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GM's Channel Stuffing Goes To Germany: Is Europe's Largest Economy A Fraud?

Zero Hedge -- We have long argued that auto manufacturers have been channel-stuffing (and subprime-lending) themselves back into a disaster and as such class-action lawsuits have begun. Recently we also pointed out the epidemic of dealer-inventory-stuffing in China (and again this morning the Chinese luxury car market's over-stuffing). So today's report from Reuters that German auto manufacturers have been stuffing dealer channels just like the rest of the world as Europe's largest car market is in recession even if few outside of the industry would know it. "Essentially, the carmakers are deceiving their shareholders, since they make it look as if the vehicles were actually sold. They want to pull the wool over their eyes," as three in every ten new vehicles in Germany are sold not to customers, but to

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Submitted Jul 31, 2012 By: ccf_jeff

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1momsunshine Champion Author Ottawa Posts:5,495 Points:1,001,555 Joined:Mar 2010	Message Posted: Jul 31, 2012 9:14:21 PM Ignore 1momsunshine Report Abuse HMM
evowner Champion Author Salem Posts:2,187 Points:360,235 Joined:May 2012	Message Posted: Jul 31, 2012 8:06:30 PM Ignore evowner Report Abuse Using, "quotes the National Legal and Policy Center's article", as any semblance of accurate reporting is entirely subject. These are organizational arms of the Koch Brothers to further their ideology, which they are certainly entitle to but hardly with merit. These people are oil people with deep pockets to take care of their business. If you think they are even aware of a policy to advance the middle class, I would be surprised. Their presented "facts" are research to advance their philosophy, not research to discover the facts. Like their "Global Warming" denier endeavour, time and research will determine who is right.
StArrow68 Champion Author Oakland Posts:3,260 Points:1,362,155 Joined:Apr 2003	Message Posted: Jul 31, 2012 7:21:36 PM Ignore StArrow68 Report Abuse Watchout what you incentivize, it will produce results. Just like the unintended consequences of many regulations set up by Govt's.
ccf_jeff Champion Author St. Louis Posts:15,292 Points:2,565,550 Joined:Sep 2005	Message Posted: Jul 31, 2012 5:04:29 PM Ignore ccf_jeff Report Abuse evowner : "Zero Hedge, seems long on adjectives with few new facts." -- It seemed to me like they had enough facts in there to make their case with respect to the channel stuffing in Germany. They also had links to a Reuters article on the topic, to two other articles they had written on the Chinese channel stuffing and mega slowdown in their luxury vehicle market, and an earlier article they had written on the GM channel stuffing in the U.S., which included some facts & figures and even a few charts to back up their premise: GM Finds Creative New Ways To "Stuff Channels", Get Backdoor Taxpayer Bailouts, which in turn quotes the National Legal and Policy Center's article: GM’s Government Fleet Sales and Truck Inventory Rise. "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." ..."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." ... "the fact that its biggest shareholder has become a key marginal client of GM should make one's head spin at the Ponziness of the transaction: 'The government's increased spending on GM vehicle purchases presents yet another conflict of interest as Treasury refuses to sell taxpayers' stake in GM and Obama campaigns on the auto bailouts. It does not appear that any members of Congress (from either party) are questioning the increased spending. Also ignored was the Department of Energy's gifting of $2.7 million of taxpayer money to GM to reduce energy consumption in its door manufacturing process by 50%. The DOE seems to be one of the main conduits to funnel taxpayer funds to cronies of the Administration. The $2.7 million contribution to GM comes after additional millions of dollars were spent by the DOE on advisory fees paid to legal firms that helped smooth the way for the GM bankruptcy process (as reported here); another move that went unquestioned.' 'GM claimed that sales increases did not rely on incentive spending, which appeared to remain in check, but one analyst during GM's sales conference call questioned whether the company's "stair step" incentive spending was accurately depicted. This incentive spending kicks in after dealerships report final sales figures for the month and may be yet another deceptive way for GM to fudge its numbers. Not mentioned was GM card rewards programs that do not get counted as incentive spending. "Why is GM forced to succumb to such increasingly more deceptive practices? Why simple presidential election politics of course: when a failed company like GM is destined to symbolize the "success" of one's administration, there aren't many straws one can latch on to." 