By on July 25, 2012

Today’s Chart comes from finance blog Zero Hedge, which has taken a periodic interest in General Motors channel stuffing endeavors. While we don’t normally report on stock prices here at TTAC, this one is worth mentioning.

The chart, using an inverted axis, shows the relationship between GM’s month-end inventory levels, and their post-IPO share price. The lower it goes, the more inventory The General seems to have.

Channel stuffing is an addiction that GM is unwilling to get help for, and it’s always the same nasty habit of loading up dealers with big full-size trucks and SUVs (to the tune of 130 day supply levels, or more), even though that’s what got them in to the whole bankruptcy mess in the first place. But that’s ok, because their sales numbers look great, even if their share price is in the toilet.

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82 Comments on “Chart Of The Day: Channel Stuffing Bonanza...”


  • avatar
    Pch101

    Zero Hedge goes well with tinfoil hats. Not a good source.

    The chart is nonsensical. Neither axis starts at zero. Combined with scales that aren’t comparable, and you end up with a chart that can say whatever you want it to say.

    • 0 avatar
      DeadWeight

      Stick with CNBS…I mean CNBC, and Cramer……and Bernanke.

      CNBC Financial Advice (fantastic impeachment of even a mere atom or quark regarding anything related to CNBC):
      http://www.thedailyshow.com/watch/wed-march-4-2009/cnbc-financial-advice

      Jim Cramer as the epitome of what CNBC is; a shill of sell side boiler rooms:
      http://www.thestreet.com/story/891820/1/the-winners-of-the-new-world.html

      Bernanke’s predictions about economy, housing and all things financial from 2005 through 2007:
      http://www.youtube.com/watch?v=9QpD64GUoXw

      And on the particulars, I don’t think any rational person could look at the evidence available and conclude that it’s not at least likely, if not highly probable, that GM is stuffing the dealer channel.

      • 0 avatar
        PintoFan

        I don’t remember anyone mentioning anything about CNBC, Jim Cramer, or Ben Bernanke. I think you just wanted an excuse to red-herring this topic.

      • 0 avatar
        DeadWeight

        That’s funny, because I thought that the subject Derek wrote about was whether GM was engaging in ‘channel stuffing,” so it was quite Red Herring of pch101 to throw off 5 sentences, most of which attacked the credibility of Zero Hedge, and none of which actually provided a factual rebuttal of the claim being made.

        Since pch Red Herring’d, I thought it somewhat appropriate to bring everyone back to examples of shining beacons of credibility such as CNBC and Ben Bernanke.

      • 0 avatar
        PintoFan

        You will not increase the credibility of Zerohedge by copy-pasting a motley of Youtube and blog links critiquing personages and entities that have nothing to do with the subject at hand. Pch already pointed out why he feels the chart to be meaningless. I happen to agree, especially since TTAC has been through this whole song and dance many times before.

        You’re missing the point, which is that Zerohedge is not really a purveyor of credible financial information as Kreindler has represented them. Jim Cramer, Ben Bernanke, and CNBC have nothing to do with the topic being discussed.

      • 0 avatar
        DeadWeight

        Pinto Fan, you’re missing the point, which is that Derek cited to a specific chart and numerical datum regarding alleged channel stuffing by GM, and neither the first comment nor yours has presented a single, concrete counterpoint to disprove the allegation and supporting datum.

        So…take a shot at it, maybe?

      • 0 avatar
        Pch101

        I can only presume that you never took a math class, otherwise you would know why the chart is complete garbage.

        I realize that you are praying earnestly for the end of the world, but a bad chart is a bad chart.

        (Big hint: the graphic is attempting to manipulate the reader with the use of two scales that don’t match.)

    • 0 avatar
      DeadWeight

      And regarding pch’s statement that “neither axis starts at zero…,” do you care to even explain what that even means?

      How could, as just one example of the nonsense contained in his statements, the axis for “month end dealer inventory” start at zero, exactly?

      How would that be possible?

      Edit – I see that pch has taken the time to respond, so I’ll ask him to eloquently explain how the referenced axis could start at zero.

      Hey, pch, how could the axis for “month end dealer inventory” start at zero, exactly?

      I’m very curious to hear you explain that quote of yours.

      • 0 avatar
        Pch101

        The shape of the curve is affected by the choice and starting point of the scale.

        Gullible people like yourself are easily fooled by this stuff. If I had two sets of data and no scruples, I could get it to say whatever I want just by manipulating the presentation.

      • 0 avatar
        DeadWeight

        I see you threw out more non-responsive statements.

        If anyone wants pch to explain how the axis for “month end dealer inventory” could possibly start at zero, good luck.

        Maybe that axis should start in the year 1907, since GM was born in 1908?

        Again, it’s not like I’m misquoting him. Oh well…

      • 0 avatar
        Pch101

        I just explained it to you.

        Again, I can only presume that you never took a math class. If you can’t understand how the scale impacts the presentation, then you’ll never get it,

      • 0 avatar
        DeadWeight

        The most satisfying thing for me, without having to resort to personal or ad hominem attacks, is watching you twist in the wind in front of everyone now that you’re stuck with that quote, and you won’t be able to find a way to spin it to sound even marginally credible.

      • 0 avatar
        bikegoesbaa

        “Hey, pch, how could the axis for “month end dealer inventory” start at zero, exactly? ”

        See the numbers on the vertical axis on the right hand side of the graph?

        See how the smallest number (at the top) is $450,000, and the largest number (at the bottom) is $800,000?

        Now, picture those numbers flipped around, so the big one is at the top and the little one is at the bottom.

