

Fri, 07/06/2012 - 14:20 | 2592743 A Nanny Moose
A Nanny Moose's picture

In the former German Democratic Republic (do they even read these titles?), the horse eats you.

Fri, 07/06/2012 - 14:42 | 2592805 Uncle Remus
Uncle Remus's picture

Or tases you, bro.

Fri, 07/06/2012 - 13:10 | 2592433 hidingfromhelis
hidingfromhelis's picture

CliffsNotes version:  GM...Backdoor...Taxpayer.  Yup, my ass hurts too.

Fri, 07/06/2012 - 13:11 | 2592436 dirtbagger
dirtbagger's picture

ZH seems to post a GM channel stuffing article every quarter.  By now you would think GM would quit making cars for the next10 years and just sell the excess inventory.   Makes you wonder about the accuracy of these posts.

Fri, 07/06/2012 - 13:20 | 2592463 Boilermaker
Boilermaker's picture

It's really a problem with ZH on this topic.  It is massively exaggerated but it's good to get people 'fired up', I guess.

Frankly, there are so many good articles, I don't understand why they do it either.

All I need is a follow up article about the obesity problem and they can call it a day with the Amerikka haters.

Fri, 07/06/2012 - 13:50 | 2592624 Jeff Lebowski
Jeff Lebowski's picture

Yeah, well, you know, that's just, like, your opinion, man.

 

Fri, 07/06/2012 - 14:04 | 2592683 Boilermaker
Boilermaker's picture

It is?

Fri, 07/06/2012 - 14:54 | 2592844 Jeff Lebowski
Jeff Lebowski's picture

Shut the fuck up, Donny.

Fri, 07/06/2012 - 16:27 | 2593208 zanez
zanez's picture

Donny, youre out of your element!

Fri, 07/06/2012 - 13:57 | 2592640 Jeff Lebowski
Jeff Lebowski's picture

^

Fri, 07/06/2012 - 17:38 | 2593369 zanez
zanez's picture

ZH does tend to be a little all-or-nothing, I believe some of it is meant to be sarcasm. (middle of the road doesn't 'sell papers'.) From my understaning of the past 40+ years, U.S. automakers traditionally re-tool for the next model year in Jul/Aug, so as to have the sales lots full of new model year vehicles by Thanksgiving. Which is also time for 'end of model year closeout' sales. As people tend to want the newest model when getting a 'new' car, and require a deep discount to settle for 'last year's model', lots of inventory at the tail end of year's production run may be a problem for profits. But as I have only worked in automotive and manufacturing industries for 30 years, what do I know? 

Fri, 07/06/2012 - 18:59 | 2593545 Boilermaker
Boilermaker's picture

Don't even try it.  There are so many authorities on GM, dealer inventory levels, model changeover, SAAR rates, and all the other complexities of the auto industry that you'll be mobbed in no time.

Just look at the comments.  There are some really really bright people here.  It's not just hollow empty-minded hate mongering. 

Everyone in the entire industry is a UAW jackbooted thug and is somehow tied to the Corvair.

It's astonishing that people can be so f'ing stooopid.  Alas, they are.

Fri, 07/06/2012 - 13:22 | 2592469 Uncle Remus
Uncle Remus's picture

Oh, you must have missed the part about "command" economy and the transition of GM's UAW locals to public union status.

Fri, 07/06/2012 - 13:25 | 2592486 Boilermaker
Boilermaker's picture

What?

Oh for fuck sake.  Shut up.

Fri, 07/06/2012 - 13:34 | 2592526 AustriAnnie
AustriAnnie's picture

Yeah, shut up for fuck sake.  The funnelling of taxpayer money to GM and unions is overly exaggerated and shouldn't concern any of us even the slightest bit.  Just bend over and take it and stop complaining.

Fri, 07/06/2012 - 14:01 | 2592669 Boilermaker
Boilermaker's picture

So, you mix apples and oranges then tossed in a banana.  The old fruit salad approach to an arguement.

Fri, 07/06/2012 - 13:42 | 2592567 Tyler Durden
Fri, 07/06/2012 - 13:52 | 2592638 Uncle Remus
Uncle Remus's picture

Ah yes, Bloomberg gospel.

