Uh oh: GM backlog looking a lot like 2008

posted at 12:55 pm on July 5, 2011 by Ed Morrissey

“Is GM falling into old, bad habits?” asked one industry analyst when the backlog data for General Motors was made public yesterday.  The bailed-out automaker now has a growing inventory in its truck lines of 122 days worth of sales, nearly twice that of its non-bailout domestic competitor Ford Motors for similar lines.  With sales flattening in the auto market, GM has now returned to the high inventory of its pre-bailout condition:

The Detroit-based automaker, 33 percent owned by the U.S. after its 2009 bankruptcy, has 280,000 Silverado and GMC Sierra pickups on dealers’ lots around the country. If sales continue at June’s rate, that would be enough to last until November.

After GM’s truck inventory swelled to 122 days worth of average sales, the company said 100 to 110 will be normal going forward for such a large and complex line of vehicles, compared with 60 to 70 days for most models. Peter Nesvold, a Jefferies & Co. analyst, isn’t convinced.Ford Motor Co. (F), which makes similar trucks, is running at 79 days, and Nesvold says GM averaged 78 days on hand at year end from 2002 to 2010.

“It’s unbelievable that after this huge taxpayer bailout and the bankruptcy that we’re right back to where we were,” Nesvold, who has a “hold” rating on the stock, said in a telephone interview. “There’s no credibility.” In a research note he asked: “Is GM falling into old, bad habits?”

GM says that the answer to the question is “no,” but there are other similarities noted by Bloomberg in this analysis.  A former chief sales analyst calls GM’s line “dated,” and now predicts that GM will have to heavily discount in the fall to move the moribund inventory.  The pickup line hasn’t changed since 2006.  Ford, in contrast, began offering a V-6 engine on its trucks as an option and has been rewarded with significant movement in inventory.

The federal bailout of GM only made sense if the automaker’s difficulties entirely sprang from the financial collapse (caused mainly by government intervention in housing and financial markets through Fannie and Freddie junk bonds), and had been both competitive and profitable without it.  That was obviously not the case; GM had struggled for years against foreign and domestic competition.  The bailout forced GM to make some long-needed changes, such as consolidation of its product lines, as well as allowed the company to benefit from a politically-engineered bankruptcy that left the legacy benefit issues largely on the backs of taxpayers.

However, the basic management issues remained and apparently still do.  Even with the bailout, the company has trouble operating in a profitable and efficient manner.  That points to the bailout being a very bad investment for taxpayers, and with billions of dollars already lost on loans to GM and Chrysler, is a rather easy conclusion to reach.  As Doug Ross puts it, more succinctly:

You mean that abrogating bankruptcy law, screwing over secured creditors and rewarding Democrats’ union supporters with billions in equity, tax breaks and subsidies didn’t really fix GM?

Gee, that was hard to predict.

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one thing is for sure, I will never buy another GM product. As far as I am concerned, GM is owned and operated by the UAW. They don’t diserve my money and all my friends and family feel the same way.

I have a friend with a large pickup truck fleet that has used chevy for 30 years. He will never buy another GM truck and has almost completed his conversion to Ford.

I hope they go broke.

saiga on July 5, 2011 at 3:37 PM

BTW, I deal with people from Japan and Korea. They are not industry experts but I do think they thank you for gutting our manufacturing base and not noticing that most of the current unemployment is in that sector.

IlikedAUH2O on July 5, 2011 at 3:32 PM

that’s a dumb argument. Most foreign cars are made in teh U.S.

Most U.S. cars are put together in teh U.S., but the vast majority of parts they are putting together come from overseas.

So, what does it mean to “buy american”? If you buy a G.M. car, most likely you are buying 75% foreign parts that were eventually shipped to the U.S. and put together here.

If you buy a Honda, most likely you are buying 75% foreign parts that were eventually shipped to the U.S. and put together here.

I never had anyone here tell me why they don’t let GM sell my Cadillac in your conservative paradises overseas. OH — without a huge tariff.

IlikedAUH2O on July 5, 2011 at 3:34 PM

I don’t even know what this is supposed to mean. What “conservative paradises overseas”? It is the left that loves other countries and wants to change the U.S. to be like various European countries. I don’t recall a single instance where a conservative said, “_____ is so great, we should be just like __”.

Monkeytoe on July 5, 2011 at 3:41 PM

With “Lt. Dan” in charge, and a bunch of morons on the board rubber stamping his decisions, another bankruptcy is inevitable.

