By on July 6, 2011

It has been around the net since yesterday that “trucks are piling up on auto lots” and that this could spell “trouble for GM.”

Bloomberg reports that GM did bet on a strong recovery and built more trucks to fill the imaginary demand. “The strategy is backfiring.”

The National Legal and Policy Center has more sinister suspicions. It states that “it looks like General Motors is up to its old tricks as it stuffs inventory channels with higher profit trucks.” The center is accusing GM and the Obama administration of “fudging earnings.”

All this was caused by a research note written by H. Peter Nesvold of Jefferies, a securities and investment group that just bought Prudential Bache.

Instead of regurgitating news pre-eaten by everybody from Bloomberg to Barrons, we wanted to wait until we get our hands on the original research note itself. The biass crowd is a rabid bunch, and we did not want to get caught copying mistakes.

You won’t be able to google the research note, but one of my high net worth friends is on Nesvold’s email list. My friend graciously forwarded the original report to me.

What worries Nesvold is this:

“GM’s pickup inventory continues to build (it now stands at 122 days vs Ford at about 80 days).”

Nesvold pretty much suggests that GM should stop making trucks for the year, as it has plenty standing around on dealer’s lots:

“We remain cautious about GM’s ability to continue producing GMT900 pickups given that inventory moved up marginally to 122 days. As described in more detail below, GM on the call unexpectedly announced that it would maintain pick-up truck inventories in the 100-110 day range through year end. While management offered reasons, we still struggle to understand the rationale. GM expects seasonality and a stronger second half to help bring inventories down, and reiterated its intent to clear the inventory by adjusting production if necessary.”


And why the huge inventories? They count as sold. Nesvold comes pretty close to calling stock manipulation:

“Perhaps the most significant takeaway is the different pickup-truck inventory strategies being pursued by GM and F. Ford F-series inventories are around 79 days, while GM’s Silverado and Sierra inventories are about 122 days. Exhibit 1 shows the cumulative difference between GMT 900 pickup production and sales, which should over time roughly match. There was a clear build in front of the IPO, and now again in front of 2Q.”

What is so important about 2Q? The US Treasury is on record that they would not lighten-up on GM stock before second quarter earnings are reported. The earnings have to be high to drive the stock price up. Nesvold seems to indicate that the stock is being pumped before dumped by the Department of the Treasury.

The exhibit 2 that accompanies the report has graphic content. Don’t view on an empty stomach if you hold GM stock.


“GM’s inventory is some 40 days higher than what Ford, which has a similar product mix, is carrying as shown in Exhibit 2. On the call GM said it was looking to exit the year at 100-110 days, which is 20-30 days more inventory than the 78 days it averaged at yearend between 2002 and 2010. Management said that it structurally needs to carry more inventories going forward because it had consolidated six plants to three. We can understand around the edges why that should result in higher inventories, plus the fact that the days’ inventory looks high due to cyclically low-end sales. But we respectfully aren’t convinced that triple-digit inventories should be the new normal. Just factoring in seasonally high sales and seasonally lower production in 2H vs. 1H, inventories should be down 15+ days. That GM intends to continue producing at elevated levels remains confusing. The net impact to the financials is that the company is pulling forward 2012 earnings into 2011. It respectfully begs the question, is GM falling into old bad habits?”

Nesvold has a BUY rating on Ford and a HOLD rating on GM. In the world of analysts, a HOLD is usually understood as “sell before everybody else does.” Such as the 900 lbs gorilla in Washington, DC.

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122 Comments on “GM Goosing Stock By Overstocking Dealers With Trucks?...”


  • avatar
    tanooki2003

    Lol GM is up to their old tricks again. I’m not surprised.

    • 0 avatar
      Contrarian

      LOL, Lutz may be right. Can’t blame this on the unions. Meanwhile, the Volt has already been obsoleted by the plug-in Prius, according to CNN. I wonder how long it will be before the next taxpayer bailout?

      http://green.autoblog.com/2011/06/29/cnn-chevrolet-volt-tech-obsolete-toyota-prius-plug-in/

      • 0 avatar
        Steven02

        Wow, didn’t take long to trash the Volt in a story that had nothing to do with the Volt. Nice.

        But, CNN is wrong. The tech is pretty darn cool and still better than the Prius. Most of the time, people are driving less than 40 miles. That is where the Volt tech is better. When the price of the tech goes down, it will improve what the real problem is. It costs too much. But, then again so does a plugin Prius which takes a huge amount of time to pay of the difference in cost over the regular Prius.

        http://www.greencarreports.com/news/1057287_2012-toyota-prius-plug-in-by-the-numbers-would-it-work-for-you

        In short, the estimate from their real world numbers would save you $860 bucks over 100,000 miles. This for a $3500 to $5000 option.

        The plugin Prius is a me too car. No reason to buy this over a regular Prius if you are concerned about costs. If you are concerned more about how much gas it uses, well, get a Volt. If you don’t make long trips, get a Leaf.

    • 0 avatar
      Robbie

      GM just isn’t about the car… doing business as usual, just like before Barack bought it.

    • 0 avatar
      vento97

      >GM Goosing Stock By Overstocking Dealers With Trucks?…

      GM cooking their golden goose again, I see…

  • avatar
    tced2

    Let’s put on our tin-foil hats,
    Why don’t the District of Control folks just order some people to buy some trucks?
    Or wait a minute, pickup trucks are the “business jets” of the workers and we know what you think of business jets. Getting your fingers in all these pies gets complicated.

    • 0 avatar
      Educator(of teachers)Dan

      Yeah I don’t think there’s “colusion” with Washington on this one. If there was the government would just buy a crap load of trucks off GM and give them to the National Parks Service or something, but…

      I do think that GM might be trying to boost it’s own stock price just to try to get out from under the government. It’s amazing that the company was allowed to keep it’s old “dirty” accounting system of doing things like counting trucks sent to dealers as already “sold.”

      • 0 avatar
        Pch101

        It’s amazing that the company was allowed to keep it’s old “dirty” accounting system of doing things like counting trucks sent to dealers as already “sold.”

        That aspect of it isn’t “dirty accounting.” This is typical of the auto industry and, for that matter, just about every other wholesale business. The sale occurs when the dealer takes delivery of the inventory, and revenue is recognized at the point of sale. Revenue is not the same thing as cash.

        What is “dirty” about it is the channel stuffing aspect of it. A dealer finances his purchase of the inventory with credit extended to him by the manufacturer. As the inventory sits on the dealer’s lot and gathers dust, the manufacturer will have to pile on incentives in order to sell that inventory, in order to get repaid for the loan that it made to the dealer. So at the end of the day, today’s revenue becomes tomorrow’s loss, when some of those revenue dollars don’t get turned into cash.

        And this is, in a nutshell, why there were too many dealers before and there probably are still too many dealers now. In the case of auto production, automakers don’t just build cars but they also provide credit to their retailers. If the retailers can’t move the inventory but keep demanding more credit, then they become a burden, not a benefit.

      • 0 avatar
        th009

        It really depends on what this inventory is … if GM is pushing extra inventory on the dealers, and the dealers can send them back later, the revenues should not be recognized yet.

        But if the dealers have placed the orders, and can’t return the trucks, it’s legitimate to recognize the revenue (from an accounting perspective): GM the corporation sells to dealers, not to end customers.

        But in either case it does look like revenues (and profits) are being pulled forward …

      • 0 avatar
        psarhjinian

        Almost everybody counts product shipped to distributors and dealers as “sold”.