Fri, 07/06/2012 - 14:04 | 2592681 Boilermaker
Boilermaker's picture

Truck supply.  Yea, that's right.

It also goes on to say that truck production will be slowed in the second half of the year to ween off the inventories and that the (3) truck assemply plants are taking an extended shut-down until July 15th.

That's in perfect agreement with our order books (EDI planning figures) in then next months to those plants.

But, let's get back to the mob mentality.  Swarm, swarm, swarm...GM, GM, GM...Volt, Volt, Volt.

Fri, 07/06/2012 - 15:04 | 2592873 Jeff Lebowski
Jeff Lebowski's picture

This is great news.  Luckily, trucks grow out of the ground fully assembled, they just need to be to harvested.  There should be no ramifications or ripple effect to any of the suppliers who can simply idle their operations due to government backing.

Are you in the automotive supply business?  I am, and we see a shit storm coming...

Fri, 07/06/2012 - 15:06 | 2592893 Boilermaker
Boilermaker's picture

Say what? So, your premise is that automotive parts suppliers would specicially and solely supply parts to only the 3 truck producing GM facilities?

I don't know of ANY suppliers that exclusively supply to GM (or any other OEM) nor supply to one specific type of vehicle.

What....are....you...talking....about

Fri, 07/06/2012 - 13:12 | 2592439 Cdad
Cdad's picture

You do not burn your equity holders, and your bond holders, and then take tax payer money on top...without pissing off a great big chunck of the country.  This company is dead.  It just does not know it yet.  

I'll never buy a GM product again...and I know millions of Americans feel exactly as I do.

Fri, 07/06/2012 - 13:25 | 2592487 Uncle Remus
Uncle Remus's picture

+ 1Bernanke

Fri, 07/06/2012 - 14:03 | 2592676 The Grip
The Grip's picture

Ditto. Owned them and leased them for years, and defected in early 09.

 

Fri, 07/06/2012 - 14:19 | 2592738 New_Meat
New_Meat's picture

Cdad: it is UNAMERICAN to buy anything associated with GM. - Ned

Fri, 07/06/2012 - 15:38 | 2593043 MachoMan
MachoMan's picture

I, and the rest of folks, wouldn't buy them in the first place...  which is why they needed a bailout...  they're just  not competitive in the slightest with japanese/korean counterparts... 

Maybe if they discount their trucks by about 50-60% I'll take a look... 

Fri, 07/06/2012 - 13:16 | 2592444 TheCanadianAustrian
TheCanadianAustrian's picture

I don't own a vehicle. I rent them on weekends from an agency a few blocks away from where I live. It usually costs me $15 a day, plus gas, to rent on the weekend. That includes all day Friday AND Monday if I so choose. Just last weekend, I reserved an economy car for $12,99 a day plus tax and VLF for 4 days. They offered me a 2012 Corolla, but they said if I wanted, I could have a free upgrade. Any car on the lot. I went with a year-old Ford Flex, limited edition, full leather seats, bells, whistles and all. Got to be at least a $50k vehicle. It rides 7 people comfortably. 60 bucks for 4 days.

They rarely have vehicles more than 1 year old for rent. I asked the salesperson there how I was able to rent such clean, new cars for such a low price. She said they buy the vehicles brand new, rent them out until about 25K miles, and then sell them on the premium used market. They buy them bulk (100s or 1000s at a time) and actually get enough of a discount to sell the vehicles at a profit after renting them out for a year.

The way it is now, I could rent a brand new vehicle every single weekend, and it would still be cheaper than owning and being responsible for the upkeep of my own rustbucket.

Explain to me how this would happen in a normal, unmanipulated market.

Fri, 07/06/2012 - 13:16 | 2592449 Boilermaker
Boilermaker's picture

This is real sensational bullshit.

I work in the auto industry and have done so for about 16 years.  GM isn't 'stuffing' jack shit. 

Sorry, ZH, this is just red meat crap-ola for the ignorant Amerikkka clan.  The only thing it's missing is a photo of a Pontiac Aztec to get some moron all fired up about GM making 'junk'.