Ward Cleaver on July 5, 2011 at 3:52 PM

June Luxury top sales:
1st BMW with 9 models, 2nd Benz 13 models, 3rd Buick 4 models, 4th Cadillac 7 models (this showing is FAR better than in the past with fewer models than the top competition)

June Mid-size:
1st Chevy Malibu, 2nd Toyota Camry, 3rd Ford Fusion

June Small-Car:
1st Chevy Cruze, 2nd Ford Focus, 3rd Hyundai Elantra, 4th Corolla

Also selling well: Camaro, Equinox, and several others of the newly redesigned products.

…I’m not sure you can make that judgement based on the sales of one dated product line which also happens to be most affected when gas prices are high.

When you see how GM’s new products are leading in their categories, it’s even harder to say that things are going badly at GM.
When an updated truck lineup is released next year, then Ed will have a chance to fairly criticize GM if those models fail to sell. But to base a critique of the company on outdated models slated for replacement is a non-starter.

By the looks and early reviews of the new Sonic, GM may extend its ass kicking from the Cruze to the subcompact market.

http://www.caranddriver.com/reviews/car/11q2/2012_chevrolet_sonic-first_drive_review

Also, when companies are in inventory “build”-mode, there is a strong motivation for publicly-traded companies to park their manufacturing inefficiencies on the balance sheet in order to maintain current GM%s. We’ll see what Q2 and Q3 has to offer.

Neo-con Artist on July 5, 2011 at 2:57 PM

I don’t find any fault with your main premise and think you’re making a solid case for concern about GM, although given the company’s strengths in Asia and post-2008 model sales, I don’t agree that the company is threatened as a going concern. When it comes to GM, you have to separate ‘legacay’ vehicles and business from what the new management team is delivering.
The reliance on promotions to increase sales is probably the most legitimate concern and certainly an old chapter that shouldn’t be re-opened as it denigrates their brand pricing power over the long-term.

bayam on July 5, 2011 at 4:01 PM

If you buy a Honda, most likely you are buying 75% foreign parts that were eventually shipped to the U.S. and put together here.

Monkeytoe on July 5, 2011 at 3:41 PM

Other way. A Honda made here is 75-80% US content. So are Toyotas.

angryed on July 5, 2011 at 4:19 PM

When it comes to GM, you have to separate ‘legacay’ vehicles and business from what the new management team is delivering.
The reliance on promotions to increase sales is probably the most legitimate concern and certainly an old chapter that shouldn’t be re-opened as it denigrates their brand pricing power over the long-term.

bayam on July 5, 2011 at 4:01 PM

LOL, new models like Volt which is selling 200 units a month?

angryed on July 5, 2011 at 4:22 PM

Bayam,

Take out fleet sales to the govt and rentals and GM is at the bottom of sales. Aside from Avis and Hertz no human on earth owns a Malibu or Cruze or whatever other UAW junk you think sells well.

angryed on July 5, 2011 at 4:25 PM

Always liked GM trucks best. No longer, the UAW can keep their overpriced junk. My wife’s new (complex) Ford 350 crew cab diesel 4×4 is awesome.

I am not a racist on July 5, 2011 at 4:38 PM

If you buy a Honda, most likely you are buying 75% foreign parts that were eventually shipped to the U.S. and put together here.

Monkeytoe on July 5, 2011 at 3:41 PM

Other way. A Honda made here is 75-80% US content. So are Toyotas.

angryed on July 5, 2011 at 4:19 PM

Right. There is also some foreign content in greedy UAW made-in-America cars. Content-wise, no car is pure.

slickwillie2001 on July 5, 2011 at 5:19 PM

It’s time to get over the fact that Bush and Obama saved the US auto industry and our status as a manufacturing power.

bayam on July 5, 2011 at 1:38 PM

The US govt has no business intervening into the ‘saving’ of ANY private enterprise.
PERIOD.
If you believe this is a good thing, then I DEMAND my bailout. SAVE THE FAMILY FARMER/RANCHER.
How ’bout that?
That kind of thinknig is pure bullshite. Bcs if GM was such a profitable company, then there was no ‘intervention’ ever necessary in the 1st place. Right?

Badger40 on July 5, 2011 at 5:26 PM

My wife’s new (complex) Ford 350 crew cab diesel 4×4 is awesome.

