Sunday, July 08, 2012

The GM Sales Memo: Not Necessarily All Politics

GM comes under some criticism for its sales announcement which makes Obama look good.

It looks like General Motors will be throwing everything in but the kitchen sink to help fluff its second quarter earnings numbers. Taxpayers continue to help with the cause as President Obama campaigns on the "success" of GM following the manipulated bankruptcy process that cost taxpayers $50 billion and another $45 billion of tax credits gifted to GM to help protect powerful UAW interests. We now learn that government purchases of GM vehicles rose a whopping 79% in June.

Umnnhhhh, yah...but compared to what?  Gummint purchases of Ford (and Chrysler) numbers aren't detailed here; did the Gummint likewise pop purchases from them?  We don't know.  We might also remind the author that it was GWBush who invented the "rescue."  Yes, the tax credits/bailout scheme was dodgy, but it was bi-partisan.

Even granted that Gummint purchases artificially inflated GM's numbers, the second "puffery" argument doesn't hold water:

The pressure is on Government Motors to appear financially strong as this may be the last earnings report before November elections and sets the stage for how "successful" GM is. One of GM's past tricks to help fudge earnings numbers has been to stuff truck inventory channels. Old habits die hard at GM. According to a Bloomberg report, "GM said inventory of its full-size pickups, which will be refreshed next year, climbed to 238,194 at the end of June, a 135 days supply, up from 116 days at the end of May." 135 days supply is huge, the accepted norm is a 60 day supply. The trick here is that GM records revenue when vehicles go into dealership inventories, not when actually sold to consumers.

So happens that GM is shutting down its truck production lines for 60 (or so) days to convert them to the new '14 models.  That means that they really DID have to 'stuff' inventories, if only to ensure that there would be trucks available on dealer lots in the shutdown period.

So a 'normal' 60 day inventory had to be approximately doubled (to 135) to make up for the lack of production.

Reminder:  I hold no brief for Obozo.  He's a failure and will be written up as the most incompetent (or anti-American) President ever elected.  But facts remain which this author didn't consider.


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