        Then, picture that flipped graph, but with the smallest number (at the bottom) as $0 instead, and the datapoints adjusted to reflect the new scaling.

        This is, exactly, how the axis for month end dealer inventory could start at zero.

        The graph is just not very useful, except as a perfect example of how to manipulate the presentation of data in order to push a particular viewpoint at the expense of clarity and utility.

      • 0 avatar
        CJinSD

        Me thinks you protest too much. Looking only at the numbers indicates that a 40% growth in GM’s channel stuffing coincided with a 50% reduction in the value of GM’s stock. How does looking at it carefully diminish it?

      • 0 avatar
        DeadWeight

        @bikegoesbaa:

        Far be it for me to un-invert an inverted trend line chart as you suggest (or do the other chart gymnastics you suggest), but I do believe THE FAR MORE BASIC ISSUE with Pch101′s statement IS THAT THE BLUE LINE REPRESENTS MONTH END DEALER INVENTORY, and no matter from what angle you view or flip the chart (or do handstands while viewing it), YOU’RE NEVER GOING TO GET TO ZERO UNITS, which is what Pch101 is babbling insanely about (apparently).

      • 0 avatar
        Pch101

        I applaud Bikegoesbaa for a good explanation. Unfortunately, some posters don’t have enough arithmetic under their belts to grasp what should be obvious.

      • 0 avatar
        DeadWeight

        You mad bro? why so angry?

        Pch101: “The chart is nonsensical. Neither axis starts at zero…”

        It finally clicked!

        I went back to Sept. 15, 1908, and finally got that axis to 0 units in dealer inventory at month end.

        It was only when some dude named Billy Durant got started that this began to change.

        You were right all along. Those data torturers at Zero Hedge should be ashamed.

      • 0 avatar
        Pch101

        Your angst is misplaced. Instead of being agitated with CNBC, Jim Cramer or me, you should be upset with your math teachers for failing to show you how to properly analyze a chart. Apparently, at least one child was left behind.

      • 0 avatar
        jkross22

        Why the outrage? GM is channel stuffing and their stock price is predictably in the tank. Are the people upset with this fact upset that it’s getting discussed or upset because it’s further evidence of the failure of an authentic reset of GM via a real bk?

        I’ll go out on a limb and infer it’s a little of both.

        Unsurprisingly, the ones most upset are the GM bk apologists.

        Next….

      • 0 avatar
        Pch101

        I’m not outraged, I’m just astonished at the level of math illiteracy around here.

        I explained in a post below what is wrong with excess inventory. The excess inventory problem doesn’t change what is wrong with the scaling of the chart.

      • 0 avatar
        jkross22

        Two issues:

        1) Some people don’t like the chart because clarity isn’t what it provides or because it comes from a website they find offensive or both
        2) Poor leadership, overcapacity, a broken corporate culture and product that is not selling as expected by GM, which the taxpayers still own 500 million shares of, is continuing the same destructive practices of “old GM” with pretty much the same results.

        Of these 2 issues, I’m confident GM’s continued failure is the more important.

        Why are we talking about the chart again?

      • 0 avatar
        Pch101

        The article is entitled “Chart of the Day”.

        In this part of the thread, I’m pointing out what is wrong with the chart. As it turns out, there is a lot wrong with it.

        Here’s a suggestion for the future: When you see a chart with two data different types of data sets (in this case, one measures the number of units, the other measures a price for stock) neatly overlapping, then you are probably being played for a sucker. The presenter was obviously making an effort to get these two lines to overlap, which is why the scale was manipulated as overtly as it was.

        If I was trying to argue that there was a correlation between the inventory levels and the stock price, and if I didn’t want to manipulate my audience, then I would have presented these with different formats, i.e. the stock price with a line graph and the inventory with a superimposed bar graph. That would presumably show the bar graph rising while the line graph was falling. That would be less exciting for the tin foil hat brigade, but that sort of presentation might actually have some merit.

      • 0 avatar
        bball40dtw

        I don’t think anyone is angry about the graph. Pch is just pointing out that the same picture could have been told in a less bias way. He isn’t talking about 0 cars in inventory, but the fact that there is no real origin of this graph. The numbers are damning enough without manipulating data.

      • 0 avatar
        DeadWeight

        I think Pch101 is upset about the graph, and that he also has made the most incorrect statements regarding it in this entire thread.

        Whether one does or does not agree that the numbers or data expressed by the trend lines are factually true, if one interprets the chart consistent with what it expresses, it shows that GM dealers had approximately 500,000 cars in aggregate dealer month inventory around the point of December of 2010.

        It further purports to show that that aggregate dealer month end inventory is 700,000 vehicles today.

        Again, whether one believes these numbers are accurate or not is a separate issue (but no one has cited to anything yet rebutting them as incorrect).

        It’s not that complicated; except for Pch101, apparently, who believes the chart is useless unless it incorporates a reference point when GM dealers had 0 units of vehicles in aggregate dealer month end inventory.

      • 0 avatar
        Pch101

        “He isn’t talking about 0 cars in inventory, but the fact that there is no real origin of this graph.”

        Correct. Unfortunately, your explanation is going to fly well above the head of at least one poster here.

        Oh, I see that it already has.

      • 0 avatar
        jkross22

        bball,

        That’s a fair response. All news is biased, some much more than others, and it’s easy to get caught up in a shoot the messenger/shoot the messenger’s style argument, as opposed to listening to the message.

        That appears to be happening here.

      • 0 avatar
        DeadWeight

        @bball:

        There is a “real origin of the [chart],” and it’s December of 2010.

        Some believe that it’s interesting to note how many vehicles GM dealers are holding in inventory at month end today versus December of 2010.

