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GMs Government Fleet Sales and Truck Inventory Rise
National Legal & Policy Center ^ | July 5, 2012 | Mark Modica

Posted on 07/06/2012 8:38:02 AM PDT by jazusamo

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.

The discovery of the pick-up in government fleet purchases at the taxpayers' expense comes just weeks before GM announces its second quarter earnings. Overall fleet sales (which are typically less profitable than retail sales) at Government Motors rose a full 36% for the month, helping to drive decent sales improvements year over year.

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.

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.

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. 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 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.

Mark Modica is an NLPC Associate Fellow.


TOPICS: Business/Economy; Government; Politics
KEYWORDS: 2012; bailout; gm; governmentmotors; obama

1 posted on 07/06/2012 8:38:10 AM PDT by jazusamo
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To: jazusamo

Odungo needs any kind of good number from anywhere. GM hasn’t been used as a lie in a while soooooooo......


2 posted on 07/06/2012 8:41:06 AM PDT by Doogle ((USAF.68-73..8th TFW Ubon Thailand..never store a threat you should have eliminated))
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To: Doogle
Yep, but stuffing the truck inventory is an old trick. It looks like they've got enough trucks to last until the election without building another one. LOL!
3 posted on 07/06/2012 8:45:24 AM PDT by jazusamo ("Intellect is not wisdom" -- Thomas Sowell)
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To: jazusamo
The trick here is that GM records revenue when vehicles go into dealership inventories

And this differs from other manufacturers how?

4 posted on 07/06/2012 8:49:17 AM PDT by nascarnation
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To: jazusamo
I guess the destitute bondholders of the old GM have no money left to buy vehicles after Obama screwed them out of their savings and handed ownership to an undeserving UAW.

Even when I rent a car now I refuse to rent a GM or Chrysler product.

5 posted on 07/06/2012 8:49:53 AM PDT by Gabrial (The nightmare will continue as long as the nightmare is in the White House)
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To: nascarnation

I think the difference is Government Motors is in the tank for The Won.


6 posted on 07/06/2012 8:51:46 AM PDT by jazusamo ("Intellect is not wisdom" -- Thomas Sowell)
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To: Gabrial
You're exactly right, not many former bondholders can afford to buy GM products but UAW workers’ retirement was saved by them.
7 posted on 07/06/2012 8:58:00 AM PDT by jazusamo ("Intellect is not wisdom" -- Thomas Sowell)
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To: jazusamo
Have you noticed the blitz of DOLT ads, "I haven't been to a gas station in months and have forgotten how to put gas in a car?"
8 posted on 07/06/2012 9:17:51 AM PDT by razorback-bert (I'm in shape. Round is a shape isn't it?)
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To: razorback-bert
I don't watch much TV but I have noticed their ads in the evening on channels the wife watches.

It doesn't seem the ads are doing a lot of good. They sold a total 1760 Volts in June and 8817 for 2012 so far which puts them on track to sell around 20,000 for the year.

That's a far cry from their projected 45,000 for 2012 and they haven't reported how many of those were government or General Electric fleet sales.

9 posted on 07/06/2012 9:27:21 AM PDT by jazusamo ("Intellect is not wisdom" -- Thomas Sowell)
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Please bump the Freepathon or click above and donate or become a monthly donor!

10 posted on 07/06/2012 10:25:43 AM PDT by jazusamo ("Intellect is not wisdom" -- Thomas Sowell)
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