'The upcoming earnings announcement by GM is, politically, the most important to date. 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.' 'The article goes on to quote Kelley Blue Book's Alec Gutierrez who stated "They're (GM) likely going to have a relatively high days supply of trucks moving forward and they're already placing some pretty aggressive cash incentives on the hood. It's going to eat into their profit margins..."' GM's earnings announcement comes on August 2nd. The main headwinds will be weak European operations and growing pension liabilities. The headline number for earnings should be viewed skeptically and an eye kept on the share price reaction after the conference call. Expect Government Motors to put a positive spin on its financial health as the stakes are now at their highest. The long-term health of GM remains in question and the true financial picture may not surface until well after voters decide who will be running our country. Eventually we will see just how successful GM really is.' "At the end of the day, all of this is noise. If China retaliates in kind to the recen escalation by Obama vis-a-vis alleged Chinese deceptive trade practices, the GM will soon be able to kiss half of its top line, and who knows how much of its margin and bottom line goodbye." ... "In the meantime, looks for channel stuffing and direct government purchases to soar to unseen levels in the weeks and months heading into the presidential election as GM (and its 40% stock price drop since the IPO) will certainly be a key debate point between the Democrats and the GOP." [Edited by: ccf_jeff at 7/31/2012 8:07:36 PM EST]
BuckyTJones Champion Author Salt Lake City Posts:4,932 Points:967,950 Joined:Mar 2010	Message Posted: Jul 31, 2012 3:43:45 PM Ignore BuckyTJones Report Abuse Ripe in iniquity
Pramodsharma Champion Author Richmond Posts:1,974 Points:388,140 Joined:Feb 2012	Message Posted: Jul 31, 2012 3:16:43 PM Ignore Pramodsharma Report Abuse No question.
Meowmy Champion Author Florida Posts:1,293 Points:348,855 Joined:Jan 2011	Message Posted: Jul 31, 2012 3:16:22 PM Ignore Meowmy Report Abuse It's business as usual.
playtimeCLE Champion Author Cleveland Posts:8,560 Points:1,544,375 Joined:Nov 2008	Message Posted: Jul 31, 2012 3:07:14 PM Ignore playtimeCLE Report Abuse When will people learn to do honest business again?
Rich1430 All-Star Author Indiana Posts:761 Points:258,840 Joined:Mar 2012	Message Posted: Jul 31, 2012 3:06:42 PM Ignore Rich1430 Report Abuse The Big 3 will never learn. They will go bankrupt.
evowner Champion Author Salem Posts:2,187 Points:360,235 Joined:May 2012	Message Posted: Jul 31, 2012 2:43:57 PM Ignore evowner Report Abuse This site, Zero Hedge, seems long on adjectives with few new facts. Also, you can be sceptical without being bitter. The negativity is distracting from the facts presented. At least its another voice.
bl626 All-Star Author Toledo Posts:824 Points:242,355 Joined:Feb 2011	Message Posted: Jul 31, 2012 2:06:09 PM Ignore bl626 Report Abuse what's good for the goose is good for the gander... there is always a loophole or ways to look better
Yooperheart Champion Author Michigan Posts:3,425 Points:528,000 Joined:Feb 2010	Message Posted: Jul 31, 2012 1:52:51 PM Ignore Yooperheart Report Abuse And, what's next?
doggod Champion Author Anchorage Posts:2,853 Points:742,335 Joined:May 2009	Message Posted: Jul 31, 2012 1:24:23 PM Ignore doggod Report Abuse Germany's economy isn't as fraudulent as the rest of the EU, and the EU economy isn't as fraudulent as China's. There's plenty of deception built into the economic system everywhere. Next question.
alex395 Champion Author Louisville Posts:2,050 Points:276,710 Joined:Jan 2007	Message Posted: Jul 31, 2012 12:59:29 PM Ignore alex395 Report Abuse Government Motors what do you expect. Sounds like something a well know Mafia type leader would promote and cram down your throat like he did Obamacare.
nerde Champion Author Florida Posts:6,425 Points:1,315,670 Joined:Jul 2009	Message Posted: Jul 31, 2012 12:28:29 PM Ignore nerde Report Abuse Great article!
humblepie Champion Author Toledo Posts:34,266 Points:2,372,345 Joined:Mar 2006	Message Posted: Jul 31, 2012 12:15:22 PM Ignore humblepie Report Abuse gm is good at smoke and mirrors, afterall they learned from the master..........
pscamp Champion Author Ottawa Posts:3,285 Points:475,960 Joined:May 2011	Message Posted: Jul 31, 2012 12:00:31 PM Ignore pscamp Report Abuse OK