By on February 4, 2009

Post Titanic Tuesday, GM is desperate to do something, anything to move its moribund metal. I speak here not of the pricing blowouts, finance deals and BOGO offers at the sharp end. I refer to the manipulation of dealer relations. Forcing dealers to stock vehicles that no one wants to buy. Back in the day, they used to call this practice “channel stuffing.” These days, they call it “pretending we’re a viable business to our Congressional overlords.” Automotive News [sub] reveals GM’s latest contribution to the genre: the more-than-slightly-ironically named “consensus program.”

The program has two parts. First, GM assigns dealers a sales objective through March 2. Second, GM “recommends” a “consensus number” to dealers—the number of vehicles for the dealer to order. Sweet, eh?

The bonus cash payout ranges up to $1,250 per vehicle depending on the percentage of consensus that the dealer orders and the percentage of the sales objective the dealer sells, dealers familiar with the program say.

At the high end, if a dealer takes 100 percent of the consensus and sells 100 percent of the sales objective, the dealer gets $1,250 per vehicle. At the low end, if a dealer takes less than 75 percent of the consensus and sells 60 percent to 99.9 percent, the bonus is $250 per vehicle.

So, if one dealer declines The General’s “request” to show the automaker’s inventory love during the time of war, that dealer suffers. A nearby competitor (i.e., a nearby GM dealer) who takes additional inventory earns more GM bonus cash. They can charge a lower price for the vehicles he or she doesn’t sell.

The trade calls this manufacturer-sponsored internecine conflict “two tier” pricing, or, to use a more technical term, “the same old shit.”

GM justifies their most recent dealer abuse as an effort to keep their inventory under control.

At the end of January, GM had 801,000 vehicles in inventory, down 103,000 units from January 2008. Cars make up 64 percent of current inventory and trucks the rest. . .

During a sales call today, GM sales chief Mark LaNeve said supply is about 105 days and GM would like to have “a little less inventory.”

“We’d like to run more at a 75- to 90-day rate,” said LaNeve. “We keep trying to get there. We are planning production schedules to get to the 75- to 90-day supply. It’s God’s work. We have to keep after it.”

As far as I know, GM marketing maven Mark LaNeve is not a Jesus freak. I’ve never heard him inject God or, God forbid, morality into a discussion of his work. However, if this is a true come to Jesus moment, rather than simple blasphemy, one wonders why God’s son would instruct the head of GM sales and marketing to bother himself with GM’s inventory levels. As Ken Elias has pointed out, LaNeve would be far better off seeking truth and reconciliation than filling GM dealer lots with unwanted product.

Yes, sixty days’ supply is the generally accepted industry ideal. But this is pre-meltdown math. New vehicle sales sank 37 percent across the board in January. They’re heading south from there. Bottom line: Chrysler and GM aren’t building much of anything—they’re just trying to clear out their existing inventories. The “days supply rate” for today’s car market is about as useful a metric as “rolls of toilet paper” at Graceland during Elvis’ terminal constipation days.

As one of the Apostles would have said (if he’d been Welsh), get your own house in order, boyo. If LaNeve still has a purpose in life, or at least within GM, sorting out the mess that is GM’s branding is it.

Obviously, LaNeve’s not calling the shots in terms of product (who needs product?) or brand culling (who needs eight brands?). Product is Car Czar Bob Lutz’ baliwick. Brand-i-cide is CEO Rick Wagoner’s responsibility. Good luck with that. Even so, LaNeve could, even with the current lineup, help GM at least start to find its way through the wilderness.

He could define GM’s brands.

GM’s marketing maven could/should make the case for whatever brands GM decides to keep. How about a series of ads: “This is what a BLANK is” (one USP per brand, please)? The current models don’t have to actually meet the criteria. Again, nobody’s buying cars. But a tightly-focused coherent example or eight of “the vision thing” would give Americans a reason to support GM. For Joe the Taxpayer, $40b+ of long-term debt is a meaningless abstraction. Cars they understand.

These are the times that try men’s souls. By thy deeds thy shall be known. The times are making it increasingly, inescapably clear that GM is a shell of a company led by lost souls. It’s a perfect time for someone with guts, character, passion and humility to step up and show what they’re made of. Unfortunately, men without these traits continue to pilot GM to its death.