      • 0 avatar
        Pch101

        “There is a “real origin of the [chart],” and it’s December of 2010.”

        Er, no. You need to quit while you’re behind.

        The good news is that if you want to sue your math teachers for gross negligence, you’re going to have a slam dunk case.

      • 0 avatar
        DeadWeight

        The math teacher joke is so hilarious is warrants repeating so many times.

        So there’s no inception or origin date regarding the data that the chart purports to express?

        Your explanations get weirder-er and weirder-er. But please continue.

      • 0 avatar
        Pch101

        Quite honestly, you are hopeless. Not only are you ignorant, but you’re committed to remaining ignorant. It’s no wonder that you are so inclined to believe conspiracy theories — you prefer mindless speculation to hard data.

        Since I obviously can’t teach you anything, perhaps these folks will have better luck.

        http://faculty.atu.edu/mfinan/2043/section31.pdf

        The scale problem with the Zero Hedge graph is illustrated quite clearly in Figure 31.1. If you can figure out that much, then maybe you’ll be ready to identify the second problem (the manner in which two different types of units are being compared to each other.)

      • 0 avatar
        DeadWeight

        What portion of 31.1 in the pdf you linked negates the validity of the data charted or even the form of the chart? There are numerous sections under that portion and I don’t see a single one that has been violated by the subject chart (in anticipation of your obsession with “scale”, the ‘break point’ that is clearly present is pre and post December, 2010).

        This chart clearly indicates, in an unambiguous manner, the absolute level of vehicles in GM dealers’ aggregate month end inventory as of December 2010 and current levels, as well as the absolute level of pricing of shares of General Motors stock during the same period.

        It’s THAT simple.

        If you wish to argue that the absolute numbers are factually incorrect, make your case, which you haven’t done yet (nor do I expect you to).

        Whew!
        Wow!
        Yikes!!!

        Attempted mental rape is never easy.
        That was R-O-U-G-H!

      • 0 avatar
        bikegoesbaa

        The absolute numbers are a separate discussion. I expect that they are accurate, as that data is pretty easy to come up with.

        The larger point is that graph has clearly been manipulated to tell a particular story, rather than to present data in as clear a manner as possible. It implies a direct link that may not actually exist.

        What would we find if we graphed Ford’s stock price against GM dealer inventory? If the graph looked similar, would you conclude that those values are also related? Because if you make that graph, you’ll find that it does; as the magnitude of chances of GM and F overlay very nicely since December 2010.

        If this site is going to have a “chart of the day” feature, it would be worthwhile to make sure that the chart in question is both based on sound data and presented clearly. If that is not the case, it’s fair game for discussion.

        Generally, it’s easy to get the presentation of statistics right; if not optimized. It actually takes work to make them misleading.

      • 0 avatar
        Pch101

        “Generally, it’s easy to get the presentation of statistics right; if not optimized. It actually takes work to make them misleading.”

        Yep. And it’s obvious that whoever put together this chart was intent on manipulation, rather than mere presentation.

        The odd choice of scales, and the decision to use the same kind of line graphs to overlay scales that aren’t comparable to one another, make this blatantly clear. It’s frankly disappointing that you needed to explain it.

  • avatar
    NormSV650

    Damn interns! What will they of to compare next?!

  • avatar
    el scotto

    Didn’t GM stuff he supply channel because they’re coming out with a brand new truck for 2013 model year? Plant shutdowns, new tooling, need to keep trucks in stock, etc. When I see a PowerPoint slide with shaky metrics I remember Mark Twain. He said: “There are lies, dammed lies, and statistics”.

    • 0 avatar

      Go back and look at the previous stories. That’s true but it also happens regularly, even when there’s no model changeover.

      • 0 avatar
        sunridge place

        You do realize that when you take trucks out of the mix, GM is right around the ideal 65 days or so inventory for the rest of their mix….right?

      • 0 avatar
        CJinSD

        http://gmauthority.com/blog/2012/06/here-are-the-changes-to-the-2013-chevy-silverado-rpo-central/

        This is the same story we were told when GM added 100,000 to their total vehicle inventory last summer. When all was said and done, 2012 didn’t bring a new truck. According to GM authority, next year brings the Silverado three new paint colors and a new tire option while losing a few other options. The ‘new’ truck is a 2014, so the urge to stockpile 2012s is a bit of a mystery, especially when GM inventory has yet to shed 100,000 in baby weight from their still-born new truck changeover last year.

  • avatar
    wsn

    That’s how they got their #1 title back in 2011.

    • 0 avatar
      PintoFan

      No, they got their title back in 2011 because Toyota basically stopped producing cars for 3 months.

      • 0 avatar
        alluster

        Pinto, GM regained the title in 2010 itself, if not for govt. subsidies in japan that allowed Toyota to sell 500,000 units more than they normally would have. GM had a huge lead over Toyota in 4Q 2010 and first two months of 2011, even before the earthquake. GM would have regained the title back in 2011, earthquake or not. Just laying out facts not that any of this matters to profitability or sustainability.

        WSN, GM regained the “sales title”, which only counts deliveries to customers.

      • 0 avatar
        CJinSD

        alluster, using your thinking GM lost the crown for good in 2009 when federal intervention prevented GM from assuming their rightful place in history.

      • 0 avatar
        wsn

        alluster, I agree with you that GM’s would be #1 even if there is no earthquake. I mean, between WuLings and stuffing the sale channel, there are 2 million “sales” instantly. Can’t beat that.

        This year, Toyota has a chance of being #1 because GM’s channel is quite stuffed aleady and can’t take much more. Only hope for GM is to ask Chairman Obama to fabricate another “accident” upon Toyota.