        I had a fascinating conversation to that effect about the BlackBerry Playbook with a distributor that started with “So, how are these things selling” and ended with “there’s about fifty thousand in the channel in Canada, sitting unsold” that RIM reports as sold product.

      • 0 avatar
        Pch101

        if GM is pushing extra inventory on the dealers, and the dealers can send them back later, the revenues should not be recognized yet.

        The dealers can’t send them back later. In the auto industry, incentives are used as a substitute for returns, which is why you have to watch the incentives numbers.

      • 0 avatar
        Educator(of teachers)Dan

        And I think that’s pretty stupid of any company counts things that way. I know that it was part of the way that old Al Sloan ran things but again, pretty dumb.

        Hey lets add a third shift at this plant cause we SHIPPED 5,000 units into our dealers this month! Who cares how much was actually sold!

        And I was refering to more than stuffing the distribution channel as being “dirty.” There was an excellent article here on TTAC around the time of the bailout discussing how government auditors had gone into GM to look at the books and couldn’t make heads or tails of things because of the special rules GM seemed to be using.

        GM, “Same $hit, new day.”

      • 0 avatar
        Pch101

        And I think that’s pretty stupid of any company counts things that way.

        It makes perfect sense if you understand the lexicon of accounting and finance, such as knowing the difference between revenue and cash. It would violate the rules for GM to report it any other way.

        It is perfectly reasonable for GM or any other company to account for revenue in this fashion. What isn’t reasonable is to consistently overbuild inventory today, only to be forced to fund deep discounts later that will net out to losses. It would have been better to have not built the excess inventory in the first place.

      • 0 avatar
        wsn

        Educator(of teachers)Dan: “And I think that’s pretty stupid of any company counts things that way.”

        It’s not stupid if it results in temporary profit to fund wage increases, and the eventual write off is paid by taxpayers.

        If you want to see something more intellegent, try this:

        Tie the UAW wage and CEO bonus to the past 8 quarter rolling profit (instead of just the last quarter).

  • avatar
    HoldenSSVSE

    I “get” the analysis but I’m still confused on why. GM China (real GM) is still growing at an astounding rate. They can’t build vehicles like the Cruze and Equinox fast enough, Buick’s rebirth (despite mistakes like the Regal) is on the right path. As TTAC noted as truck sales are up on their own merits.

    On their newer models, the “new” GM so to speak they have production problems on being able to build them fast enough. The evidence of channel stuffing on trucks is undeniable, but if other aspects of the business are doing well then why do it? Did $4 a gallon gas hurt truck sales that much? Hasn’t GM been saying they are hiring more workers and adding shifts?

    100 day inventory on trucks doesn’t make sense (and I’d even question 80). Why not just ramp production on the higher demand vehicles with tight inventories and count the profit.

    I know Ford fans are quick to mark out MPG as the reason for the downfall, but GM trucks are number two in MPG ahead of Dodge and Toyota – and the gap isn’t that huge. GMT900 is certainly dated as a platform, only the Titan has been around longer.

    I’m also confused on 2013/2014 product plans because I thought vehicles like the Tahoe/Avalanche/Yukon were dying – either due to slow sales (Avalanche) or being addressed by Lamada, why are they keeping those vehicles in the pipeline???

    A lot of questions

    • 0 avatar
      srogers

      I think that “profits” is the key word in your post. I imagine that GM (or Ford and Dodge) makes much more profit on a pickup than they do on a Cruze or Equinox. Easy money.

    • 0 avatar
      PintoFan

      It’s not easy to just shift from producing lots of trucks one day, to lots of cars the next. Any kind of production capacity transfer takes time, and if you guess it wrong then it will be very, very costly for you. Buicks and Chevrolets for Chinese consumption are very hot items right now, but what happens when a schizophrenic Chinese government declares tomorrow that everything sold in the country has to have a certain Chinese parts content, or be a hybrid, or something else? I may be running against popular opinion, but GM’s managers aren’t dumb; they know now that you have to plan for contingencies.

      • 0 avatar
        mike978

        I agree – you cannot change production on a dime. All companies place bets on where they think the market is going with production targets and product mixes.
        It is easy for us on this site to second guess management in all companies. Idiots are not running these companies and they make the best decisions they can – sometimes wrong, sometime right.

        I just recall predictions that some on here have made and got wrong (with no apology or humbleness later) – for example a) the new Jetta will never sell, b) the Camaro is a one season wonder, c) Detroit can`t make a good small car (Focus and Cruze prove that wrong) and d) the 2007/8 Focus revamp was terrible (when it led to great sales and I personally was wrong on that one)

  • avatar
    Mark MacInnis

    I called this out about 3 weeks ago to some of my friends….and this week on FOX I saw the add…0% financing and $5k cashback on GM trucks….

    Seems like the new owners are up to the same ol’ tricks…

    “Meet the new boss. Same as the old boss..”

    • 0 avatar
      HoldenSSVSE

      All they are showing is 0% financing on the Chevrolet site:

      http://www.chevrolet.com/offers/?offer=model-offers

      Completely realize offers change all the time, but no cash on the hood on the Silverado, according to the Chevrolet website at the time I posted this.

      I did some more digging and found $1,500 cash back through 9/30/11 – with the previous details expiring yesterday.

      http://webcache.googleusercontent.com/search?q=cache:gqC3n6ZzdAMJ:autos.aol.com/cars-Chevrolet-Silverado%2B1500-2011/incentives/+2011+chevrolet+silverado+rebates&cd=2&hl=en&ct=clnk&gl=us&source=www.google.com

      • 0 avatar
        mike978

        Some people won`t let the facts get in the way of their pre-disposed bias.

      • 0 avatar
        Pch101

        no cash on the hood on the Silverado, according to the Chevrolet website at the time I posted this.

        I’m sorry, but that’s not a particularly good way to learn about incentives, particularly factory-to-dealer incentives that no automaker will ever publish on its own promotional website.

        You need to look at the trades, such as Automotive News, as well as pricing guides such as Edmunds. If you had looked at Edmunds, you would have seen that there are Silverados with factory-to-customer incentives as high as $4,505. http://www.edmunds.com/chevrolet/car-incentives.html

    • 0 avatar
      vento97

      > “Meet the new boss. Same as the old boss..”

      Let’s hope “We won’t get fooled again…”

  • avatar
    jkross22

    Boy, I sure am glad to hear that “old GM” isn’t doing the same old thing to tweak the numbers to make them look better than they really are.

    Further evidence that there was no real bankruptcy reorganization. It was a deck chair shuffling exercise with some people taking it in the shorts while others got a seat at the table and a slice of the mud pie.

    • 0 avatar
      GarbageMotorsCo.

      Might want to watch what you’re saying, the hired GM shills, AKA, the Internet police will be on you before you know it, striking down negative posts like yours.

  • avatar
    MikeAR

    It’s perfectly legitimate for a manufacturer to book units shipped to dealers as sales. Technically the dealers are the customers of the manufacturers and we are the customers of the dealers. The practice can be abused however and often is. Whether or not GM is abusing it is something that everyone will have to decide for themselves.