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34 Comments on “Editorial: General Motors Death Watch 230: “God’s Work”...”


  • avatar
    OldandSlow

    Robert, GM sold around 129,227 here in the US in January.

    I beg to differ with Mark LaNeve. With 801,000 of unsold inventory, does this mean they are sitting on over 6 months/ 180 days of inventory?

  • avatar
    mikey

    @Oldandslow field stock is based on 10 day sales periods.Robert Farago is right on this one.The 60-90 day thing don’t mean squat in this market.

  • avatar
    KatiePuckrik

    “For GM dealers, this more-than-slightly-ironically named “consensus program” sucks. If one dealer declines The General’s “request” to show the automaker’s inventory love during the time of war, that dealer would have a price disadvantage. A nearby competitor (i.e. a nearby GM dealer) who takes additional inventory earns more GM bonus cash. They can then charge a lower price for the vehicles he or she doesn’t sell.”

    This is just diminishing returns for GM now. IF that paragraph above is GM’s ploy to return to profitability, then GM are next door to “knackered”.

    Scenario 1: A dealer would took enough stock to get more rebate cash, sells said vehicles. Fortunately for the dealer, they can eat for the next month. Unfortunately for GM, they’ve just sold a load of cars at marginal profit or worse, a loss. Result: This will do their bottom line no good.

    Scenario 2: The dealer doesn’t sell the vehicles, even with the rebate cash. Unfortunately for the dealer, they won’t eat this month. Even more unfortunately for GM, they’ve now got no money coming in and more stock coming out of their factories which needs a home (or driveway). Result: The same. Their bottom line look terrible.

    Scenario 3: If you’ve read this far, then, you must have an attention span better than mine.

    I used to be an agnostic, but the more and more I questioned religion, the more and more I found myself becoming a atheist. Why do I tell this story? Well, it’s the same with GM (and Detroit).

    In the beginning, I thought GM could turn it around and all this would be just a blip in GM’s storied history. Now, the more I read and hear about GM (channel stuffing, lack of customers, incompetent management, cash burn, unstable suppliers, poor company image, tapped out lines of credit, crippling debt, etc), the more I think GM are done for.

    As Jigsaw from the “Saw” film said:

    “Game over!”

  • avatar
    OldandSlow

    801,000 divided by 129,227 per month = a lot of field stock.

  • avatar
    jim

    BOGO ???

  • avatar
    mikey

    So GM is sort of twisting the dealers arms to accept vehicles they don’t want or need right?
    The article goes on to point out what?That GM is taking this route to convince Washington that they are indeed moving the metal.So Washington buys into this and keeps GM on life support a little longer.

    So tomorrow Rick and company read this DW and come to the conclusion,that this Farago guy might just have a point.Lets go to plan “B”chapter 11 it is!

    Now NOBODY is quite sure of the ramifications of
    chapter 11.Its been debated here endlessly,but the outcome is a crap shoot.As I understand it with chapter 11 GM can rip up franchise agreements
    and kill,Buick Hummer GMC Pontiac Saturn or whatever come to mind.I guess it would be safe to say, a lot of dealers will suffer a negative impact.

    Question that comes to my mind.Would the dealers be better off with chapter 11?Or maybe the dealers should suck it up and come up with thier own survival plan?Maybe cause a survival plan,is what the rest of us caught up in this mess,have to do eh?

  • avatar
    mcs

    I wonder if we’ll see Detroit versions of the Hyundai Assurance Plan soon.

  • avatar

    BOGO = Buy One Get One

  • avatar
    Gardiner Westbound

    Q. What is the difference between General Motors and the Titanic?

    A. The Titanic had an orchestra.

  • avatar
    magoo

    Oldest story in the car biz, people. To finance his buyout of the original FoMoCo stockholders, Henry Ford I ramped up production and forced all the Model Ts he could build into the dealer system. And in the midst of a postwar recession.

    Of course it’s a shaky practice but in the 1970s Chrysler developed overproduction into a statistical fine art and kept the company going. Today we call it “channel stuffing” and feign surprise. Do we think the transplants don’t do it? Bwahaha.

  • avatar
    KatiePuckrik

    Mr Farago,

    It’s normally known as “BOGOF” (Buy One Get One Free). It’s a pun on the UK expression “Bog off”, meaning “get lost”.