  • avatar
    CJinSD

    While GM apologists love to say that everyone in every industry counts retailer inventory as sales, isn’t it true that most of this inventory is paid for by GMAC floor plan financing until it is actually sold to a retail or fleet customer? Maybe GM has ‘sold’ about 22 billion dollars worth of cars to their agents, but it was paid for with GM’s money and that won’t be paid back until 700,000 real customers can be found. Until then, the channel stuffing is an allocation of capital.

    • 0 avatar
      PintoFan

      That is true, CJ. And I was stunned, STUNNED, I tell you, to learn that this insidious practice of “floorplanning” and so-called “capital transfer” is actually normal throughout the industry.

      http://www.toyotafinancial.com/consumer/tfs.portal?_nfpb=true&_pageLabel=pg_CommercialFinancePagePortlet

      “Originally known as TMCC Equipment Finance, Toyota Financial Services Commercial Finance, a division of Toyota Motor Credit Corporation began operations in November 1984. We funded our first wholesale flooring (dealer) transaction in January 1985 and our first lease (customer) transaction in November 1985.”

      It’s amazing to see Toyota, that paragon of efficiency, transparency and good business practices, experimenting with such risky financial instruments. I just can’t BELIEVE that they would risk their own capital to help fund their dealer network, no doubt an incredibly dangerous and uncommon maneuver.

      • 0 avatar
        CJinSD

        Now show me the part where Toyota carries 700,000 cars in inventory in just one market and you’ll have fooled anyone other than yourself.

      • 0 avatar
        PintoFan

        Unless you believe that GM’s dealers are going to default on the inventory they hold in floorplan, why do you care? The folly of Toyota’s lean inventory strategy was shown to everybody last year when they quickly ran out of cars to sell following a production disruption. Maybe Toyota should take a page from GM’s book and understand that it’s important for consumers to have a wide variety of product to choose from. When their needs can’t be satisfied immediately, they go elsewhere. You want to make a mountain out of a molehill because that suits your vision of GM.

      • 0 avatar
        Pch101

        “Unless you believe that GM’s dealers are going to default on the inventory they hold in floorplan, why do you care?”

        GM continues to maintain the largest incentives in the industry because they need to pay to get rid of that inventory.

        The dealer buys the inventory with the manufacturer’s money. The losses generated by excess inventory are ultimately eaten by the manufacturer, since they’ll have to get their floorplan money back.

        130 days is excessive because it ties up too much capital. If a company such as TMC can turn inventory in 45 days, then that means that every dollar can be turned about eight times per year. An average of 120 days would mean that dollars are being turned only three times per year.

        The company with longer turn needs to have more cash just to stay in business, because it needs to have more cash available to it which ends up being parked in that excess inventory. And the need to get that cash out of the excess inventory then pressures the automaker to crank up the incentives, as they need to find a way to get their money back. That depresses prices, which harms the branding, etc., etc.

        Zero Hedge is tinfoil hat garbage and the chart is completely bogus. But the inventory levels are a legitimate cause for concern, even among those of us who don’t wear tinfoil hats.

      • 0 avatar
        CJinSD

        Default doesn’t need to be the concern. The pattern here is that GM’s baseline inventory keeps growing to support their claims of business success. If they add 3 billion dollars(100,000 vehicles) to inventory each year then that is 3 billion fewer dollars available for more productive activities. Compare monthly figures against one another from year to year and that seems to be what they’re doing.

  • avatar
    APaGttH

    If channel stuffing = sinking stock price than Toyota and Ford must be guilty as charged. As this stock chart shows, with the exception of Tesla, the entire sector is significantly under performing against the S&P 500 based on the last 12 months of performance.

    The S&P is basically flat over the last year. Toyota is down over 14%, Ford is down 31%, GM is down 35%. Tesla, for giggles, is up 2.5% so about on par with the S&P 500 (beating it by 2%).

    https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1343246400000&chddm=98923&chls=IntervalBasedLine&cmpto=NYSE:F;NASDAQ:TSLA;NYSE:TM;INDEXSP:.INX&cmptdms=0;0;0;0&q=NYSE:GM&ntsp=0

    If the TTaC gods didn’t delete the above Google finance link, with the exception of a spike that Tesla got with the Model S release last month (now given completely back and then some) the overall sector has followed the same trend line together (down).

    Investors are lukewarm to put their money into the auto industry in general due to weak markets in Japan and Europe, concerns over China, and the US economy being gimpy, at best.

    To somehow draw some connection that stock price down = channel stuffing problem, when any person with a web browser and a shred of understanding of finances can do a simple chart analysis and see the whole sector is down hand-in-hand is tin foil hat worthy.

    • 0 avatar
      CJinSD

      Did you believe yourself when you said that Toyota is in the same boat with a company whose stock is down far more than twice as much? The intellectual dishonesty involved seems difficult for one to accept from oneself, whether one is paid for one’s disinformation campaign or not.

  • avatar
    Juniper

    Here is some truth about GM truck inventory. http://www.torquenews.com/106/gm-announces-2012-downtime-three-us-truck-plants
    And yea I think the chart blows

    • 0 avatar
      CJinSD

      GM spread the same story to justify the explosion of their inventory last summer, but inventory never fell to previous levels and has a baseline 100,000 units higher than a year ago.

  • avatar
    highdesertcat

    There’s a lot of discussion here but does anyone actually refute that channel stuffing is happening?

    I find nothing offensive in the chart and from my own personal knowledge in my area I see a concerted effort to sell a lot of GM vehicles with current ads like “$8500 off on all Avalanches” or “$9500 off all Silverados”.