    Just as an aside, Morgan Stanley yesterday rated GM as the best domestic car maker stock. Coincidentally MS was the lead underwriter of the IPO and I’m sure has an inventory of the stock. The link is to the MS research report.

    http://www.scribd.com/doc/59440409/GM-Morgan-Stanley

    • 0 avatar
      Lumbergh21

      Which is an example of one of the dirty practices that have seemingly become prevalent (really it’s been going on in one form or another for at least 200 years) in the banking and finance community. A financial firm pumping up the stock of a company that they own stock in so they can then sell the stock and make a nice profit (or dirty profit if you don’t work for the financial firm). Not so coincidentally, the government bailed these guys and the country out of the mess they made as well.

  • avatar
    mjz

    Bertel: The phrase is “800 lb gorilla”, not “900″.

  • avatar
    mtr2car1

    Revenue is booked at the point of production, not at the point of sale. Every car/truck that leaves the factory is counted as revenue on the books – hence the push to jam out a ton of trucks (which obviously have higher prices)prior to the IPO and the Q2 results hit the streets.

    Raising revenue like this gives you time and additional dollars to offset the inevitable increased costs that comes with cash on the hood.

    If they are correct in their read of the market and truck sales come back in the fall – the “strategy” will work and the stocks will catch up with themselves – if they are wrong….well, we seen that story before.

    • 0 avatar
      MikeAR

      Just curious, I’d like to discuss whether or not anyone thinks that this strategy is the right one for GM given the state of the economy.

      And Bertel is right, when an analyst rates a stock as a hold, it means sell as fast as you can.

      • 0 avatar
        musiccitymafia

        GM appears prepared to take the risk that their strategy, although seemingly ill-timed, may have a big pay-off. Knowing Big Brother is prepared to step in if you get into trouble tends to make one less risk-adverse.

  • avatar
    Pch101

    Revenue is booked at the point of production, not at the point of sale.

    When the manufacturer delivers the car to the dealer, it is a sale…for the manufacturer.

    That does not necessarily mean that the dealer will have an easy time selling the inventory to a retail customer. But at that point, the dealer owns it and the company has sold it to its customer, which is the dealership.

    The auto industry is prone to channel stuffing because manufacturers can effectively force dealers to buy unwanted inventory. Therefore, a sale by the manufacturer to the dealership is not necessarily an indication that there is any retail demand for that unit. Consistently high days of inventory over extended periods would be indicative of a channel stuffing problem, as would be consistently high incentives.

    • 0 avatar
      Lumbergh21

      This is a way in which car manufacturers and widget manufacturers are different, and why the classic way of accounting for a manufacturer’s revenues and determining profit doesn’t quite work when evaluating a car manufacturer’s revenues and profits.

      • 0 avatar
        Pch101

        This is a way in which car manufacturers and widget manufacturers are different

        It’s normal for wholesalers to recognize revenue when the retailer (their customer) takes delivery.

        You and I and the general public are not GM’s customers. The dealerships are. GM’s revenues from new car sales come from the dealers, not from us.

        What’s different about the car industry is the extent to which the manufacturer carries the retailer (the dealership). The producer almost completely finances the dealer’s inventory, even giving money to the dealer that the dealership can use to service its debt (the holdback), and then essentially subsidizing most of the losses on inventory that is difficult to sell. Even though the product has been sold, the manufacturer still assumes much of the risk, albeit indirectly in such a way that it can legitimately claim a sale.

      • 0 avatar
        Lumbergh21

        That was the point I was trying to agree with PCH101. A car manufacturer has a much closer and more controlling relationship with a car dealer, at least with regards to inventory, than the widget manufacturer has with the corner hardware store, or even a franchise situation where there are some controls on sales prices but still no control on inventory. For this reason, the classic accounting method of counting the revenue upon delivery to the retailer doesn’t really paint an accurate picture with car manufacturers. Their involvement doesn’t end with the sale of their product to the retailer, like it would in most manufacturing businesses, it is only just beginning.

  • avatar
    jonny b

    Best & Brightest, take me to school.

    How much control does a dealer have over their inventory, specifically purchasing? To what degree are they obligated to buy stock from the manufacturer?

    I’m in the wholesale business. Over the years I’ve come to the conclusion that the key to profits, growth, and most importantly in a recession, survival, is tight inventory control. Surely this is true for dealers.

    • 0 avatar
      Pch101

      How much control does a dealer have over their inventory, specifically purchasing?

      If dealers want access to the more popular cars, then they also are forced to buy the dogs.

      I’ve come to the conclusion that the key to profits, growth, and most importantly in a recession, survival, is tight inventory control. Surely this is true for dealers.

      Inventory control is important for most retailers, recession or otherwise. But the dealer’s inventory problem can be offset with incentive payments, so much of the cost of the dealer’s inventory issue is ultimately paid for by the manufacturer.

      Of course, it would be better for the dealers if all of the products were in high retail demand. But if the manufacturer will mitigate the problem with extra money paid in the back end, then the dealer can outsource much of the financial burden to the top of the food chain. For such a dealer, the new car lot becomes a conduit for attracting used car buyers and branded repair work; even for successful new car dealerships, new car sales comprise only about one third of their profits, so there can still be a fair bit of money to be made otherwise.

      • 0 avatar
        jonny b

        “If dealers want access to the more popular cars, then they also are forced to buy the dogs.”

        I get that. It makes sense that a franchise has to carry the entire product line. A McDonalds franchise can’t decide they’re going to stop selling the filet-o-fish. But what mechanism does the manufacturer have to make the dealer buy more cars than the dealer wants even if they’re good sellers. Silverados sell at a fairly brisk pace, but if a dealer thinks he only needs 10 on his lot can the manufacturer force him to buy 20? Returning to the McDonalds analogy, McDonalds can’t force a franchisee to buy an exorbitant amount of milkshake mix in December. Is it different for automobiles?

      • 0 avatar
        Educator(of teachers)Dan

        My local Buick/GMC (used to be Pontiac) dealer had an roughly 30 G3′s (remember that Aveo clone?) sitting on the back of his lot. He didn’t order them cause he was sure he could sell them, he did it cause he was forced to take them. He couldn’t sell them until Pontiac was no more. I’d love to know how much GM lost and how much money he lost on that little excercise in futility.

      • 0 avatar

        even for successful new car dealerships, new car sales comprise only about one third of their profits, so there can still be a fair bit of money to be made otherwise.

        I want to see that miracle dealer. The rule-of-thumb number in the industry is that the typical dealer makes more than 90% of profits with “non new car related business.”

  • avatar
    bomberpete

    This is an update of the old song-and-dance “sales bank” madness. It was perfected byChrysler CEO Lynn Townsend in the Sixties and Seventies to keep ahead of the bankers.

    It caught up with him then, and it’ll catch up with Lt. Dan now.

    Somehow I don’t see a $52/share complete payback to the American taxpayer. Even the fanboys must have some doubts.

    • 0 avatar
      Truckducken

      Yeah, if commenting hadn’t frozen up, I was going to make the same point. This very gimmick did in Mopar in the late seventies when the “120 days” turned into 365+ as OPEC II killed large vehicle demand (cue ominous background music). Kudos to Nesvold for calling out GM.

    • 0 avatar
      mike978

      I am sure we won`t get to $52 – so? A loss of say $5 billion for the whole auto bailout business is still not bad considering. I am still waiting for the $180 billion given to AIG – but financial companies seem to be let off by most people who prefer to pile onto GM and Chrysler.