    Wait till I explain Cockney rhyming slang!

  • avatar
    Packard

    I’ve met LaNeve. He’s a classic car salesman, and I have absolutely no doubt he’s capable. But, he is not running the show at GM. He’s picking up the pieces.

    When GM adhered to a true divisional structure, the division general manager was primarily responsible for both sales and product planning, so the person making product planning decisions had good reason to know what the market demanded, or would demand. Not so at GM today.

    Mark LaNeve is expected to be the point man with dealers who have every reason to distrust GM, not only because of channel stuffing, but also because GM has changed the dealer’s cost to the dealer’s disadvantage and, ultimately, because it’s told a large number of those dealers (Pontiac, Saturn, Saab, Hummer) that the plan is to hang them out to dry.

    I assume he gets paid well for this job, but he can’t be having fun trying to clean up, day after day, the mess GM’s management keeps making.

  • avatar
    mikey

    Hey westbound,speaking of sinking ships check out the link on the ships for storage piece.It made my day.

  • avatar
    geeber

    Robert Farago: A nearby competitor (i.e. a nearby GM dealer) who takes additional inventory earns more GM bonus cash. They can charge a lower price for the vehicles he or she doesn’t sell.

    This seems like a backdoor attempt to weed out weaker dealers. The stronger dealer (i.e., the dealer that sells more vehicles) is getting more bonus cash from GM, which strengthens that dealer’s already existing advantage.

    Robert Farago: He could define GM’s brands.

    Why don’t you ask him to bring about peace in the Middle East; that would probably be easier.

  • avatar
    CarPerson

    Love the way the Transplants advertise in the paper: MSRP, minus factory rebate, minus dealer discount, equals Your Price.

    Hate the way Detroit advertises in the paper: MSRP, minus college grad rebate, minus military discount, minus, dealer bonus bucks, minus loyalty dollars, minus financing discount, minus Family Plan rebate, minus Lease Loyalty, minus Owner Loyalty, minus Financing that Fits, minus Drive Away Dollars, minus Bonus Cash, minus RCO/RCL Renewal, minus Open Bonus Cash, minus Retail Cash, minus quarterhorse assoc. discount, etc. etc. etc.

    Phantom discounts to a bottom line nobody will qualify for.

    This over-the-top in-your-face car dealer dishonesty is a real turnoff to buying a new car. It has to be despised by thinking people everywhere. Hated enough to drive them to the Saturn and Transplants dealerships to find something that will work for them.

    From a dealer’s point of view: “When a customer comes in and wants the car at that price, I point out with shock and amazement they are not in the military going to college driving a leased car from us financed by us leasing the car in the ad. I make the dumb-ass bastard feel ashamed for asking and the DF buys it at nearly full tag he is so embarrassed.”

    Yea, and the Transplants are now 54% of total auto sales and climbing every quarter due in no small part to BS like this.

  • avatar

    Will someone insert the fork?

  • avatar
    GS650G

    You could walk into a GM dealer with a dead cat to trade and they would make a deal.

  • avatar
    TEW

    Mikey that would solve one problem. CarPerson does have a point in that the domestic dealerships are turning into mattress salesmen. Some dealers around me it seems like if you are breathing then you get least an extra $1000 off MSRP.

  • avatar
    RetardedSparks

    KatiePuckrik: wouldn’t “Buy One Get One For Free” fit better? ;)

  • avatar
    lahru

    actually makes alot of sense for GM, they sell alot of vehicles to the dealers knowing that as each month passes more dealers will fall and the inventory will be the problem of the finance company that floored the vehicles. Under normal circumstances those vehicles would be spread out to remaining dealers by the finance company but things are going to change and remaining dealers will get all of their vehicles from GM only. The vehicles that are under control of the finance companies will have to go to auctions and be liquidated.

  • avatar
    Srynerson

    It’s God’s work. We have to keep after it.

    Does this mean I’m going to Hell if I don’t buy a GM product?

    Also, this seems to open up the possibility for all sorts of new promotional offers. A free Gideon Bible in the glove compartment of each new vehicle! Buy any new GM vehicle and receive an indulgence for the mortal sin of your choice!

  • avatar
    RetardedSparks

    Oh, so that’s what the “G” in GM stands for!

