Not News: The Flat Big 3 and GM's (Election-Driven?) Channel-Stuffing

December 4th, 2012 5:46 PM

While it's not fair to criticize the press's coverage of November's vehicle sales as unfair or not balanced, it would be more than fair to say that the press is either ignoring or minimizing the impact of two important influences which have been at work all year. The first is the continued loss of combined market share at the industry's two US-headquartered makers, General Motors and Ford (Chrysler, the other member of Detroit's "Big 3," is owned by Fiat).

The second is that 2009 government bailout beneficiary GM continues to "channel-stuff" its dealers with vehicles they won't sell for four months or longer -- and that's if the economy doesn't slow down or go into a recession. Dealer inventories are now twice as high as they were three years ago -- and no, GM's sales haven't doubled in the meantime -- which makes one wonder, especially this fall, if it was being done solely to make the government and President Obama look good.

First, here's a comparison of November and year-to-date sales for 2012 and 2011 (Source: Wall Street Journal):


Detroit's Big Three lost over three points of market share in November compared to November 2011, the majority of it to what I call the "Japanese Big Three" of Toyota, Honda, and Nissan. Year-to-date, they're down by 2.3 points, with nearly all of it going to the Japanese. Four years ago, just as the initial bailout "loans" were being disbursed, the Big Three had 50% of the domestic market.

If one (in my opinion accurately) considers Chrysler to no longer be a "Big Three" member by virtue of its foreign ownership, one sees that November's market share drop is entirely due to flatness at GM and Ford, and that their combined year-to-date share loss is over three points.

President Obama was somehow still able to use the performance of the domestic auto industry, particularly at bailed-out GM (year-to-date market share loss: 1.8 points) as an asset instead of having it thrown in his face as a liability during the presidential campaign -- at least partially because the press paid no attention to the continued share shrinkage at GM.

As to GM's channel-stuffing, except for the expression of an acronym containing a profanity, the following graph left the folks at Zero Hedge speechless (click to enlarge):


Since December 2009, when GM appeared to hold back on shipping vehicles to dealers to make calendar 2009 look as bad as possible (in accordance with industry practice, it records a sale on its books when a vehicle is shipped to a dealer), dealer inventories have ballooned by 105% from 385,000 to 788,000. Dealer inventories are now officially (per the company's press release) 106 days, or 3-1/2 months, of sales. The official number for trucks alone is 139 days, up from 110 at the end of October, an increase of almost a full month in just one month(!). The situation with certain individual models almost has to be far worse.

Reports at the Associated yesterday by Dee-Ann Durbin and Tom Krisher (one is here recognized GM's sales problem ("Only General Motors was left struggling to explain yet another month of weak growth"), but not the overall Big Three (or Big Two, if you will) market share loss. It also noted the existence of GM's inventory issue, but certainly not its urgency ("some analysts think GM will be forced to offer more deals in December to clear out inventory"). A Wall Street Journal story Monday evening noted that the company is already having to scale back production schedules.

Come to think of it, it seems reasonable to ask if the inventory buildup, especially the 99,000-unit increase in October and November combined, occurred for appearances' sake for the sole reason of looking really busy to assist in Barack Obama's reelection effort. It's certainly difficult to see any business-related justification.

Cross-posted at