By on December 2, 2010

Tyler Durden over at ZeroHedge reports on the untold story of GM’s increasing delivery numbers: they’re sitting on lots.

Hidden deep in today’s disappointing GM November sales release is a number that all GM longs may want to quickly forget, or else pay serious attention to. But first, earlier today, GM reported slightly disappointing sales numbers: the newly IPOed company sold 168,739 cars in November, a 11.4% increase to November 2009, which came in below expectations of a 13% rise. That’s mostly noise. What isn’t, however, is the linear rise in GM’s auto inventory safely stashed away at dealers, i.e., unsold….

It is obvious that beginning in July, GM has started an aggressive channel stuffing program whereby it offload tens of thousands of cars (over 110,000 since July) on dealer lots, hoping these will get sold somehow, at some price, all the while dealers enjoy taxpayer subsidized floorplan leases which allows them to hold nearly infinite inventory. If and when the liquidation event takes place who cares? After all the company is now public and has managed to massage it artificial sales numbers sufficiently to fool investors that there is actual end demand for its cars.

So what would have happened if in October GM had held its dealer inventory flat (not declining, just flat): well, the top line number would have been 21,000 cars less sold. Which also means that total sales would have been not 169k but 148k, and instead of a 11.4% increase, GM would have reported a drop of 2.4% in November sales YoY, which would have made the life of GM DMM GETCO that more unbearable as the High Frequency Trader would soon end up with 100% of the stock float at $33.

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23 Comments on “Is GM Back To Channel Stuffing?...”


  • avatar
    SVX pearlie

    How many days of inventory are we talking about? I understand GM inventories were getting very lean, below “optimal” levels.

    If GM is just building up for the inevitable seasonal December sales rush, that’s smart of them.

    • 0 avatar
      HoldenSSVSE

      Is it stuffing?  Is it bring inventory back to optimal levels?  GM can’t build Lambadas, CTS, SRX, the Equinox or Camaros fast enough.  Buicks are selling extremely well.  Regal production is slated to increase.  Sure Impalas sit around and Malibus don’t have the mojo they had at launch – but is this a “real” problem or some other dynamic.

    • 0 avatar
      view2share

      What on earth are they buying and why?  I had an extra minute or two at a drug store today to thumb through the latest Consumer Reports.  I was thinking of getting the first generation of CTS as a possible future car, as it is something kinda cool.  Alas, it has many problems.  In looking at most of the GM line of cars, it is far from spectacular.  I will just stay focused on Ford, or even take a chance with Dodge some day.  The GM reliability is not that great, nothing I see stands out, and no real values.  The Camaro is a good show car, but the tiny windows, and driving out of a coffin is a terrible thing.  Visibility is poor, even forward, with fat A pillars.
      I just don’t get it.  If people want for FWD and like this EPS steering, Hyundai, Honda and Ford pretty much have more to offer.

  • avatar
    parbuster

    Edward…….please explain this to me “all the while dealers enjoy taxpayer subsidized floorplan leases which allows them to hold nearly infinite inventory”  I don’t see how dealers floorplan’s are subsidized by taxpayers in any way shape or form.  Furthermore, are they “leases”.

  • avatar
    John Horner

    From http://www.steelmarketupdate.com/pub/blog/posts/2010/12/1/gm-posts-lower-auto-sales-for-november/
    “But Paul Benton, owner of Chevrolet-Cadillac of Goldsboro in North Carolina, thinks he would have sold 20 percent more new vehicles if he had had adequate inventory over the past several months. … Benton said a healthy inventory for his store is about 80 days. He expects to sell 300 to 350 new vehicles this year.”
    Now, from http://www.steelmarketupdate.com/pub/blog/posts/2010/12/1/gm-posts-lower-auto-sales-for-november/
    ” According to the GM website, month-end dealer inventory stood at 536,000 units which was up 21,000 units compared to October 2010 and 98,000 units higher than November 2009. Based on the November sales rate GM dealers have 3.177 months of inventory on their floors.”
    So, GM has about 94 days worth of inventory on average on dealer’s lots. That is above ideal, but hardly in OMG territory. The typical rule of thumb is 80-90 days.
     