I am not a racist on July 5, 2011 at 4:38 PM

Damn. How much did that set you back?

I long for the days when you could get just a truck … radio extra, with no carpeting, no power windows, no fancy extras. Just a truck to use as a truck.

Someone would make a fortune if they just built cheap, reliable, no frills pick-ups.

darwin on July 5, 2011 at 5:30 PM

http://www.caranddriver.com/reviews/car/11q2/2012_chevrolet_sonic-first_drive_review

“A brief disclaimer: Our driving exposure was limited to preproduction prototypes in one configuration (1.4-liter turbo, manual transmission, five-door) on an improvised circuit at Lucas Oil Raceway in Indianapolis, Indiana. In other words, we won’t be able to give you a definitive review until we get more time in a finished production car.”

Yea, a rave review if I ever saw one. And BTW, they hated the name Sonic.

Mr_Magoo on July 5, 2011 at 5:35 PM

It’s almost as if socializing failed companies to bail out their connected Union political machines isn’t a sound business move!

Blacklake on July 5, 2011 at 5:36 PM

Take out fleet sales to the govt and rentals and GM is at the bottom of sales. Aside from Avis and Hertz no human on earth owns a Malibu or Cruze or whatever other UAW junk you think sells well.
angryed on July 5, 2011 at 4:25 PM

GM fleet sales accounts for a third of total sales. I couldn’t find a breakdown by model.

Mr_Magoo on July 5, 2011 at 5:48 PM

Maybe President Predators-Over-Yemen can jot a little executive order telling those 1,700 DOT bureaudrones who make over $170,000 a year to buy a GM truck instead of a limo.

curved space on July 5, 2011 at 6:19 PM

GM’s problem was never excessive debt and obligations. GM’s problem was their non-competitive behaviors that inevitably caused the excessive debt and obligations. Until GM is forced to pay the price of its stupid decisions, it will not be truly motivated to stop being stupid. This of course assumes that it is not too late and that GM isn’t already in an unavoidable death spiral. After what they did to their creditors, I want them to fail. They are beyond redemption.

Immolate on July 5, 2011 at 6:41 PM

This explains GM claims of being profitable again because they get credit for a sale when the vehicles are shipped to the dealers. Just wait until next years numbers come out and they will show a loss again.

JeffinSac on July 5, 2011 at 7:27 PM

I’ll wait to see if I can pickup a 2011 Camaro SS for under $20,000.

Caper29 on July 5, 2011 at 8:01 PM

This is called “dealer stuffing” I read about it at least a month ago on http://www.zerohedge.com .

That site can attract some kooky commenters but the hiugher level economic knowledge is great.

Theworldisnotenough on July 5, 2011 at 8:39 PM

If you buy a Honda, most likely you are buying 75% foreign parts that were eventually shipped to the U.S. and put together here.

Monkeytoe on July 5, 2011 at 3:41 PM

Other way. A Honda made here is 75-80% US content. So are Toyotas.

angryed on July 5, 2011 at 4:19 PM

Right. There is also some foreign content in greedy UAW made-in-America cars. Content-wise, no car is pure.

slickwillie2001 on July 5, 2011 at 5:19 PM

I seem to remember the car with the highest American content is a Honda Accord built in Marysville, OH

Theworldisnotenough on July 5, 2011 at 8:46 PM

Instead of shooting hellfires at terrorists I propose we start dropping Sierras and Silverados on them.

TheBigOldDog on July 5, 2011 at 9:46 PM

Take out fleet sales to the govt and rentals and GM is at the bottom of sales. Aside from Avis and Hertz no human on earth owns a Malibu or Cruze or whatever other UAW junk you think sells well.
angryed on July 5, 2011 at 4:25 PM

Not true, GM has cut back on discount rental sales which is the segment which should be subtracted from total sales figures.

Having recently test driven a Civic, Corolla, and Cruze, I couldn’t disagree more. I found the Cruze superior in almost every respect, esp. interior cabin design and its turbocharged engine. You clearly want to see GM fail- go ahead, cheer on the failure of US industry at the hands of foreign competitors. Fortunately for GM, the Chinese worship the Buick brand and Asian sales are only going up.