      • 0 avatar
        Lumbergh21

        Nope, morally, both bailouts were wrong based on my sense of morals. However, I still don’t believe that a normal bankruptcy – say what you will, but those bankruptcies were not business as usual – of the American owned GM and Chrysler automakers would have impacted our economy so greatly as to prevent recovery. However, I don’t see how the level of failure we were facing at the number of large brokerages and lenders would not have severely impacted this nation’s economy. Of course, to add insult to injury, the people who brought about this near and still looming disaster were not made to pay for their stupidity or down right dishonesty. Instead they either stayed on making their millions or “retired” with golden parachutes worth billions collectively. That is truly sickening.

      • 0 avatar
        mike978

        Lumbergh21 – I completely agree with your sentiments in the few sentences.
        As to the point about whether a protracted bankruptcy of GM and Chrysler as opposed to a bailout would have significantly impacted our recovery – I cannot honestly tell you. It is a situation that was unprecedented and the consequences could not have been predicted with any great certainly. Anyone who tell you, either for or against the bailout, that they are certain their preferred course of action would have been better is being over-confident at best (and lying at worse).

  • avatar
    CJinSD

    A 4 month supply of GM pickups is about 160,000 trucks, or $5.5 billion dollars in depreciating inventory. Calling these sold while ignoring the incentive liability they create and the utterly sated demand for GM’s once-most-profitable product line through the end of the model year does create an unrealistically rosy picture of GM’s plight.

    • 0 avatar
      PintoFan

      Who said “incentive liability” is being ignored? They are sold, that is an indisputable fact. What price the end consumer winds up paying for them is largely up to the dealers and customers. GM (like all other manufacturers) provides the MSRP, but it’s not their job to set final purchase prices. You insist GM is in a “plight” of some sort, but the rest of their product line seems to be selling pretty strongly. The stock would not be performing as well as it is if GM was in serious trouble, and didn’t just have a few extra pickup trucks laying around which will all get sold eventually.

      • 0 avatar
        CJinSD

        Put your money where your mouth is and buy GM stock back from innocent taxpayers. GM ‘sold’ these trucks, but they haven’t been paid for them. Getting paid means that actual customers have to buy them, and that will cost thousands per truck in the current market. GM built pickups to fluff their numbers because if people can’t tell the difference between an accounting practice and end user sales, they’re the one GM NA product that actually generates large profits. Making a ‘profit’ on small sedans at GM means taking a one-year write down of billions for R&D and tooling, then claiming to make a few dozen million a year until the model is so stale that incentives get too big. GM can fill up every rental lot in the country with Cruzes, and the only real profits will be in hands of 2nd tier suppliers in China and Korea. Pickups have traditionally netted GM large profits, but they need to be sold to people who want them, not carried on the books in numbers large enough to shut down the pickup factories for the summer.

      • 0 avatar
        mike978

        CJ – I said, if you read carefully, that GM make most of their profits from pick-ups, just like Ford and Chrysler do. However where did the comment “GM can fill up every rental lot in the country with Cruzes, and the only real profits will be in hands of 2nd tier suppliers in China and Korea”
        The Cruze is not stale, the Cruze is not a fleet queen, from figures I saw on Edmunds it was around 10%.

        I know some people, not necessarily you, have stated that a) the Camaro will be a one season wonder, b) the Cruze will never sell well or c) if the Cruze does sell well it will be because of fleet sales – all three predictions have been proven wrong.

        As for us innocent taxpayers – I never got a choice on the following programs :

        V-22 Opsrey – $0.5 billion a year DoD procurement project (2009 data)
        F-22A Raptor – $3.5 billion a year DoD procurement project (2009 data)
        amongst others. We spend as a country over $130 billion a year on procurement/R&D in the DoD. Most is very worthy but some is not and yet we are squabbling over at most a $10 billion one time loss on Chrysler/GM.

        Another issue – the inference in the article is that GM is goosing the figures to help sell the Government stake for a minimised loss. They really are damned if they do and damned if they don’t – you want the Government out of GM as quickly as possible, but also at the best price. That is most likely mutually exclusive.

      • 0 avatar
        geeber

        The calculations performed by Pch101 show that, for the most recent month, about 32 percent of Cruze sales were to fleets.

        And betting that the auto market will strengthen during the remainder of this year is a risky one at best, based on the factors that I’ve seen. We’ll be lucky if it holds steady.

      • 0 avatar
        Pch101

        The calculations performed by Pch101 show that, for the most recent month, about 32 percent of Cruze sales were to fleets.

        Whoa, let’s be fair — that was a guess. It could be off by several percentage points in either direction. GM didn’t provide enough data for June Cruze sales to pinpoint that figure.

        However, we do have hard fleet sales figures for April 2011. And during that month, the Cruze ran at 27% fleet. http://blogs.motortrend.com/gm-leads-strong-sales-month-chevy-cruze-beats-toyota-corolla-15021.html

        The numbers remain to be seen, but my guess is that in absolute terms, Cruze fleet sales are probably about the same as they were for the Cobalt. However, they are selling a lot more Cruzes, so the increase is probably entirely or almost entirely retail. I think that it’s probably fair to say that the Cruze is selling well and defying expectations for the better.

      • 0 avatar
        PintoFan

        CJ, I pay taxes too, so don’t pretend that you have some kind of victim status that I don’t. Although I’m sure in your worldview, all GM supporters are just welfare leeches. Even if GM has to offer incentives on the trucks, they will still make a decent profit on every one sold. Your inventory value figure was wildly misleading, anyway. I’m not sure what “real” profits mean to you, but to me they aren’t ones that are exported out of the country to fill the coffers of foreign governments and be taken away from American communities. Even if GM acquires some parts from overseas, it won’t come anywhere near the economic damage inflicted by wholly foreign-built cars.
        Although I do admire your backwards admittance that GM has invested far, far more in small production than the Japanese competition, who have been content to sell us the same models with slight content cuts for the last decade. If our latest market share report is any indication, that doesn’t seem to be working out for them any more. But I’m sure you’ll rationalize it away as only temporary and not reflective of any kind of trend, despite all the evidence to the contrary.

      • 0 avatar
        geeber

        Sorry about that, Pch101. I shouldn’t have put words into your mouth.

      • 0 avatar
        CJinSD

        PintoFan,

        Meet the 2009 Daewoo Lacetti, introduced almost three years ago: http://autoworld.files.wordpress.com/2008/10/daewoo-lacetti-2009-premiere-img_4.jpg

        Maybe you’ll recognize it. Hillarious.

      • 0 avatar
        PintoFan

        What’s your point, CJ? I never denied that the Cruze was developed as a global vehicle. US market vehicles aren’t built overseas, though, and the profit stays with GM. Honda can build as many Civics as they want, but the majority of that profit is going to get exported, never to return.

      • 0 avatar
        CJinSD

        “Although I do admire your backwards admittance that GM has invested far, far more in small production than the Japanese competition, who have been content to sell us the same models with slight content cuts for the last decade.”

        Spring Hill and NUMMI don’t make many small cars for GM anymore. The money was spent, not invested. The Traverse isn’t a small car, but it is all that is left to show for two huge small car initiatives from GM.

        “What’s your point, CJ? I never denied that the Cruze was developed as a global vehicle. US market vehicles aren’t built overseas, though, and the profit stays with GM. Honda can build as many Civics as they want, but the majority of that profit is going to get exported, never to return.”