I don't know why ZH pollutes it's site with this stuff.

 

Fri, 07/06/2012 - 13:17 | 2592454 Uncle Remus
Uncle Remus's picture

Now that's funny.

Fri, 07/06/2012 - 13:24 | 2592478 Boilermaker
Boilermaker's picture

It's also true.

I'm living right here in beautiful Troy, Michigan and I'm a VP at an auto parts supplier.  GM is my second largest customer.

This article is complete and utter bullshit.  But, hey, I realize that EVERYONE knows the auto industry at an expert level.  For whatever reason, buying a vehicle makes people authorities on reliability, intial quality ratings, overall value, and evidently dealer inventroy levels.

I'm used to it.  When do the stories about the Chevy Vega or Ford Pinto start?

Fri, 07/06/2012 - 13:27 | 2592494 fuu
fuu's picture

Max?

Fri, 07/06/2012 - 13:29 | 2592503 Boilermaker
Boilermaker's picture

Fred?

Fri, 07/06/2012 - 13:41 | 2592565 Uncle Remus
Uncle Remus's picture

Clearly you have a macro view. /sarc

I have a good friend of mine who was in the auto parts business a couple of decades back. Got tired of the downsizing BS and left the business entirely. He saw the writing on the wall. Worked his ass off and got a whole new career.

Empirically, I see a lot of GM new car lots full of inventory. That doesn't make me an expert, but it does give cause to wonder why that is.

I haven't purchased new since around 1985 and that was an import. I currently own domestic, but it's not a GM product and it likely never will be. Nor is it likely to be a new vehicle. The prices for new domestic cars are beyond ludicrous.

Fri, 07/06/2012 - 14:00 | 2592664 Boilermaker
Boilermaker's picture

A buddy in the industry a couple of decades ago...wow.  I'm beat.

Fri, 07/06/2012 - 15:19 | 2592931 Uncle Remus
Uncle Remus's picture

The point of the paragraph about my friend is that a) the problems of the auto industry are not new and b) I sincerely hope you have a Plan B.

I used to be all-in in the construction industry up until the mid-80's, when I started my own company and expanded my business into IT. When AZ commercial construction collapsed in the late 80's I made a relatively painless transition into all IT. I am currently expanding into a new tangential field. I don't expect my current IT niche to collapse in terms of demand, but I do expect the ability of my clients to pay to be, how you say, attenuated.

I genuinely wish you luck.

Fri, 07/06/2012 - 13:42 | 2592571 wonderatitall
wonderatitall's picture

another bailout nazi....who'd a thought.....never  will and won't even look at a gm piece of shit...hope you choke on your obama bailout along with his banker buds ...we'll be coming for all of you

Fri, 07/06/2012 - 14:06 | 2592693 Boilermaker
Boilermaker's picture

Exactly the knid of empty, ignorant, moronic comments I've come to expect.  You managed to mix together nazi's, bankers, quality ratings, pieces of shit, and Obama into a 'channel stuffing' article.

GM! Get 'EM!

 

Fri, 07/06/2012 - 17:20 | 2593317 Temporalist
Temporalist's picture

I up voted you for resilience and courage to speak your mind.

Fri, 07/06/2012 - 13:50 | 2592585 AustriAnnie
AustriAnnie's picture

Michigan.

One of the few places you can drive for miles and see nothing but Detroit autos.   Drive a foreign made car in Michigan and people come at you right and left telling you how unpatriotic you are.  Then you find out they or half their family are in the union building cars, parts for cars, or trucking the cars and parts.  

Or GM is their "biggest customer".....

 

Fri, 07/06/2012 - 14:08 | 2592698 Boilermaker
Boilermaker's picture

Yea...wait...WTF are you even trying to say again?

Fri, 07/06/2012 - 14:39 | 2592797 AustriAnnie
AustriAnnie's picture

I didn't even need to say it.  You already did:

"I'm living right here in beautiful Troy, Michigan and I'm a VP at an auto parts supplier.  GM is my second largest customer."

Fri, 07/06/2012 - 15:08 | 2592902 gina distrusts gov
gina distrusts gov's picture

Michigan.