     

    • 0 avatar
      aspade

      94 days worth of what?
       
      The Nox/Terrain have been so short this year they’ve sold at sticker which is unheard of for GM.  The Camaro doesn’t need money on the hood.  6 months worth of Traverses and Malibus not moving at 4K under invoice don’t average that out into OK.
       
       
       

    • 0 avatar
      MikeAR

      I thought that 60 was pretty much the standard industry wide. Above that you have too much below that spot shortages. So if 94 days is right then they are channel stuffing.

    • 0 avatar
      geeber

      The ideal inventory level for new vehicles has long been 60 days, not 80-90 days.

      I had heard that inventories were low throughout the year, so my first thought upon seeing this article was that GM was getting inventory levels back to what has been the norm. If they are at 80-90 days, then we are beginning to see some channel stuffing, although maybe GM expects sales to further improve in the coming months.

    • 0 avatar
      SVX pearlie

      Seasonally, November is usually a slower month, and then December jumps 15-20% over that.

      So 3+ months inventory at the November rate is less than 3 months after factoring the typical December jump.

      The fact that November 2010 is actually up from October signals that we may have bottomed, and that December 2010 could be very strong for those dealers who have cars on the lot. We could see a 25% jump in sales, meaning that inventories are just about spot on for a very strong December.

  • avatar
    tparkit

    Sounds like IPO-stuffing, yearend-bonus-stuffing, and November-election-stuffing.

  • avatar
    mtr2car1

    I could see this happening but not for the reason this guy’s pushing.  Obviously selling the product is an important component of their business cycle – but Revenue is booked as the car is manufactured NOT at the point of sale.

    That’s why in the past the domestics would be so hesitant to slow the lines – crank them out to book the revenue and worry about the expence of getting them sold on the back end – and we all saw how well that worked.

    The sceptic in me says they now have 94 days of supply b/c they cranked up the lines to goose the revenue line for Q3 reporting – which looked good prior to the IOP…things that make you go hmmm.

  • avatar
    gslippy

    It would be interesting to see how inventories are going at Ford, Chrysler, Toyota, Honda, and Hyundai.  That would tell you something.

  • avatar
    HerrKaLeun

    the problem causing these statistics tricks is that they are allowed to count sales that aren’t.
    to me a sale can be counted the moment a costumer signs the papers and hands over cash, starts his loan or other financing. Anything before that very moment (incl. the dealer kind of “buying” the car with money he borrows from the manufacturer’s finance arm or however floorplan financing works) isn’t a sale at all.
    Anyway, over long enough time all these stuffing tricks should cancel each other out. They only are important to manipulate short-term thinkers (like Wall Street guys….). Unless they come with new tricks.
     
    I’m under the impression GM (and many other car manufacturers) hired all those accountants when Anderson consulting went under.

  • avatar

    I have had cash buyers for Terrain and Lacrosse who now getting $1500 and zero percent plus 120 days deferred pyts when their orders came in. these vehicles are in short supply and selling anyway but GM is flat giving money away. they are back to distress merchandising. Ewanick is a joke and Reuss is no different than the last bunch. short the stock and buy Ford.

  • avatar
    Telegraph Road

    Chapter 6 of Darryl Huff’s classic “How to Lie with Statistics” discusses distorting bar charts by having them start at values greater than zero. ZeroHedge should read it.

    • 0 avatar
      gslippy

      Yes, but zero is not always a legitimate starting point, and neither are raw numbers.
       
      For this data, a more relevant value would be the number of days’ inventory tracked per month.  And as I mentioned above, the other major mfrs should be shown as well.  I can’t conclude much by just looking at GM.

  • avatar
    SkiD666

    FFS – this has been settled in the past when GM was producing no trucks – ‘Deliveries’ are ‘Sales’ to customers NOT dealers.

  • avatar
    Dave M.

    Lambadas

    Our dealer has a ton of all three versions. The Equinox and Terrain are in great short supply however.

  • avatar
    Steven02

    If December is a big sales month as everyone here is stating, is GM just getting dealers ready for the month?  We should revisit this in December.


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