        My point was that the Cruze doesn’t represent a huge investment in the US by GM. It was developed in Korea and uses parts from all over the world. Saying that the Japanese have sold the same models for a decade with content cuts is made up from whole cloth. It isn’t like a 2012 Civic doesn’t have more standard everything than a 2003 Civic, or that a Cruze isn’t a Cobalt with smaller engines under its new Korean Skin. As for profits of Japanese cars made in the US going home, there is nothing but evidence that the Japanese reinvest their earnings right here. They raise US content, expand US production, perform R&D in the US, and shift additional model lines to the US constantly. Meanwhile, GM and Ford ‘leverage international expertise and suppliers’ in an effort to build competitive cars.

    • 0 avatar
      mike978

      Once profitable? Aren`t they profitable now? Don`t other companies from time to time have towards the end of the year (and for Goodness sake we are just at the half way point) a large inventory of old model year.
      I recall Ford and some of the other companies had a large number of 09′s as we entered 2010 and GM did better with clearing out old inventory. So I wouldn`t get too worked up (just yet).

      • 0 avatar
        CJinSD

        When was the last 2010 model car built? July of 2010? August? We aren’t halfway through the model year. We’re more like 85% of the way through the model year. 160,000 trucks sitting on the books as incentives grow aren’t profitable. GM has only sold about 240,000 trucks so far in calender 2011. They’d need to make an absurd profit on each one for the model line to still be profitable with so many unsold on borrowed money and getting closer to an incentive bonanza that has been kicked off with $5,000 rebates. GM dealers no doubt want 2012 trucks to sell. That’s what customers who aren’t bargain hunting will be looking for in August. What will they have instead of desirable new trucks? Huge sums tied up in 2011s that need to be sold at a loss.

      • 0 avatar
        mike978

        You mix-up calender and model year’s to suit your argument.

        I agree we are, to use your figure, 85% of the way through the model year. But then you use the calendar year (ie 50%) to show how small sales have been. 2011 model year trucks were sold from August 2010 to July 2011 (or thereabouts). In that time many more than 240000 have been sold. It is quite normal for manufacturers to still have sizeable “old” model year cars around in November/December. So there is time for the 160,000 to be reduced down. Hell just stop making them for one month will get the number down towards 100,000

      • 0 avatar
        Pch101

        Once profitable? Aren`t they profitable now?

        Generally speaking, trucks are profitable. But with high inventories and the predictable incentive spend that is to follow, it’s fair to wonder whether they’re profitable at this moment.

        And again, let’s remember that profit = revenue – expenses. “Revenue” is not the same thing as “cash collected from sales.”

        Q2 numbers aren’t out yet, but we do have Q1. And this is what GM reported:

        Operating income from automotive operations: $4.194 billion
        Net cash provided by automotive: – $596 million

        http://www.sec.gov/Archives/edgar/data/1467858/000119312511130473/d10q.htm

        In other words, the activities that supposedly produced $4.2 billion in net operating income are the very same activities that depleted almost $600 million worth of cash. If I was a shareholder, I’d want an explanation.

        In addition to it having an inflexible production system and overly ambitious goals for market share, I suspect that part of the problem is that GM still has two truck channels — GMC and Chevy — not just one. Between that and too many dealers, they end up planning for too many trucks in order to have adequate inventories for the system. They should have killed off the GMC-Buick dealership network, and either dumped those brands entirely or else consolidated them into the Chevrolet channel. The auto task force did a good job, but they didn’t go far enough with GM.

      • 0 avatar
        CJinSD

        I didn’t mix up numbers to mislead. I used the numbers I have available, and I presented them as described. 240,000/6 months is 40,000/month. That you think 60K/month is the normal sales rate reflects that pickups aren’t selling at traditional rates. I used the last 6 months to estimate what a 122 day supply would be. If they’re still using ‘traditional’ rates of 60K a month, then the problem is bigger than 160,000 unsold 2011 trucks when competitors are going to begin stocking 2012s any day. 2011 models lose their luster when they’re on the lot with 2012 models, not when the calendar changes. By that point, they’re damaged goods.

        Without any effort to overstate anything, GM has a two month oversupply of their core product line. Call it a 17% miss on the supply curve. They won’t just lose profitability on the extra units, the value of each unit produced is diminished by the surplus. It will be an interesting measure of brand loyalty to see whether or not GM’s error drives down the prices for all full sized trucks.

      • 0 avatar
        mike978

        I am not saying you intended to mislead but taking different timeframes can cause confusion.

        I agree with you they have an oversupply. Yes it will impact prices. This is hardly new for GM or other companies. They are times when companies overshoot the production cycle. But before we make definitive predictions lets see how sales (and production) for July and August pan out since several companies are predicting increased sales in the second half.

    • 0 avatar
      Pch101

      A 4 month supply of GM pickups is about 160,000 trucks

      Based upon the chart in the Jefferies report, they believe that the 120 days worth of inventory is about 120,000 units, not 160,000 units.

      I haven’t bothered calculating an accurate annual sales figure, but just extrapolating from June 2011 YTD, I would guesstimate annual sales of pickups of approximately 500,000.

      If that 500,000 figure is correct, then 120,000 units of inventory would be around 90 days, not 120. So something may be amiss here — 90 days would not be stellar, but it would be a manageable number.

      • 0 avatar
        CJinSD

        I think you looked at Silverada numbers alone in the Jeffries report. Add in GMC Sierra volume, and the number works out to 160,000 unsold trucks. Surely you see that your argument is strangely circular, coming up with an artificially low number and then using it to conclude that the inventory is only 90 days instead of the reported 122 days that began this discussion.

      • 0 avatar
        Pch101

        I think you looked at Silverada numbers alone in the Jeffries report.

        No, I’m using Exhibit 1 on page 3 of the report, which is also the chart posted in this article.

        The chart above is saying that 60,000 units of excess inventories are equal to 120 days of inventory. They also identify another period during which 30,000 units of excess inventory is equal to 30 days of excess inventory.

        This tells me that (a) they see 60 days as being optimal and (b) every 30 days = 30,000 unsold units. So 120 days = 120,000 unsold units.

        You and I are coming up with similar annual sales figures for GM pickups of approx. 500,000. Now the math: Days of inventory = (120,000/ 500,000) X number of sales days per year. That’s closer to 90 than to 120.

        Surely you see that your argument is strangely circular

        It isn’t circular. It’s in their chart. I didn’t prepare the chart, Jefferies did.

      • 0 avatar
        CJinSD

        Gotcha. I wonder how they determined 30,000 represented an average month’s sales. Surely demand has fluctuated wildly during the period charted on the graph.

      • 0 avatar
        Pch101

        I wonder how they determined 30,000 represented an average month’s sales

        I can’t find anything in the report that specifically states how many units of unsold inventory there allegedly are.

        According to GM, combined deliveries of the GMT-900 trucks (Silverado and Sierra) between July 2010 and June 2011 totaled 527,922 units, so the 500,000 guesstimate wasn’t that far off the mark.

        Something is missing here. Either Jefferies completely blew it, or else there is a missing data point that I’m not seeing. GM seems to be confessing that there is a higher number, so something isn’t quite right.

      • 0 avatar
        CJinSD

        “GM seems to be confessing that there is a higher number, so something isn’t quite right.”

        Surely they’d love to answer this by saying they have the same number of days supply as Ford because they’re selling more trucks than Jeffries is reporting. If they’re staring at their shoes and dissembling rather than pointing out that having more strong selling trucks on hand than before reflects that they’re selling more and positioning themselves for production slowdowns and the model changeover in August seems to point to things being worse than reported, not better. Keep in mind that the Jeffries numbers are from May. May 1? May 15? May 31? They’re all long enough ago for GM’s truck inventory to have trended one way or the other.