One of the few places you can drive for miles and see nothing but Closed factories boarded up towns and destitute people

Fri, 07/06/2012 - 15:49 | 2593086 deez nutz
deez nutz's picture

Michigan.  One of the few places you can drive for miles and see nothing but Closed factories boarded up towns and destitute people

Pray the UAW doesn't come to a town near you!!

 

Sat, 07/07/2012 - 01:22 | 2594232 Dr. Sandi
Dr. Sandi's picture

Get out of the stinking southeast and visit the Real Michigan. This is the time of the year to get out of the stinking hell of the Detroit shithole anyway. Visit a lake, tube down a river. Hit the sand dunes. Go for a walk in the woods. Watch some fireflies at night. Pretend to catch some fish. Do some water skiing. Pick some fruit. Visit a tourist trap or two.

Christ, there's a lot to see other than closed factories and boarded up towns. Just get away from Detroit, Flint, Lansing, Grand Rapids and see some real Michigan instead.

Fri, 07/06/2012 - 15:48 | 2593076 deez nutz
deez nutz's picture

GM is my second largest customer.

socialism is contagious, isn't it???

 

Fri, 07/06/2012 - 16:08 | 2593155 Hal n back
Hal n back's picture

I used to be at a supplier. GM for OE went to the lowest bidder on our part, so they went elsewhere. Trouble was, the part did not function so major engine work was required under warranty-then they bought our part for the repair and bought it not thru contract but in the aftermarket where prices were higher. And it worked fine but they still continued to buy the OE part elsewhere. Go figure.

 

GM-mark of excellence.

Fri, 07/06/2012 - 21:05 | 2593830 dirtbagger
dirtbagger's picture

Boilmaker - Why bother responding.  The "world is coming to an end" crowd is really not going to listen to a reasoned argument.   The channel stuffing reports have been going on for decades.  If the reports were even half-true GM would have gone belly-up long before 2008.

Fri, 07/06/2012 - 13:18 | 2592457 Commander Cody
Commander Cody's picture

I detect a little bias.

Fri, 07/06/2012 - 13:20 | 2592464 TrainWreck1
TrainWreck1's picture

UAW goons can't spell 'Aztek'

Fri, 07/06/2012 - 13:26 | 2592492 Boilermaker
Boilermaker's picture

Oh my god, the shame.  I'm ruined.  It would be even worse if I were even remotely associated with the UAW.  But, it was great hyperbole.  Ignorant as fuck...but, awesome.

Fri, 07/06/2012 - 13:24 | 2592479 azzhatter
azzhatter's picture

Maybe not, but I worked 35 years in the industry and 135 days of pickup trucks is pretty dangerous. There has always been channel stuffing by the mfg, GM was just not always the worst offender. They still suck, this company has always had the worst culture of any company in Detroit

Fri, 07/06/2012 - 13:29 | 2592501 Boilermaker
Boilermaker's picture

If GM only sold trucks, yea, that would be right.

The truck inventory is high.  The passenger cars are not.

Fri, 07/06/2012 - 13:44 | 2592581 bourbondave
bourbondave's picture

Wasn't trucks one of the few places GM actually made any money?

Fri, 07/06/2012 - 14:10 | 2592703 Boilermaker
Boilermaker's picture

Yea, 10 to 20 years ago.  But, why let that hold you up from a good rant?

Fri, 07/06/2012 - 14:31 | 2592778 bourbondave
bourbondave's picture

That wasn't really a rant.  You are very angry.

Fri, 07/06/2012 - 13:40 | 2592561 wonderatitall
wonderatitall's picture

you tell them you union jackboot fascist obamaite lover of hitler and stalin....they didnt stuff either..ask the jews

Fri, 07/06/2012 - 14:11 | 2592711 Boilermaker
Boilermaker's picture

We don't just try to achieve the minimum level of flair.  It's well documented.

Fri, 07/06/2012 - 14:24 | 2592754 CrashisOptimistic
CrashisOptimistic's picture

Rather a lot of daytime posts for a VP.

Fri, 07/06/2012 - 14:30 | 2592774 Boilermaker
Boilermaker's picture

I don't care if you don't believe me or not.