    If there were shortages, the dealers wouldn’t resort to ads like that. I know several guys who have taken advantage of these great deals. Of course the dealers make most of their money on the vehicles the buyers traded in.

    To me it sounds like GM, its distributors and its dealer network would like to move a lot of iron as quickly as possible. I don’t see ads like that for Ford or Chrysler in my area.

    That makes right now a great time to buy a new car or truck. The question then becomes, will there be enough buyers that want to take advantage of GM’s channel stuffing and spring for that new car or truck?

    The year-end sales numbers will tell the story this coming January 2013.

    • 0 avatar
      wsn

      Simple. Sales to dealerships are counted as sales. And this is election year. They need more sales to make their boss look good.

      • 0 avatar
        highdesertcat

        Yeah, everything reverts back to politics, doesn’t it?

        I don’t want to go on a political spiel here since I’m an Independent, but Obama will win re-election easily. It’s in the bag. They have nothing to worry about.

        There simply aren’t enough people in America who will vote for Romney to give Romney a majority to oust Obama. It’s just not going to happen. No self-respecting Independent would vote for Romney. Too many issues there. Even more than Obama has.

        A lot of people will simply stay home on election day in November because a choice between two bad candidates is no choice at all.

        And who’s to say that Romney will be any better than Obama? The big objection to Obama is his affordable health care mandate, and Romney is the father of that healthcare bill and successfully implemented it in Massachusetts when he was governor there.

        Channel stuffing, IMO, is used to try to quickly turn outdated and overstocked, slow moving merchandise. Obama doesn’t benefit from it.

    • 0 avatar
      sunridge place

      If the situation is so dire for GM…

      Why does Chrysler have higher incentives than GM last month?
      Why is GM not #1 in Incentives/Transaction price? Heck, Nissan has a higher % of Incentives to Avg Transaction price than GM last month according the Truecar.

      http://blog.truecar.com/2012/07/03/honda-and-toyota-with-record-highest-average-transaction-prices-for-second-straight-month-industry-incentives-lower-in-june-according-to-truecar-com/

      If a dealer is willing to offer more money off a particular vehicle than the corporate incentive….so be it.

      I also still haven’t met too many poor Owner Pricipal’s of dealerships. I’ll betcha the owners of those dealerships offering the $8500 discounts aren’t living on the poor side of town. What gives? Are the owners of those dealerships stupid? Why would they do that? GM is not offer 9k rebates off of Avalanches…they are offering a $4500 rebate. If a dealer wants to take off another 4k out of his margin….who cares?

      As far as channel stuffing? GM has repeatedly said that they are going to build up truck inventories ahead of rolling shutdowns of their truck plants to make sure they have enough supply to carryover to the 2014′s that start coming out in Q2 of 2013. There will be a short 2013MY. You don’t build that inventory overnight….its not like they can just decide to triple production in October and November to achieve that.

      If you eliminate trucks, GM is sitting around a 65 day supply of their vehicles…right where you want to be. Are some models (besides trucks) oversupplied? Probably….Are some models (Sonic/Equinox/Terrain) a bit undersupplied? Probably. Show me a car company that doesn’t have a mix like that today….especially a full line car company.

      I realize some people like to look to the crisis of the day and predict an exact repeat of the past based upon a finding. I just don’t think the sky is falling here.

      • 0 avatar
        highdesertcat

        You won’t get an argument from me. I remember well the mad dash at the end of each model year that had my brothers scrambling to clear their lots of old stock. They weren’t always successful with the slow movers, no matter how much the manufacturer spiffed them.

        So, all in all, that makes this a great time to buy a new vehicle, especially from GM. The trouble as I see it, channel stuffing or no, there aren’t enough people willing to commit to take all of those unsold GM vehicles off the dealers’ lots.

        And with 2013 being a short model year for some auto makers, that makes upcoming 2014 models more desirable to own when they hit the lots in May-June 2013. Unless you just can’t keep the old Betsy running a little longer and need to buy now. But then, how many will actually choose to buy GM?

        After all, it is the people with money and/or those secure in their employment and income who buy new. The unemployed don’t buy anything unless they are independently wealthy.

        Unless employment suddenly takes off and more people become employed, I just don’t see GM sales increasing based on channel stuffing.

        I suppose time will tell. Derek makes a good point in his article. This channel stuffing has been tried before, it didn’t help. We now live as shareholders of GM with unintended consequences of past epic-fail decisions made by GM and its union.

        My guess would be that most Americans do not want to be shareholders in GM. Ergo, they vote with their wallet.

      • 0 avatar
        sunridge place

        ‘I just don’t see GM sales increasing based on channel stuffing’

        I don’t even think you know what channel stuffing is. The accusation is that GM is building more trucks than they need to artifically inflate revenue (which they book when a vehicle is shipped to the dealership.)

        You seem to think GM’s strategy is to build a bunch of stuff that people don’t want to increase sales. That’s not even what channel stuffing is. No, they are building more than the need to supply dealers for a production ramp down.

        Ask your brothers whether they would have preferred:

        A. To have an oversupply of their best selling product for a period of time before their supply of said product was going to go away leaving them short of that product for a period of time.

        or

        B. Have a normal supply of their best selling product for the second half of the year, then run low on their best selling product during the first half of the next year

        I wonder what their answer would be.

      • 0 avatar
        highdesertcat

        My brothers retired Sept 30, 2011 after more than 30 years retailing new cars from multiple brands and sold all six dealerships in four states to one of the largest wholesalers in America. They retired wealthy so they must have done something right.

        “I don’t even think you know what channel stuffing is.” I take exception to your assumption, but feel free to believe what you wish.