      • 0 avatar
        Pch101

        I think that I just figured it out — Exhibit 1 is incorrectly labeled. It doesn’t represent all GMT-900 trucks, but just the Chevy Silverado.

        If that’s correct, then yes, there would definitely be more than 100 days worth of inventory, at least for the Chevy model. (The denominator in the formula would be Silverado sales of about 386,000 units, which ties more closely to the chart.) The GMC version would probably not be much different.

    • 0 avatar
      HoldenSSVSE

      All auto manufacturers book inventory shipped to dealers as “sold,” this is industry wide practice; there may be some small niche manufacturers that don’t do this, but all of the majors do (Ford, Chrysler, Honda, Toyota, Nissan, VW, etc. etc. etc.)

      The dealer “buys” the vehicles, either through floor financing (and takes the hit for the depreciation – not the manufacturer) or through cash. A big part of the auto crash was caused by the virtual elimination of floor financing.

    • 0 avatar
      masterofnone

      I never post but as I can’t find the description anywhere of how this is done in the industry, I give up and will explain.

      The automaker has an internal estimate of the incentive costs for the unsold inventory. They book these expenses as liabilities in the same period as the revenue they see.

      If they’re cheating on the estimates that’s one thing, but they don’t ignore it.

      Full size trucks and SUVs are always positive even with the liability.

  • avatar
    mike978

    If GM is goosing then it is stupid behaviour but I think this is overblown for a number of reasons :
    a) the inventory is around 40 days greater than Ford, production has been cut with workers at two truck factories having some extra vacation. Production can continue to be reduced incrementally in the next 6 months (such as extended shutdown for model year switchover)
    b) GM (along with Ford – http://www.autoobserver.com/2011/07/june-sales-divided-as-industry-anticipates-second-half.html) are expecting a pickup in demand in the second half of the year since the pickup market as a % of the overall market is currently around 9% as opposed to a long term average of 11% – thereby giving grounds to think it could grow back to the long term average and
    c) even if GM were goosing the figures it is extremely short-sighted and stupid since it can only help 1 maybe 2 quarters of result and then the sh*t hits the fan. Chrysler did this back in ’08-’09 and got caught out (rightly).

    Also the analyst quoted said “GM should stop making trucks for a year”. Yes that is sensible to not make anything for 365 days to clear a 120 days supply – seems like they would be out of stock for 8 months – great business acumen there. Before people complain, I am assuming the analyst was joking but some of you don`t like to admit that administration officials or GM management can ever “joke” with their off the cuff comments.

    • 0 avatar
      PintoFan

      mike, you give the most vehement GM critics too much credit for niceties. Many of them are actively interested in sabotaging the company, for various reasons. Some are quite open about it, but most of them work more surreptitiously. The whole “stop making trucks for a year” is part of the bad advice they’re hoping GM will absorb and suffer from.

      It’s no different from the gigantic fraud that Daimler perpetrated against Chrysler in the 90′s.

      • 0 avatar
        HoldenSSVSE

        If they were to “stop making trucks for a year” and then you do the math:

        July 31 – 92 days inventory
        Aug 31 – 62 days inventory (now customers are starting to not be able to find what they want because of the many different truck combinations)
        Sep 30 – 32 days inventory
        Oct 30 – wiped out

        That also assumes no pick up. They definitely need to dial back production to normalize around a much healthier 60 to 70 day number, but not make trucks for the rest of the year is hyperbole.

  • avatar
    Britspeak

    Such an interesting article, and good for you guys for going to the ‘source’ material, rather than recycled news items that tend to mis-quote, etc.

    A bunch of years back I remember an Economist article that spelled out what I thought was a key attribute of GM: they lose money on every car they make, breakeven on trucks and SUVs, and (barely) make money via financing… And this was before the market was right-sized (ugh, I hate that term) – when home equity loans financed around 25% of all auto purchases. Obviously, those have now gone away.

    What is astounding to me is that any firm would rate GM a ‘Hold’.

    • 0 avatar
      mike978

      Well as you say that article is from years ago. I expect they now make profit from both cars and trucks. Obviously more from trucks but GM is making a profit and it cannot all be from 40 days extra supply of trucks (on a rolling basis).

      Also why is hold considered bad – plenty of stocks are. Analysts have buy, sell and hold (sometime outperform) so if they mean sell then use sell. Hold mean keep what you have but don`t buy any more (or sell any).

      • 0 avatar
        Lumbergh21

        A Hold is considered bad because if a brokerage isn’t telling you to Buy a stock, most people figure the stock is on the way down and isn’t worth owning. There are exceptions to this perception, but the perception definitely exists. Also, by the time a stock is rated “Sell” lots of people have already started dumping the stock driving it’s price way down; so, you want to sell before it gets to that point.

      • 0 avatar
        MikeAR

        Mike, a hold is definately a sign that you have waited to long to sell. Think of it this way, a bank or an analyst has to serve several masters. Banks either are doing business with the companies their analysts are covering or they hope at some point in the future to do business with them so negative coverage is discouraged by bank management. Analysts have been fired for being too negative. Also an anlayst who is too negative can impact his future employability in the industry. If he wants to change jobs to a bank that does business with say GM and has been negative on them in the past, GM management will torpedo the hiring. The biggest reason analysts pull punches about ratings though is very simple. The analysts work for the brokers in the bank who are selling stocks. A negative rating on a stock can make a broker look bad to customers if that broker had pushed tha stock in the past. Remember the investmant banks and brokerages are in the product sales business, they aim to make money and the customer often comes in last.

  • avatar
    Lumbergh21

    If an extra 40 days of truck inventory equates to roughly $5.5B in sales for GM, I would consider that significant. Let’s see what GM reports for their 2nd quarter profits then take away that $5.5B in pipeline stuffing to get a real picture of what their 2nd quarter profits were. I’ll be surprised if it even would have been a profit without those extra truck “sales.” And, that is what is wrong with building up inventory and counting it a sold product. I’m not saying that it is wrong per se; it is actually perfectly logical to report the vehicles as sold upon delivery to the dealers. However, either the financial “experts” out there are really incredibly stupid or they refuse to report the truth of the profit numbers reported by all manufacturers not just GM. The reason some of us are jumping on GM is because they are the ones increasing the inventory on the dealer’s lots in order to make their own balance sheet look better. Eventually those chickens will come home to roost in the form of losses in the future and hoping that the market will turn around to bail them out is pie in the sky wishfull thinking. More likely, the government will bail them out, again.

    • 0 avatar
      mike978

      I agree with the premise of subtracting some figure from the Q2 results. However not all 160,000 since most of that is normal inventory (80 days as opposed to 120). Also all that inventory is not profit either – it does actually cost to make the truck. So if you accept 60,000 over stocking and they make a loss of $5000 on each on now that is “only” $300 million. I would expect a profit greater than $300 million.
      Also reading quarter to quarter results is misleading precisely because of inventory stocking/over stocking/selling. Best to look over a whole year and then year on year comparisons. This 120 days stock will be reduced over time (how long, who knows) and this will wash out in the results. If you unwind it all in one quarter then it would dent those figures. Unwound over 2 or 3 quarters then not so bad.

      Also the $5.5 billion figure equates to nearly $35,000 per truck. Is that what, after normal incentives, the average truck is going for?