It's shut down week in Detroit.  But, hey, whatever.  You're obviously the expert.

Fri, 07/06/2012 - 13:45 | 2592590 sunnyside
sunnyside's picture

Boilermaker....are the numbers in the article bullshit?  If we weed throught the commentary, are the inventory numbers showing huge dealer increases over the past few years bullshit?  I'm certainly not calling you out here, just looking for other opinions or views about what is wrong or right with the premise of the article. Thanks.

Fri, 07/06/2012 - 14:15 | 2592725 Boilermaker
Boilermaker's picture

It's not 'wrong' it's just sensationalized like hell.

Yes, the truck inventories are too high.  Sales haven't been where they should have been.  But, yes, they are slowing production at the truck assembly plants in the 2nd half of the year and they are ideling production this month (they always shut down in July for tooling changeovers) longer than normal.

GM isn't going to just start melting the vehicles down or throwing into the ocean and stick it to the taxpayer.

It's one thing to report a balanced article such as Bloomberg did and JDPowers and AutoNews do.

But, this senseless 'chumming' of the waters for the ignorant masses to mob against is dissapointing.

Fri, 07/06/2012 - 13:16 | 2592451 Commander Cody
Commander Cody's picture

Next up: Cash for clunkers II.

Sat, 07/07/2012 - 01:23 | 2594234 Dr. Sandi
Dr. Sandi's picture

If they'll trade me even up on my 2002 U.S. Made Honda Odyssey, I'm in.

Fri, 07/06/2012 - 13:35 | 2592527 Liquid Courage
Liquid Courage's picture

Welcome to the B O N E Y A R D, bitchez!

http://www.michaeljohngrist.com/2009/10/airplane-boneyard-in-the-mojave-...

Don't laugh ... somehow ... some way ... you'll be getting stuck with the bill.

Fri, 07/06/2012 - 13:40 | 2592555 ptoemmes
ptoemmes's picture

The US Tax Payer is getting channel stuffed too - bent over and cheeks spread.

 

Oh for a WB7 graphic of a Chevy pickup being driven up someone's ass.

 

 

Fri, 07/06/2012 - 13:44 | 2592578 Uncle Remus
Uncle Remus's picture

Corvair

Fri, 07/06/2012 - 13:46 | 2592600 earnulf
earnulf's picture

I drive by the lots here in the midwest and see the cars packed onto the asphalt.    Not just on the "official dealer lot" but in the back lots a block or two away.    It's steadily getting worse and they are running out of space on the overflow lots.     I also sold cars back in the early 90's when a full lot was a cause for major newspaper runs for the weekend.    We get newspaper segments now that are nothing but ads for cars from dealers up to 60 miles away,  screaming about how they will give thousand more than the other guy for our old POS.

700K is not a big number.   A 135 day supply, however, is.    And since they are not announcing any "summer vacations" at the plants, it can only dwell or get bigger because the banks are not lending unless you have 725 plus credit.   Of course GM will always extend you credit to buy a 25K car that is worth 20K when you sign on the dotted line.    Finding the sheep who are still stupid enough to do that is becoming harder and harder.

Fri, 07/06/2012 - 14:15 | 2592677 Tippoo Sultan
Tippoo Sultan's picture

The solution to overflowing lots is quite simple, according to the Supreme Court: impose a tax, via your 1040, on all driving-age adults with an AGI of $25,000 or greater if said driving-age adult chooses not to buy a GM vehicle. Roberts' novel interpretation of "penalty" as "tax" essentially facilitated the state forcing of consumers into commerce; ergo, apply this principle of justice to purchasing a motor vehicle.

Problem solved.

Fri, 07/06/2012 - 14:05 | 2592690 Hal n back
Hal n back's picture

the 79% higher sales to the Govt. June 12 to June 11, or June 12 to May 12?

 

Also, a link here or there to show us where the info comes from would be helpful.

 

The comment that if the plants do not shut down or curtail this summer we wil see more channel stuffing investory may or may not make sense. Obviously depends on what is sold to end consumer, which is not a gimme.

 

However, Obama will keep the union vote as we do move closer to a socialsitic society. Hey, look what the guy did for us, neglecting the country is crapping out.