        I’ll wait until the sales stats come out in January of next year to see how well GM did or does based on its strategy for the North American market.

      • 0 avatar
        sunridge place

        Of course, you didn’t answer my question. I’m not doubting your brothers retired rich. You mention that often. That was kind of my point about asking them whether they would rather :

        A. To have an oversupply of their best selling product for a period of time before their supply of said product was going to go away leaving them properly supplied durng the production shutdown

        B. Have a normal supply of their best selling product for the second half of the year, then run low on their best selling product during the first half of the next year when production stops.

        It would be interesting to get a dealers perspective on this…especially one retired and able to speak freely.

      • 0 avatar
        highdesertcat

        “It would be interesting to get a dealers perspective on this…especially one retired and able to speak freely.”

        To most of them it’s just a job, a means to an end, a function in life that gives purpose and meaning to one’s existence earning a living doing what they’re competent at.

        Sometimes the dealers are at the mercy of their OEMs. It’s a tough business. Ask anyone who’s done it for a living. Better yet, ask anyone who failed at it.

        No matter how you define channel stuffing, the end result must be the sale of the commodity, car, truck, whatever. Unsold stock is a boat anchor on the bottom line.

        There are times that dealers receive stock they neither want nor need. This usually results in a lot of yelling at the sales staff to push, push, push. I’ve heard it. It ain’t pretty. I felt sorry for the boys and girls doing the pimping. You can always make more money, but you can’t ever regain the time you wasted on a lost sale.

        And FYI, there are several dealers, former dealers and automotive executives that I know personally, retired and otherwise, who are active on ttac. Just because you do not know who they are doesn’t mean that they’re not here.

        Ever so often they do comment. Sometimes they even identify themselves as to their position within the hierarchy of the automotive industry. Most of the time they don’t. Most of the time they just read.

        ttac did not rise to this level of prominence because their writers write trash, half truths or untruths. Things have mellowed since the Farago era, in case you missed it.

        The only reason that I mention repeatedly that my brothers must have been successful at what they did and retired wealthy is because those not successful in this business do not last long. Those auto manufacturers not competitive fail and declare bankruptcy. In the worst instance they live on, on indefinite life support funded by the taxpayers.

        “Of course, you didn’t answer my question.”

        That is by choice because your mindset is not open to anything other than your own interpretation of the world around you, as others have mentioned earlier in other threads.

        Maybe if the B&B knew more about you and your affiliation with the automotive industry, your opinionations might be more valued by others. I sure hope you’re not a bean counter.

        I would be thrilled if you were the buyer for a regional distributor and could enlighten us all about the inner workings of disseminating unsold stock to dealerships. Now that would be something we would all welcome!

      • 0 avatar
        sunridge place

        Didn’t realize I had to provide my resume to ask some questions and challenge statements of facts that are often disguised as opinions by others on a public forum. My bad.

        Nor do I recall being called out by anyone (besides you) that my mindset is closed and I’m unable to deal with anything outside my own interpretation of the ‘world around me’

        So, I have to identify myself to get you to respond to a challenge to your opinion?

        I think the answer to my original question is that:

        A dealer would rather deal with a ramp up of his inventory on a popular product and deal with the extra expense that such a ramp up will incur in order to make sure he has adequate supply of that product through a reduction in production instead of maintaining normal inventory of that product ahead of a production stop and being out of that product.

        Thanks for the lecture…who knows….maybe I’m one of those people you referenced:

        ‘Sometimes they even identify themselves as to their position within the hierarchy of the automotive industry. Most of the time they don’t’

  • avatar
    wsn

    APaGttH, if 14% down is bad, 35% down is call-your-black-union-boss-in-the-white-house-for-more-bailout bad.

    If you use Toyota as a benchmark (itself been declining), since the new IPO, GM stock has underperformed Toyota by 40%. Suckers just don’t learn. Their memory is shorter than 2 years.

    • 0 avatar
      jkross22

      + 1

      Lots of excuses and deflections, yet nothing to refute reality – channel stuffing is alive and well at GM 2.0. They will not learn. They will not change. They believe they’ll get bailed out again.

      Seems like there is not much substantive difference between this and LIBOR manipulation or Glass Steagal (sp?) repeal or any of the other actions that our hoodwinked society won’t get led around by the cajones. We used to be better than this.

      Yet, there are those defending this sham.

      • 0 avatar
        sunridge place

        So, because the US Govt owns a bunch of shares of stock, GM should let their truck inventories get down to say 60 days right now so they can be completely run out of them when they cycle through weeks of production downtime while they retool for 2014MY trucks between now and next Q2?

        The math is really simple.

        As of July 1, here is GM:

        700,927 Total Vehicles in Inventory
        9500 Vehicles Sales per Day
        74 Days Inventory

        238,194 Total Trucks in Inventory
        1750 Truck Sales per Day
        136 Days Inventory Trucks

        462,733 Total Non-Trucks in Inventory
        7800 Vehicle (non Truck) Sales per Day
        59 Days Inventory Non Trucks

        As of end of June:
        GM= 74 Days
        GM Non Truck= 59 Days (my calculation)
        Chrysler=67 Days
        Ford=59 Days
        Toyota=54 Days
        Honda=55 Days
        Nissan=65 Days

        http://wardsauto.com/keydata/USInventorySummary

        Its just a Truck thing…and they have weeks of production downtime (around 21 weeks)rolling across several plants over the last half of 2012 and into 2013.

        How would you like to have the conversation with the owner of Classic Chevrolet, for example, in DFW area (who sells a ton of Silverados) that he’s going to be starving for Silverados for the first half of 2013 until the ramp up for the 2014′s is complete? Tell me, what would you tell your dealers???

