Is GM Back To Channel Stuffing?
Tyler Durden over at ZeroHedge reports on the untold story of GM’s increasing delivery numbers: they’re sitting on lots.
Hidden deep in today’s disappointing GM November sales release is a number that all GM longs may want to quickly forget, or else pay serious attention to. But first, earlier today, GM reported slightly disappointing sales numbers: the newly IPOed company sold 168,739 cars in November, a 11.4% increase to November 2009, which came in below expectations of a 13% rise. That’s mostly noise. What isn’t, however, is the linear rise in GM’s auto inventory safely stashed away at dealers, i.e., unsold….
It is obvious that beginning in July, GM has started an aggressive channel stuffing program whereby it offload tens of thousands of cars (over 110,000 since July) on dealer lots, hoping these will get sold somehow, at some price, all the while dealers enjoy taxpayer subsidized floorplan leases which allows them to hold nearly infinite inventory. If and when the liquidation event takes place who cares? After all the company is now public and has managed to massage it artificial sales numbers sufficiently to fool investors that there is actual end demand for its cars.
So what would have happened if in October GM had held its dealer inventory flat (not declining, just flat): well, the top line number would have been 21,000 cars less sold. Which also means that total sales would have been not 169k but 148k, and instead of a 11.4% increase, GM would have reported a drop of 2.4% in November sales YoY, which would have made the life of GM DMM GETCO that more unbearable as the High Frequency Trader would soon end up with 100% of the stock float at $33.
Chapter 6 of Darryl Huff's classic "How to Lie with Statistics" discusses distorting bar charts by having them start at values greater than zero. ZeroHedge should read it.
FFS - this has been settled in the past when GM was producing no trucks - 'Deliveries' are 'Sales' to customers NOT dealers.
If December is a big sales month as everyone here is stating, is GM just getting dealers ready for the month? We should revisit this in December.