 

 

 

 

 

 

Fri, 07/06/2012 - 14:14 | 2592722 Hohum
Hohum's picture

Why so much emphasis on a rapidly depreciating asset bought with borrowed money?

Fri, 07/06/2012 - 14:23 | 2592749 Boilermaker
Boilermaker's picture

There's never a shortage of experts and authorities on anything that has to do with GM or the automobile industry. 

Here...let's just go for it.

I'm going to say it.....here it comes...ready???

VOLT

 

Fri, 07/06/2012 - 14:31 | 2592777 Apocalicious
Apocalicious's picture

There's never a shortage of experts and authorities on anything that has to do with Goldman or the banking industry.

Here...let's just go for it.

I'm going to say it.....here it comes...ready???

HEDGE FUNDS

Fri, 07/06/2012 - 14:42 | 2592803 Boilermaker
Boilermaker's picture

GS was bankrupted, equity zeroed, bond holders slammed, executives fired, and brand image slaughtered also?

I missed that part.

Fri, 07/06/2012 - 14:47 | 2592816 Apocalicious
Apocalicious's picture

Intentionally obtuse much? Lehman, Bear? Guilt by association? God's work? Abacus?

 

No, never mind. Certainly you have a monopoly on an insider's opinion of public misperception on a specific industry in general, and the largest, most politically connected firm widely considered representative of said industry as a whole.

 

Yes, back to it, then...

Fri, 07/06/2012 - 14:29 | 2592768 Apocalicious
Apocalicious's picture

Komrade, I disagree. Is great success. Strong trucks. I thank Mother Russia for my grey suit and bread, too. Spasiba, USSA.

Fri, 07/06/2012 - 14:30 | 2592771 Bagbalm
Bagbalm's picture

AustriAnnie - We had two Hondas. After having threatening notes left under our wipers and the windows all smashed out with a baseball bat that was left tossed inside we gave up on trying to own a foreign car in Oakland county. Safe yet? No...I had some 70+ year old chew me out in public at the grocery store check out for driving a "piece of shit Toyota pickup truck". I asked him please to look on the grill before he slashed my tires because it says GMC in big letters.

Fri, 07/06/2012 - 14:45 | 2592811 Boilermaker
Boilermaker's picture

Amazing that I've never seen any such thing not ever know anyone to have ever witnessed anything like that. In Oakland county too, huh?

What a lie.

Fri, 07/06/2012 - 14:53 | 2592839 Shibumi2
Shibumi2's picture

Boilermaker, what kind of parts does your company supply...injection molding?

 

I idled my auto parts plant last year because margins were too slim. I'm watching for a point to get back in but haven't seen a resurgence which suggests domestic suppliers can get back in the game at a PROFIT.

 

What advice, if any, do you have of the next few years.

Fri, 07/06/2012 - 15:18 | 2592940 Boilermaker
Boilermaker's picture

We make C class components. We are not doing injection molding.

Actually, our margins aren't that bad with the domestics.  They could be better, sure.  But, we are profitable and healthy financially.  GM margins are about the same as VW.  On the thin side, for sure.  But, not negative by any means.

The next few years actually scare the hell out of me.  I think the pop we are seeing now in the SAAR will lose steam late next year and then regress rapidly back down to 12M or so vehicles.  Right at the pain point for alot of suppliers and OEMs. 

Unlike the rest of these numb nutted morons here, I actually know the industry.  Short term, it's going to continue going 'OK'.  But, longer term, of course, it's a really risky situation.  The best recent news has been the market share increases by the B3.  If the pie is going to shrink, you'd best have the largest slice possible when it does.

Right now, we have little competition from overseas / China in our product due to technology limitations there.  But, I would suspect injection molding was probably hammered down pretty good.  Sorry to hear you had to shutter your plant.  There's way way too much of that going on in Detroit and elsewhere.

Fri, 07/06/2012 - 15:35 | 2593018 Shibumi2
Shibumi2's picture

Actually, our main areas are electronics and fuel system/suspension components. Hard hit by Chinese imports as well as volume declines. We started seeing pushbacks in early 2000's when auto suppliers were cramming tooling costs down the supply chain and such innovations as the "reverse internet auctions" and other such bullshit.