        You don’t build up inventory on trucks overnight…or even over a few months…its just not possible.

        I’m guessing that GM was hoping to be around 200,000 trucks right now instead of 238,000. Perhaps YTD sales aren’t quite where they forecasted them….off a % or two. Silverado sales are up 6.4% YTD…maybe they thought they would be a tick higher. Its an older model…the economy is tough to forecast….some on here predicted gloom and doom for autosales in 2012. Most experts were wrong when predicting the year so far.

        A lot of effort goes into sales forecasting and production schedules. So, tell me again how this is rampant channel stuffing instead of a calculated plan to ramp up truck production to make sure their dealers weren’t low on profitable trucks going into 2013?

      • 0 avatar
        jkross22

        “The performance of GM is moot”

        Ok.

      • 0 avatar
        jkross22

        @ sunridge,

        Right, no channel stuffing:

        http://sdnyblog.com/wp-content/uploads/2012/07/12cv5124-Scott-v.-GM-et-al..pdf
        http://dailycaller.com/2012/07/19/gm-turnaround-reports-rely-on-overbuilding-jam-packed-dealer-lots/
        http://seekingalpha.com/instablog/2914431-bubbles-and-busts/871811-is-the-return-of-auto-subprime-lending-and-gm-channel-stuffing-connected
        http://www.thetruthaboutcars.com/2012/04/gm-back-to-its-channel-stuffing-ways/

        Okay.

      • 0 avatar
        sunridge place

        Good lord.

        I can play the link game too…

        Subprime lending? Chrysler leading the way.

        http://www.detroitnews.com/article/20120723/AUTO0101/207230340/Chrysler-setting-pace-auto-lending?odyssey=mod%7Cnewswell%7Ctext%7CFRONTPAGE%7Cs

        Keep me posted on the success of that lawsuit….

        here’s a well written paragraph from one of your links:

        Indeed, on July 1, 2011, GM admitted on an investor conference call that it had substantially exceeded inventory targets. An article appearing on Barron’s on July 5, 2011 quotes Don Johnson, the VP of GM’s U.S. sales operations, who stated on an investor call that “[r]ight now we are at 122 day supply on full-size pickups. And this is slightly above where we would like to be. I acknowledge that our target is between 100 and 110 day supply but I think it’s important that people realize why we are there and what we may do about it.”

    • 0 avatar
      APaGttH

      Nice twisting of the data.

      The sector is down. I was not defending GM’s stock price, performance, or anything else (but thanks for going there). Where did I ever say that.

      What I did say is sinking stock price is in direct relation to the amount of channel being stuffed is pure tin foil hat rubbish.

      If that’s true (and funny how you “selected” GM in your reply and left Ford down at 31.8% alone – gee do THEY need a bailout thank you please too) then Ford is stuffing the channel every bit as GM is and Toyota is stuffing the channel about half as bad.

      Stock price amount of channel stuffing. That’s all. Its rubbish. Crap. Silly. Stupid. Holds zero merit. Case in point, Ford is down pretty much as bad (OK,we can split hairs on 2-1/2 percentage points) so are they channel stuffing too? Because for this theory to work, it would mean all the under performing makers are channel stuffing and that is why the price is down.

      RIGHT??? I’ll ask again, where did I defend GM’s performance as a company? Hmmmmm???

      The only thing I’m showing in the chart is the automotive sector is under performing the S&P500. Do you REALLY want to argue that point? Are you saying that the automotive sector is not under performing?

      I would rather ask than put words in your mouth or accuse you of positions you never stated. Just for giggles, I added Honda to the chart…

      https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1343258131591&chddm=98923&chls=IntervalBasedLine&cmpto=INDEXSP:.INX;NYSE:F;NYSE:GM;NYSE:TM;NASDAQ:TSLA&cmptdms=0;0;0;0;0&q=NYSE:HMC&ntsp=0

      Not quite to 30% down, but at off 26% for the same period I guess they just need government loans – not a bailout quite yet (if I follow your benchmark)

      • 0 avatar
        jkross22

        When the taxpayers are holding 500 million underwater shares of Ford or Toyota, you will have a point. When Ford or Toyota go through a faux bk, you will have a point.

        If that happens, I would definitely group them in with GM 2.0. I would hold the same disdain for them as any other groveling, corporate, labor, or monied interest looking for a handout just like GM has done.

        I think most people would agree with this. Watering down criticism of GM’s actions doesn’t do anything to help. Channel stuffing is one of the ways numbers were fudged pre-faux bk. To see them continue this practice will of course lend plenty of justified criticism their way.

      • 0 avatar
        APaGttH

        @jkross22

        And I’ll never forgive Julius Caesar for the burning of the Library of Alexandria, but what your post has to do with channel stuffing equals declining stock price in direct alignment with each other is nothing but folly.

        The performance of GM is moot – this story is specifically about cause and effect. Channel stuffing is not causing the price to go down. Silliness.

  • avatar

    what hits 15 first, share price or market share?

  • avatar
    sunridge place

    Hey…look everyone…Ford did the same thing last time they did a major redesign. And, golly, they didn’t go bankrupt. So, maybe the morons at GM are just following a proven strategy to not go bankrupt again.

    http://www.autoblog.com/2008/03/17/ford-ramps-up-f-150-production-ahead-of-2009-model-changeover/

    • 0 avatar
      Pch101

      “Ford did the same thing last time they did a major redesign.”

      The 2014 Silverado is still in final testing. It isn’t supposed to be launched until fall of 2013. There won’t be any retooling for that just yet.

