Is Gm using Channel Stuffing to appear to be doing well?

[1prophet]

http://www.zerohedge.com/news/2012-12-03/gm-channel-stuffing-wtf

GM Channel Stuffing WTF!?


Submitted by Tyler Durden on 12/03/2012 11:10 -0500

• Channel Stuffing

Those who have been reading our 2+ year series tracking the ridiculous "bottom-left to top-right" trend in GM dealer inventory channel stuffing, know all there is to know about the modern day equivalent of AOL (in which the purchases of modern equivalents of "dial up connections" are funded by loans from the US government itself), in both (non government backstopped) business continuity terms as well as in channel stuffing notoriety. Which is why we will present the November update of total dealer "inventory" (which rose to a record for the fresh-start company 788,194, or a record 99K increase in two months) a without commentary, except to say: WTF!?

Source: GM

For those that don't know, "channel stuffing", is a technique (usually illegal) were a manufacturer moves product to a retailer (in this case the dealer) above and beyond what the market can bear and count it as a sale for accounting purposes,

because as long as the vehicle sits on the dealer lot, it's on the dealer's floor plan and off of GM's books even though an actual sale to an end customer hasn't occured.

Is GM betting the economy is going to take off like a roaring wildfire, or perhaps Santa is going to bring all those highly paid Walmart employees a huge bonus check which they can then spend on their favorite automaker.

 

[glenn1]

So what? The Obama administration could care less; hell they're probably applauding this move. Do you think Uncle Sam, still a major stakeholder to the tune of billions of dollars, cares that they're forcing a few hundred millions of unwanted inventory onto dealers? Especially after the same government handed them tens of billions via TARP and further goodies like letting them carry forward through their bankruptcy tens of billions of dollars worth of tax loss carry-forwards?

 

[lotus503]

http://www.zerohedge.com/news/2012-12-03/gm-channel-stuffing-wtf

For those that don't know, "channel stuffing", is a technique (usually illegal) were a manufacturer moves product to a retailer (in this case the dealer) above and beyond what the market can bear and count it as a sale for accounting purposes,

because as long as the vehicle sits on the dealer lot, it's on the dealer's floor plan and off of GM's books even though an actual sale to an end customer hasn't occured.

Is GM betting the economy is going to take off like a roaring wildfire, or perhaps Santa is going to bring all those highly paid Walmart employees a huge bonus check which they can then spend on their favorite automaker.

I really like ZeroHedge, but it looks more like they are getting ready for holiday sales and new sales from tax returns.

 

[s0me0nesmind1]

So what? The Obama administration could care less; hell they're probably applauding this move. Do you think Uncle Sam, still a major stakeholder to the tune of billions of dollars, cares that they're forcing a few hundred millions of unwanted inventory onto dealers? Especially after the same government handed them tens of billions via TARP and further goodies like letting them carry forward through their bankruptcy tens of billions of dollars worth of tax loss carry-forwards?

Really? I didn't think there were people this retarded, but I keep on getting surprised.

 

[LegendKiller]

Monthly Payment Rates for the dealer floorplan deals for Ally are holding up well. That is the true indication of whether they are "stuffing" the channel.

Many companies that issue public (SEC registered) securitizations have to create Regulation AB website to enhance securitization reporting. For example, Ally's RegAB website is...

http://www.ally.com/about/investor/auto-securitization/

Then you can navigate into their wholesale reporting and find the October report here...

http://www.ally.com/files/auto-securitization/us/wholesale-bank/wholesale-bank-2012q3.pdf

Which shows that the MPR was 33.8% at the lowest, meaning their receivables turn about once every 3 months. That's down a little for Ally but not significantly. You can even use your noggin and aggregate the data up into a time series and analyze it yourself.

Then to expand on that, you have sales increasing significantly...

http://www.cbsnews.com/8301-505145_162-57556750/better-economy-storm-delays-lift-u.s-auto-sales/

and ZH cherry picking a nice low datapoint (2009) as mentioned in the article.

So yeah, ZH is full of shit.

headshot /thread.

 

[OverVolt]

Aren't the car sales just because of the super easy credit?

 

[1prophet]

Monthly Payment Rates for the dealer floorplan deals for Ally are holding up well. That is the true indication of whether they are "stuffing" the channel.

Many companies that issue public (SEC registered) securitizations have to create Regulation AB website to enhance securitization reporting. For example, Ally's RegAB website is...

http://www.ally.com/about/investor/auto-securitization/

Then you can navigate into their wholesale reporting and find the October report here...

http://www.ally.com/files/auto-securitization/us/wholesale-bank/wholesale-bank-2012q3.pdf

Which shows that the MPR was 33.8% at the lowest, meaning their receivables turn about once every 3 months. That's down a little for Ally but not significantly. You can even use your noggin and aggregate the data up into a time series and analyze it yourself.

Then to expand on that, you have sales increasing significantly...

http://www.cbsnews.com/8301-505145_162-57556750/better-economy-storm-delays-lift-u.s-auto-sales/

and ZH cherry picking a nice low datapoint (2009) as mentioned in the article.

So yeah, ZH is full of shit.

headshot /thread.

Then why the lawsuit?
http://sdnyblog.com/class-action-accuses-gm-of-channel-stuffing/

http://sdnyblog.com/wp-content/uploads/2012/07/12cv5124-Scott-v.-GM-et-al..pdf

 

[Demo24]

Aren't the car sales just because of the super easy credit?

Partly, economy is easing slightly, and of course sandy bumped nearly everyone last month.

 

[NesuD]

That article is so much crap. The provided chart clearly shows that historically November vehicle deliveries always spike which the chart in that article clearly shows. There is a very practical reason for it. December has lots of production downtime at the plants because of the holidays therefore fewer cars get built hence the inventory buildup preceding. The fact that there are lawsuits doesn't necessarily mean anything. Lawyers are gonna sue its how they make their living. I look at that chart and I just see a company that is steadily growing their sales year over year. Looks like a pretty steady growth curve to me.

 

[HomerJS]

So what? The Obama administration could care less; hell they're probably applauding this move. Do you think Uncle Sam, still a major stakeholder to the tune of billions of dollars, cares that they're forcing a few hundred millions of unwanted inventory onto dealers? Especially after the same government handed them tens of billions via TARP and further goodies like letting them carry forward through their bankruptcy tens of billions of dollars worth of tax loss carry-forwards?

I find it odd that methods of measureing business outcomes that been used for years are only questioned when the results are favorable to the administration. Remember when the unemployment numbers were "suddenly cooked"?

You guys must try harder.

 

[dank69]

Wow the guy writing that article needs to stop trying to be an intellectual. He is not good at it.

 

[Ausm]

If it pisses off the Rightist, Hell I'm all for it.

 

[LegendKiller]

So the guy's entire theory is that the IPO price is lower *only* because channel stuffing that supposedly occurred a while ago but hasn't really materialized. These "reports" are nothing more than simple DSO measurements on trailing sales numbers and completely ignores any drivers behind the buildup in inventory.

Sounds like he has a long haul to prove anything. People launch stupid lawsuits all of the time.