Channel stuffing means forcing dealers to take more cars than they can sell, or making the vehicles and parking them somewhere or other. It’s an art that was perfected by DaimlerChrysler just prior to the automaker’s assumption by Cerberus Capital (a company more than a little familiar with the dark arts of dark arts.) The upside: the company books a vehicle as “sold” once it does an Elvis (i.e. leaves the building). The downside: there’s always a reckoning. One of our spies tells us that GM can’t cut production fast enough; new units are beginning to pile up here, there and everywhere. (Confirmation to robert.farago@thetruthaboutcars.com.) Meanwhile, one of our friendly GM store owners tells us that The General’s about to launch a new dealer incentive program. The new deal will encourage dealers to, as he puts it, “order unneeded and unwanted inventory.” “We’re talking about two to three thousand dollars in extra stackable rebates,” the mole reveals. “Depending on how much gas [new units] you take.” This does not please our guy on the front lines a bit. No sir. “It’s just great,” he kvetched with a dollop of sarcasm. “Unfair and unequal pricing to force franchisees into paying dangerously high floorplans.” Translation? “If you manage your units in a reasonable and sensible way, you are unable to compete on price.” Just another indication that this ain’t no party. [thanks to you know who you are X3]
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Start the day off right
On purely anecdotal evidence (i.e. the local GM dealerships) I would say this is probably not a wild ass rumor. Not only do both have additional new vehicles sitting on ancillary lots, such as out in front of the local mall, along the sidewalk/verge, and filling the “used” car areas, but their own standard lots are filled, especially with slow sellers (big trucks, vans, SUV’s, and fleet queens).
To be fair, the Chrysler dealership is doing this to a greater degree, having spilled over into the parking lots of the nearby closed/empty storefronts business, the grocery store next door, etc.
“Those who cannot remember the past are condemned to repeat it.” …Santayana
DCX. Sales Banks. Parking lots all over SE MI wallowing in new Dodge metal.
…yep, that one worked out pretty well too.
Could be; in Spain, up to 25% sales last year were not “exactly” sales (in spanish): http://www.motorpasion.com/2008/11/18-la-venta-de-coches-en-espana-tambien-era-una-burbuja-y-ahora-ha-explotado
It’s easy to believe that rumor.
More ancedotal evidence here in Dallas – Close to my office complex, located in the south-west corner of the Dallas Metroplex, there is a storage lot for new cars…. I’ve seen both Chrysler and GM products there on my drive-bys, so I’m not sure how it works, but right now there are oceans of cars. Oceans and oceans and oceans. Acres of new cars.
It used to be a pretty sight, that picture of American industrial strength….
Now it scares me.
Not only Channel Stuufing; GM dealers were “asked” recently to “buy down” their GMAC floorplan a point in a nasty cash grab.
That was a six or seven figure check to GM…
Having a GM dealer used to be a license to print money, for owners.
Interesting how it’s now become a leaky bag of smelly dung, just a precursor to the same thing which is soon to happen to the US Dollar.
Adding several trillion dollars to the debt in the next few years (after exponential increases over the last 7 years in the US debt) will catch up to us.
Zimbabwe being the prime recent example of what happens next.
http://americandigest.org/mt-archives/truth_slant/zimbabwe_hey_ho.php
“…making the vehicles and parking them somewhere or other. The upside: the company books a vehicle as “sold” once it does an Elvis (i.e. leaves the building).”
Can some Motor City accountant explain to me how revenue can be booked without a corresponding entry to cash or accounts receivable? Isn’t there supposed to be a debit for every credit?
So wait, GM is incentivizing the dealers… with what?? They’re already stiffing them on incentives owed.
Here – take 2 more Tahoes – but I don’t have the cash right now – so will you take… another Tahoe?
@50merc: When a car leaves the factory, a dealer’s or person’s name is attached to it, and considered sold (invoiced). If there’s not a name attached, it lands in a “bank” which any ethical accountant would log as inventory. However I think the Chrysler M.O. has been to somehow still cast these as sales to some – i dunno – holding company? Of course they then try to cram these down the dealer’s throats because the last thing OEMs want is lot queens on their lots.
UPDATE from an anonymous source:
I can confirm GM is filling up parking lots with excess inventory, at least in Flint, MI.
There is a recently closed auto dealership off of I-69 on Dort Hwy., which used to be Superior Pontiac. I just drove by there last week and the entire parking lot in the back was filled with new trucks. It is a fairly large parking lot, and if I had to guess, there are probably 200 – 300 trucks parked there.
jgholt: “I think the Chrysler M.O. has been to somehow still cast these [lot queens] as sales to some – i dunno – holding company?”
Maybe so, but wasn’t the essence of the Enron fraud that it was booking revenue from deals with supposedly outside entities that turned out to be Enron under another name?
So I’m still wondering how there can be revenue when they have “sales bank” cars. Even finished inventory must be written down and losses recognized if the reality is that it can’t be sold at original book value. Which, I suspect, the auditors would insist upon.
Another question: could GM be stacking inventory to sell during a (temporary, they’d hope) shutdown following filing for bankruptcy?
In my back parking lot at work there are about 15 H2s and H3s with the local GM dealer front plates on them and stickers in the window. They haven’t moved in about 2 months.
I don’t doubt that GM is doing this, because, from what I see, sales have just about collapsed for everyone. The local Honda dealer is literally overflowing with vehicles.
The local Chrysler dealer is overflowing with product, way more than it ever had.
One thing to keep in mind, besides M-B and Toyota also parking fleets at the ports, is that one way to get around the new CAFE standards is to build like crazy before the standards go into effect. Granted, that is four years from now, but some suits at GM did cast it as a feasible option.
WAR? GM channel stuffing barely rates as newsworthy I would think.
Bunter
We need someone in the Long Beach, Ca area to check out the port and see where they’re stuffing the Mercedes, Toytotas and Nissans. I read an article where a new ship loading area is being converted to a parking lot.
When all the big manufacturers start stockpiling, it truly illustrates how the market just absolutely collapsed.