      Rather than defending it or squawking about channel stuffing, Occam’s Razor provides a simpler answer — GM botched the forecasting, and built more stuff than it needed.

      Here are some sales numbers for the full size domestic pickup truck market:

      Model/ Jan-Jun 2012 / Jan-Jun 2011
      Silverado / 194,508 / 182,785
      Sierra / 72,945 / 67,598
      Total GM / 267,453 / 250,383

      Ram / 138,581 / 111,898

      Ford F-Series /301,141 / 264,079

      Total / 707,175 / 626,360

      Now, do the math:

      -The total market grew by about 81,000 units (13%.) But GM grew only by about 17,000 units (7%.)

      -For the January-June 2011 period, GM had 40% market share. For the same period of 2012, that slipped to 38%.

      Ford is leading in share, and added the most volume, and Chrysler increased sales the most in percentage terms. Ford and GM currently have similar incentives on pickups, while Chrysler has the most.

      It’s a matter of time before GM cranks up the truck incentives in order to burn through these extra units. I would suggest that anyone who wants to buy one of these should hold off for a bit.

      • 0 avatar
        sunridge place

        Agree with some of your thoughts on the missed forecast being a part of the oversupply and I acknowledged that earlier in this discussion…but you are incorrect on the timing of the 2014 Silverado/Sierra half tons.

        Start up is in Q2 of 2013. Arrival will be before fall. Retooling will be staggered. There will be a short 2013MY and a lot of the downtime is in 2012CY.

        http://www.bloomberg.com/news/2011-12-23/gm-plans-21-idle-weeks-at-u-s-pickup-plants-in-2012-for-updates.html

        Last earnings call:
        http://seekingalpha.com/article/557061-general-motors-ceo-discusses-q1-2012-results-earnings-call-transcript

        see pages 4,7,9

        It will be interesting and revealing to get applicable updates during the next earnings call to see what has changed.

      • 0 avatar
        Type57SC

        Here’s Ward’s from June:

        GM Car = 56
        Ford Car = 53
        Chrysler Car = 46
        Toyota Car = 50
        Honda Car = 57
        Nissan Car = 50
        Hyundai/KIA Car = 26

        Ok, looks good. Well managed except for Hyundai screwing up the capacity planning and being caught without capacity

        GM = 91 (Sierra/Silverado 137)
        Chrysler = 76 (Ram 108)
        Ford = 63 (F-Series 81)
        Toyota = 58 (Tundra 96)
        Honda = 53 (Ridgeline 78, but not really relevant)
        Nissan = 85 (Titan 103)
        Hyundai/KIA = 32 (seriously Hyundai, just build a damn plant already!)

        So yes, GM has about a month too much inventory in full size PUs.

        I doubt this has anything to do with the stock price. Opel? China? UST ready to dump shares? Sales and earnings? These are the dominant factors.

        PLEASE:
        Don’t confuse correlation with causation.
        Look at days, not total.
        Separate for mix a little (incentive and inventory norms are very different in vehicles sold to fleets and upfitters. F150 is a great comparable. Ram is close. Others are not).

  • avatar
    CJinSD

    Wow. This thread is serving as the counterpoint to TTAC. GM could have introduced MY 2013 in May if they were preparing for a short model year. All it would have taken is three new colors and a set of optional BFG A/Ts, which is all Silverado fans are going to get next year. Surely 2013 trucks would have been more valuable in January than 2012s will be. Instead they are recycling the same story they used last year when they added 100,000 vehicles to their baseline inventory that were never shifted. Baseline was 500,000. Then it was 600,000. Now it is 700,000. Supposedly the big shutdown that is going to reduce inventory to manageable levels is coming this fall, just as it was last fall. I’m a big fan of a car company or two that makes some poor decisions. I don’t defend the ones that are obviously ridiculous, but then I don’t get paid to.

    • 0 avatar
      sunridge place

      GM started the 2013 trucks in June…not May. They were a month off from your suggestion.

      So, lets say a car company wants to get an extra 2 months supply of a product to plan for a shutdown and slow ramp up of a new product. And, lets say that car company is already running around 90% factory utilization. How would you suggest that car company build up that supply?

      Lets assume that car company sells around 45,000 units of that product on a monthly basis and has the capacity to produce around 60,000 units of that product if they stretch to 110% utilization on a monthly basis.

      To build an extra 90,000 units of that product to plan for the shutdown and ramp up should they:

      a. Decide to build those extra 90,000 units of that product in a few months right before they shutdown (hint…not possible)

      b. ramp up prodution of the course of a year…make extra units a month to get to that extra volume in inventory to plan for the production shutdown and slow start up of the new product?

      Oh, by the way, make sure to account for the 100′s of suppliers and THEIR production capacity amid THEIR increased utilization since the meltdown to make sure you have enough windshields, hoses, screws, AC units, sound systems etc. at the right time

      You tell me? What would you do? How would you do it?

  • avatar

    Gentlemen, I am proud of you. All of you. Apparently, it is possible to have even a heated discussion without name calling. Without the name calling the quality of the discussion improves.

    Isn’t “The good news is that if you want to sue your math teachers for gross negligence, you’re going to have a slam dunk case” m,uch better than calling the other guy a moron?

    Thank you.

    • 0 avatar
      geozinger

      I guess it IS nice that this didn’t degenerate into a name calling event, but is it really that much of an accomplishment when the premise (the suspect graph) is at the heart of the discussion?

      I think Derek’s claims to channel stuffing could have been made using other references (as several posters seemed to able to show) and we would have avoided all of the posts debating the effectiveness of math instruction in the US…


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