The Cruze starts at about $16,000, a price that is already above what the Ford Fiesta, Honda Fit and Hyundai Elantra cost, and the bottom line increases when you add features

You’re comparing different categories. The Cruz isn’t priced to compete against the Fiesta and Cruz. Chevy’s outdated Aero is the right point of comparison, and it’s due for replacement by the Sonic next year. Based on early reviews, the Sonic is a huge improvement over the Aero and it should become one of the top 3 sellers in the subcompact category.

bayam on July 5, 2011 at 10:49 PM

There are enough folks POd about the bailout to not want to buy GM until there is NO Government involvement any longer.

No surprise here.

I like the designs, have no doubt about the quality, but expect that many folks may take exception to the unacceptable involvement of our tax dollars in the first place.

YUP, Ford had a better idea.

Jason Gillman on July 5, 2011 at 11:17 PM

one thing is for sure, I will never buy another GM product. As far as I am concerned, GM is owned and operated by the UAW. They don’t diserve my money….
I hope they go broke.

saiga on July 5, 2011 at 3:37 PM

My sentiments exactly. I used to be a big GM guy, but not anymore.

Mirimichi on July 5, 2011 at 11:32 PM

Not only for Zero having bled the taxpayers for the Gummint Motors UAW pensions about to go bust… I’m hesitant about how sleazy Eric Holder might send the IRS and Black Panthers out after a GM “customer” the instant a car payment towards a mandated Volt written on a bank the FDIC decides to shut down gets lost by the Postal Service

viking01 on July 5, 2011 at 11:39 PM

Picking winners and losers failed?

Shocking.

BKennedy on July 6, 2011 at 7:08 AM

bayam on July 5, 2011 at 10:49 PM

So since you agree with the federal govt bailing out an auto industry player, then I assume you agree we family farmers & ranchers deserve a bailout also?

Badger40 on July 6, 2011 at 7:51 AM

Always liked GM trucks best. No longer, the UAW can keep their overpriced junk. My wife’s new (complex) Ford 350 crew cab diesel 4×4 is awesome.

I am not a racist on July 5, 2011 at 4:38 PM

Yep, I own my last Chevy truck now and my wife owns her first Ford. Love the Ford. Hate the Chevy quality, hate the unions, hate the politics.

hawkdriver on July 6, 2011 at 9:05 AM

I expect a large variety of public sector entities will update their fleets with GM vehicles in the not too distant future.

John Deaux on July 6, 2011 at 9:28 AM

Have you driven through a GM lot and looked at their cars? I mean really, who would want to buy one? Have to be the ugliest vehicles being produced today.. Looked at Nissan, Toyota, Ford. Bought a new Ford Taurus SHO. AWESOME.

TEXASLEGAL on July 6, 2011 at 9:50 AM

bayam on July 5, 2011 at 10:49 PM

So since you agree with the federal govt bailing out an auto industry player, then I assume you agree we family farmers & ranchers deserve a bailout also?

Badger40 on July 6, 2011 at 7:51 AM

What about us contractors? Don’t we deserve a little presidential sugar?

skeneogden on July 6, 2011 at 12:13 PM

I dont know if it has been said or not, but Ford should NOT be praised for putting a v6 in a truck…. There is only one thing worse than a v6 powered f150, and that is a v6 mustang…

Talk about wasting good car/truck bodies…….

the_ancient on July 6, 2011 at 1:52 PM

bayam on July 5, 2011 at 4:01 PM

Care to post the profit margin’s for these highly sold brands???

You list a host of salesman marketing mumbo jumbo – without looking at the root cause of concern among analysts in the automotive sector:

Higher inventory ratio, double compared to last year – without enough revenue growth to compensate for the overstocked inventory.

Prices will then go down (or forced, depending on your dealership agreement) to maintain the artificial “sales numbers.”

To think “whats coming down the road” as the savior in an industry like automotive is laughable, namely for a company with brutal debt obligations.

Odie1941 on July 6, 2011 at 2:43 PM

The solution is obvious — just furlough the guys building the cars until inventory falls to acceptable levels.

Because they aren’t technically unemployed — just furloughed — the jobless numbers don’t go up and Mr. Obama can keep claiming victory with GM.

unclesmrgol on July 6, 2011 at 4:04 PM

No problem; Obama will pass a new “Cash for Clunkers” to stimulate car sales and get GM’s inventory moving again…

GM probably built up the inventory on purpose knowing they could get a head start on the plan to push 6 months of sales into a 2 month window like we did last time.

I mean once you’ve got the POTUS working for you, you’ve got a competitive advantage over the competition.

gekkobear on July 6, 2011 at 5:09 PM

Comment pages: 1 2