      • 0 avatar
        Lumbergh21

        I can agree to that as long as the profits are normalized to some baseline. I choose no days of supply, but it could be established as 30 days or 60 days, just so long as there is a baseline to prevent inflation of manufacturer sales and profits in the short term by placing more product on the lots, say right before an IPO or right before upper management bonuses are determined. I just think that normalizing to zero days would be the simplest as that eliminates the situation where there is less than 30 days supply as there is at times for hot models of cars/trucks. Maybe they could report both numbers, but then they are already providing the information in a manner of speaking by providing the number of vehicles “sold” to the dealers but not actually sold. It just seems that most people ignore that number when reporting an automaker’s “profits.”

        I was borrowing the $5.5B figure from a previous poster and did nothing to verify it. It may well be that it is less than accurate.

      • 0 avatar
        CJinSD

        GM’s average transaction price in February 2011 was $32,965. In explaining why GM, Chrysler, and Ford had higher average transaction prices than far more sought after automakers, industry observers stated that full sized trucks raise GM’s average price above that of Honda, for example. If trucks are the driver of GM’s high transaction figure, it makes sense that Sierras and Silverados have higher MSRPs than Lacrosses and Malibus. My estimate was fairly conservative.

  • avatar
    mtymsi

    The thought that immediately popped into my mind is institutional investors would know the effect of pumping up the truck inventory as it relates to profits and the stock price so IMO GM isn’t really trying to fool anybody from an investment standpoint. It is disheartening to hear they’re not doing a better job of matching production to actual sales.

  • avatar
    Steven02

    I assume that it is a misprint, but I like the data for 6/2012 in exhibit 2.

    I am also confused by the chart. It has cumulative overproduced @ 92 days for 30k units, but then says 120 days for 60k units. They probably should have just had a truck inventory total with days next to it. It would be much easier to see.

    GM has sold just over 250k units Jan-Jun. 250/6 is 41.6k. A 120 supply would be about 160k trucks in inventory. So which way is it? The report seems to contradict itself. Are they expecting a different sales rate for the 2nd half of the year? Is the chart wrong, or just so confusing that no one seems to be able to figure it out?

    • 0 avatar
      Pch101

      I am also confused by the chart.

      As was I. As I noted above, I believe that Exhibit 1 refers only to the Silverado (not the Sierra), and was mislabeled.

      It would be good to get the baseline numbers for this:

      -What is the presumed number of unsold units?

      -What is the baseline number for annual sales that was used to calculate the days of inventory figure, and how was it calculated? (I’m presuming that it should have just been the most recent 12 months of actual sales.)

      -How many days in a year? (365, 360 or some number of “sales days”?)

  • avatar
    Educator(of teachers)Dan

    OK I should know better than to jump back into this fray but I was at another site reading something and although it’s a parody about the mortgage mess… I see some parallels with what’s going on, considering that people treating their houses like ATMs is what helped overheat the vehicle market. This is for everyone who says… “This is OK, because everybody does it.”

    http://www.slate.com/id/2298582/pagenum/all/#p2

    • 0 avatar
      MikeAR

      Dan, you wasted your time reading that. It was written by Charlie Munger, Warren Buffet’s right hand man and a total scum and bailout recipiant. We gave Buffet and Munger billions during that time. Munger was speaking at the University of Michigan Business School earlier this year and he had the gall to tell his audience that they should have been grateful for the opportunity to bail the financial industry out and if they didn’t like to just suck it up. Munger and Buffet are evil old bastards who have become billionaires by playing the crony capitalist game. Even worse they’re self=righteous old hypocrites who will tell you how virtuous they are while they’re stealing your money. I hope Munger lives long enough to die in prison without a penny to his name.

      • 0 avatar
        mazder3

        Still better than the “5 Guys You Shouldn’t Date” article Salon suggested for me.

      • 0 avatar
        Educator(of teachers)Dan

        @mazder, thanks for the LOL I needed that. I think I’m gonna stick to CurbsideClassic and here at TTAC giving 16 year old girls advice on what car to get, Jack Baruth’s latest conquests, and Murilee’s latest trip to the junk yard. The political discussions are only getting uglier and uglier on here.

  • avatar
    Secret Hi5

    “GM Goosing Stock By Overstocking Dealers With Trucks?”

    Ugh – There’s that cowardly question mark again. Either say or don’t say it, just please don’t hide behind a question mark.

  • avatar
    bucksnort

    I wonder when GM Death Watch II will start?

    • 0 avatar
      Lumbergh21

      Personally I wouldn’t start GM Death Watch Part Deux for another year. Yes it appears they are slipping into the same old games in order to bolster stock price and management bonuses, but I believe it will be 2 to 3 years before they have mortgaged whatever they can and have the creditors banging on the door again.

      • 0 avatar
        MikeAR

        If it happens again, there won’t be a bailout no matter what. We can’t afford it and we sure won’t want to do it.

      • 0 avatar
        Jimal

        MikeAR, agreed. I was for the bailouts of GM and Chrysler because at the time there didn’t seem to be any other tenable options (I don’t buy the argument about allowing the companies to go Chapter 11). There were extenuating circumstances that have been argued here ad nauseum. They got the bailout and the opportunity to right their ships. If they are unwilling or unable to make the structural and cultural changes needed to be successful, then they should fail.

      • 0 avatar
        PintoFan

        Only if we get a Toyota Death Watch first. That has far more basis in reality.

      • 0 avatar
        geeber

        Only to those who have limited knowledge of the auto industry and finance.

        From what I see, the New GM and the Old GM have far too much in common for comfort. GM has to make far more in-depth changes in its corporate culture if it wants to really take advantage of Toyota hitting a speed bump.

      • 0 avatar
        Pch101

        GM has to make far more in-depth changes in its corporate culture if it wants to really take advantage of Toyota hitting a speed bump.

        Let’s be fair — there have been a lot of changes for the better. For one, somebody is finally paying attention to interior design, and if combined with overall product quality, that will help to sell more cars and earn some conquest business for a change.

        It would seem that somebody blew it with the trucks. (It’s the old impulse to maintain market share over margin, which is a bad instinct that they need to shake.) But the old GM would have carried 180 days worth of inventory and had another $1-2000 in incentives to go with it, so this is actually an improvement.

        It is a shame that they didn’t go farther and move to a two-channel strategy. Near-luxury niche strategies no longer work for entire car lines (yes, that means you, Buick), and having two complete truck lines in separate dealership networks is redundant and increases the likelihood of inventory management errors like this.

        Nobody should buy the claim that carrying 100+ days is a “strategy.” That’s a lame cover-up for past mistakes, not a strategy for future business.

      • 0 avatar
        geeber

        It is true that there have been many changes for the better. But, if I recall correctly, the new vehicles were designed and engineered by the Old GM, so the jury is still out on whether the New GM will result in further improvements.

        According to Mr. Rattner, the reason Buick and GMC still exist is because they were shown to be profitable. I agree that having two lines of nearly identical trucks and SUVs is not the best strategy over the long haul. I would also imagine that, after having killed Saturn and Pontiac, there probably wasn’t too much enthusiasm for putting another chain of dealers out of business.

        Recent comments by Mr. Akerson focusing on cost-cutting, and comparing cars to Diet Coke, do not encourage confidence. Nor does his professional background.

        GM has a LONG way to go before it successfully tackles Toyota. Yes, Toyota, for whatever reason, has allowed the Corolla to grow stale, and the Cruze is a more compelling product than the Corolla. Which is a complete reversal of the usual order of things in this particular segment – an order that has stood since 1971, when the Vega debuted. But one car, as of this point, does not a conquest of an entire competitor make. It will be interesting to compare the new 2012 Camry to the upcoming 2013 Malibu – that will be the acid test, in my opinion. If GM bests Toyota in the heart of the market, then things really have changed.