  • avatar
    no_slushbox

    “GM justifies their most recent dealer abuse as an effort to keep their inventory under control.”

    GM doesn’t have to justify its dealer abuse to me. I hope they can put down as many as possible. Better than buying them out on my dime.

    The problem is, now that GMAC is on the government’s tit the dealers are just going to cover their losses with “loans” and keep droning on as walking zombies just like GM.

  • avatar

    Katie –

    In the US, it’s “BOGO”. Buy One Get One. Used mostly in the mobile phone space, but has caught on in other walks of life over the last few years, especially as Cry-slur has attempted to prove viability using BOGO’s. HA

    That said, I can appreciate BOGOF in the UK. I will try to introduce it State-side immediately.

    I’ll begin in the lot of a Pontiac dealer.

    THEM “You can imagine how that G8 GT handles!”

    ME “BOG OFF!” (translation: “get lost”)

    Or at the Caddy dealer.

    THEM “We finally got the formula right. The CTS really holds its value.”

    ME “Ya, compared to a Hummer. BOG OFF!”

  • avatar
    Bunter1

    One of my co-workers got a call today from his local Poncho Pimp offering him a G8 GT for $25k out the door, tax and everything.

    I’m with Oldandslow on LaNeve’s numbers, he can project sales numbers that make that come out to 105 days inventory-but reality will probably be different.

    Just saying.

    edgett-unfortunately our duly-elected etc. are the ones who are holding the fork.
    They will probably , once again, choose a shovel-full of our money.

    Bunter

  • avatar
    Bunter1

    MgoBlue-The guy did decline the G8, effectively-”Bog Off!”.

    Bunter

  • avatar
    Paul Niedermeyer

    New photo caption:

    “Putney Swope says the Borman Six girl has got to have Soul”

  • avatar
    stevelovescars

    Of course, there’s a serious problem here: GMAC has been drastically cutting floor plan credit to a large number of dealers, effectively calling in loans and putting many of them out of business.

    No matter how much extra cash they throw at dealers to take cars it won’t help if they can’t get the credit to take them. It won’t help if the dealer needs to start spending more to rent storage space because their existing inventory if overflowing, and it won’t help if they don’t sell the cars to earn their bonus cash, which is the most likely scenario.

    It seems that the most likely scenario is that they will load up dealers with inventory, then GMAC will come in and call in the loans, and GM will be able to cull their dealer network without spending a dime to buy out franchises.

  • avatar
    Bridge2far

    “Love the way the Transplants advertise in the paper…”

    “Hate the way Detroit advertises in the paper: …”

    I didn’t realize that only the domestics advertise in such a manner. I must live in an unusual area as I can easily spot bogus ads in my local paper–by imports! Can you believe it?

  • avatar

    If GMAC is financing the floorplanning, how does this help GM? They’re just moving money from one pocket to the other.

  • avatar
    jerry weber

    All of this desperation as a dinousour in in it’s death throws, thrashing around wildly. Who will ever have faith in the general again? Not: dealers, customers, US Govt. And with all of this goes the real fly in the ointment, the value of their discounted cars down the road. Is GM’s extended powertrain warranty much like chrysler’s lifetime warranty,not as good as someone elses 3 year 36,000 mile warranty? Is GM’s promise of say cadillac’s cts resale value really going to be that good if I buy one at a fire sale price? Can the mood of the consumer really be any more wary of GM if it did declare chapter 11? Is there really any salvage plan for a slimmed down GM in anyones playbook? It seem to me the longer this goes on, the more chance that GM goes into the history books. Chrysler is already there and is like the dead cat on the pavement that everyone walks around.

  • avatar
    Robert.Walter

    I’m just waiting to see GM ape Hyundai’s “return it if you get unemployed after 2 payments plan”, this was original thinking …

    btw how about “Buy Unit Get One For Free”, or better yet, “Find Unit Can Keep Only For Friends”

  • avatar
    guma

    “God’s work” ??? For being a car salesman?

    LOL!

    Has dementia finally settled in?

  • avatar
    jerry weber

    Mr Schreiber, don’t you get it. If GM can get the cars on the dealers floor plans, they can say they actually sold the units. They now go back to uncle Sam and say, see there is a reason to keep us, people are buying our cars.


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