 

The writing was on the wall and margins were in the toilet. I started cutting back on capital investments and watched in amazement as our competitors went "all in" on investments to meet the latest 3% annual reductions on global pricing.

 

We had a smooth landing, if ending up with an idle plant can be described as such, but didn't flame out in BK as nearly all our competitors did. A lot of second guessing and sleepless nights...but that comes with the territory of being CEO.

 

Lately, two foreign companies have expressed interest in a JV which makes me wonder if they know something I don't. The landscape still looks bleak from my perspective.

 

Channel stuffing is nothing new. It's pretty fucking hard to manage the logistics/supply chain for so many suppliers...particularly now that GM has a politically motivated "partner". Only one who has been in the fight would understand how challenging it all is. You have to remember ZH is a financial blog primarily comprised of folks who don't live in the real world of manufacturing. It's a tough world, and frankly, I was proud to have been a part of it for almost 30 years.

Fri, 07/06/2012 - 16:19 | 2593184 Uncle Remus
Uncle Remus's picture

Listen to your margins. I did and it got me out of the OEM side of PCs long before margins effectively collapsed even with volume. I had the option of going pure consultancy and didn't look back.

signed,

numb nutted moron

Fri, 07/06/2012 - 16:26 | 2593205 Shibumi2
Shibumi2's picture

Margins are hard to ignore.

 

Is there actually a consulting industry? I always read that on resumes as UNEMPLOYED

Fri, 07/06/2012 - 16:49 | 2593255 Uncle Remus
Uncle Remus's picture

Heh heh. True that. I have a niche, a few years in the business and many long-term clients - all of which help a lot. I actually do just about everything IT except resell hardware or software and serious coding, but mainly design, install and administer networks for government and private clients with 10+ seats and most of it in rural fly-over country. I've been known to wield a soldering iron, pull some cable, throw some sparks and knock down a wall or two if need be.

Consultant just sums it all up rather neatly.

Fri, 07/06/2012 - 19:02 | 2593551 Boilermaker
Boilermaker's picture

Ignorant fuckwad really sums it up much better.

Sat, 07/07/2012 - 09:36 | 2594566 MeelionDollerBogus
MeelionDollerBogus's picture

To be honest I'd have shot their knee caps out if I caught them doing it. And smashed all their cars or shot them up.

Fri, 07/06/2012 - 14:32 | 2592783 Morrotzo
Morrotzo's picture

The U.S. treasury owns hundreds of millions of GM shares so when it is time for Uncle Sugar to buy some government vehicles they just buy 'em from Government Motors.

This swindling in turn makes GM's bottom line look good in time for the 3rd quarter and helps the President's election chances. Win-win-win situation, unless you are a bondholder or taxpayer who has been taking it up the ol' dirt road for years. Everybody wins except the citizen's colons! Bend over and get your channels stuffed with pickup trucks GM couldn't give away.

Crony socialism and channel stuffing abounding. "Democracy" is a hell of a racket if you get cut in on it.

Fri, 07/06/2012 - 14:53 | 2592842 Bawneee Fwank
Bawneee Fwank's picture

Some reporter needs to look into the fact that every federal, state, city and county government buys nothing but GM/Chevy and Dodge vehicles since the bailouts...My own local county always purchased Fords, figure Ford gave the best price.  Since the bailout though I have noticed all new purchases of vehicles has been what I previously stated.  This goes for every county and city I live near...all state/county/city vehicles are Chevrolet and Dodge...From the police to building department vehicles.  I doubt Ford gave up this market, so something is going on.

Fri, 07/06/2012 - 16:01 | 2593133 Hal n back
Hal n back's picture

and how many cars were sold to the rental agencies with an offer they could not refuse

 

Fri, 07/06/2012 - 16:46 | 2593246 shovelhead
shovelhead's picture

GM has a rosy future if they branch out to manufacture attack drones.

"Die the US way from a Chevrolet."

"Getting Silverado-ed" will be the call sign for wiping out Afghan weddings.

Sat, 07/07/2012 - 10:09 | 2594610 monad
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