    • 0 avatar
      highdesertcat

      Didn’t know the first GM Death Watch had ended. We should hope that GM succeeds because it owes us (that’s we, the people) billions and billions and billions of dollars. When they liquidate, we, the people, will be out of a lot of money. We should never have bailed out any failed companies to begin with. Blame it on Bush AND Obama.

      Biggest problem with GM/GMC trucks is that they are antiques, with their pushrod engines and old-school design and engineering. Compared to the F150, Tundra and Titan, GM is so far behind that they think they are leading the pack and have the race all to themselves. Dodge? Fuggedaboutit! Foreign company, run from Italy.

      • 0 avatar
        PintoFan

        It’s been over for a while. Still more of that nonsensical “”pushrod engines are outdated”logic, I see. Saying that GM is behind Toyota or Nissan in truck technology is pretty rich.

      • 0 avatar
        GarbageMotorsCo.

        We should hope that GM succeeds because it owes us (that’s we, the people) billions and billions and billions of dollars.

        GM already said they paid back the loans in full

        http://media.gm.com/content/media/us/en/news/news_detail.brand_gm.html/content/Pages/news/us/en/2010/Apr/0421_fairfax

        ANYTHING otherwise is a lie.

      • 0 avatar
        highdesertcat

        Pintofan, I have owned Silverado and I have owned F150 over the past 46 years of buying new trucks, and until I bought my first-ever foreign-brand pickup truck, I knew no better than pushrod engines.

        I’ll take that magnificent Tundra DOHC, 32-valve, all-aluminum, 5.7-liter V8 engine any day, over anything I have owned previously. It does everything my old trucks could do, and does it with a lot more finesse.

        Garbage, if you are a US tax payer, you should be concerned about all the money we poured into the GM, and all the other bailed-out entities. What they claim to have repaid US, and what we are still out of, are two different things, and WE, THE PEOPLE, that’s the tax payers, are out, and will be out, of a whole lot of money.

        It isn’t right to keep 6% of the work force working at the expense of the other 94%, especially when you consider that currently 14% of the workforce is unemployed and another 6% is underemployed. There was a time when dead was dead. With the bail outs we ushered in a new era of dead-on-indefinite-lifesupport. There is no free lunch. Someone is paying the UAW to continue to live large with government hand outs. And those someones are the US tax payers.

        The right thing to do would be for the new GM to pay back ALL the money that was poured into them, like Fiatsler did by robbing Peter to pay Paul. I don’t care who finances them, as long as it isn’t the tax paying public.

        At the current rate GM COULD repay all the money we poured into them within 10 years. I don’t believe that GM as we know it today, will be around in even THREE years. I hope all of GM will have moved to China by then and starts to send money home to Mama, like Toyota and Honda do.

        There is still a large chunk of the US population that does not support the bail outs and my relatives in the new car business have heard the same excuses from potential buyers for not buying a GMC Sierra in favor of buying a Tundra, and paying significantly more for the Tundra.

        My reasons for buying a 2011 Tundra 5.7 had nothing to do with politics and everything to do with what was simply the best IMO in comparison. And that is what makes the world go ’round and ’round.

      • 0 avatar
        GarbageMotorsCo.

        Yes……

        But GM “Said” they paid back the loans in full. So it must be true :)

      • 0 avatar
        highdesertcat

        Garbage, I got you the first time around. I wanted to emphasize what a deep pile of dung we, as a nation, are in when we start bailing out companies that clearly have failed and should have been liquidated. Why only SOME companies getting bailed out? Why not all? Who determines selectively who lives on at taxpayer expense and who dies?

        I will say this: I think that there is a better chance of US getting back more money from the financial industry than we will ever get back from Ford and GM. The US financial industry is making more money, quicker, than Ford and GM.

        The name of the game for Ford and GM is to sell cars, and they need to sell a whole lot more cars than they are selling now to be able to make it on their own after they pay back our money. Many of us cannot see any way for that to happen unless we see a SAAR in excess of 17m for at least five years. Good luck with that.

        The US financial industry makes money just chasing the sun. No selling of cars involved – no competition from better foreign products – just plain greed and knowing when to time the markets.

  • avatar
    Sam P

    Wonder what GM’s independent auditors will say about channel stuffing, which is a very old trick to manage earnings.

  • avatar
    Cerbera LM

    Quote taken from this blog post:
    http://www.evolvingexcellence.com/blog/2011/07/no-lightning-strikes-in-detroit.html

    GM is led by a chairman who made his bones – and a lot of money for himself, as well as his cronies on the Street – by growing the top line of telecom companies to staggering heights – but those companies never turned a profit under his leadership. A master of numbers games, but not of of creating anything of lasting value. The Obama administration put a team comprised from top to bottom of financial people over GM – not a manufacturing leader among them. The people in Washington never understood – GM’s problem wasn’t a lack of clever financial management – it was too much of it. Sending even more clever accountants to Detroit was the last thing needed.

    • 0 avatar
      vento97

      > Sending even more clever accountants to Detroit was the last thing needed.

      On that note, here’s an interesting blog (Why Is The World is Run By Bean-Counters):

      http://stevedenning.typepad.com/steve_denning/2010/08/why-is-the-world-run-by-bean-counters.html

  • avatar

    Gentlepersons:

    Exhibit 1 is not just the Silverado. There is text accompanying the pictures, sometimes it is worthwhile to read the text.

    The text says: “Exhibit 1 shows the cumulative difference between GMT 900 pickup production and sales, which should over time roughly match.”

    • 0 avatar
      Pch101

      Exhibit 1 is not just the Silverado.

      You had better hope that it is. If not, somebody at Jefferies really f*cked it up.

      (It makes no sense to claim that 30 days worth of inventory is approximately 30,000 units, as is indicated in the chart, while annual sales of the GMT-900 line are over 500,000. That math doesn’t work.)

    • 0 avatar
      CJinSD

      Bertel Schmitt,

      Can you explain why 30,000 units would constitute a month of GMT 900 supply? If the report is using 30K as the measure for all GMT 900s, why isn’t GM pointing out that they’re selling over 40K a month and so the supply isn’t 122 days? Since the word cumulative is there, one might assume it isn’t a measure of extra trucks produced each month.

  • avatar
    obruni

    when the vehicle leaves the factory, it is no longer the responsibility of the car manufacturer.

    this is compliant with both US and International accounting standards. I do not know if all automakers do this, but most of them do.

    • 0 avatar
      Lumbergh21

      Really? No longer the reasponsibility of the car manufacturer? Given that they finance the stock on the dealer’s lots and provide incentives/kick backs to help sell those vehicles if they aren’t already moving off the lots at the hoped for rate, I would say they have some hand in the sale of the car to the end user. And, you plain and simple do not see this level of involvement (not to mention the way they coerce dealers into accepting products they don’t want) in any other industry that I can think of.

  • avatar

    my Return to Greatness plan and Extra Mile program would alleviate their inventory problem before year end.

  • avatar
    nevets248

    NO comment from the esteemed Aaron Bragman OR Rebecca Linland ( insert mooing bovine sound here) for IHS Global Insight? The horror, the horror!

  • avatar
    GarbageMotorsCo.

    Hopefully GM is goosing it’s stock in Intermediate steering shafts to go with their trucks.


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