GM Reports Record “Channel Stuffing”: Dealer Auto Inventory Highest Since June 2007

As we await all US carmakers to report June auto sales, we remind readers that when we discussed last month’s disappointing monthly car sales report, which badly missed expectations showing the fifth consecutive month of declining auto sales – the first time this has happened since July 2009 – with domestic light vehicle auto sales printing at an annualized 12.59, the lowest sales number going back more than three years – we noted what may be the biggest concern for the auto industry: inventory days continued to trend higher as OEMs push product on to dealer lots even though sale-through to end customers has seemingly stalled.
Of note, we highlighted GM, one of the few OEMs to actually disclose dealer inventories in monthly sales releases, which reported that May inventories increased to 101 days (963,448 vehicles) from 100 days at the end of April and just 71 days (681,402 vehicles) in April 2016. Indicatively, analysts say an overall inventory level of 60 to 70 days is healthy. 100 is not. GM management was eager to deflect attention from this troubling statistic, and said that soaring inventories are normal and, somehow, “reflect strong sales”, as per the press release: “As planned, GM’s inventories reflect strong sales, lower car production and strategic, launch-related growth in truck and crossover stocks.”
Or maybe not, because as Automotive News reporter Nick Bunkley pointed out something troubling: with 935,758 unsold GM units collecting dust in dealer lots at the end of June, this was the highest inventory number in 9.5 years, the highest since November 2007, one month before the recession began.
Fast forward to today when GM reported its June results which again disappointed, and were down 4.7%, more than the expected 3.4% decline (although one wouldn’t know it by looking at the stock which was up as much as 3%). GM sales were dragged by most brands: Chevy -6.4%, GMC -3.6%, Buick +16.4%, Cadillac -11.8%. But that’s not what caught our attention: a bigger problem is what GM revealed in its deliveries report which disclosed a whopping 980,454 units in dealer inventory at the end of June, up nearly 17k from the past month, and representing 105 days of supply, up from an already red-flag raising 101 in May. As Buntkley notes, “GM’s inventory has officially hit a 10-year high. 980,454 units in stock (a 105-day supply) as of June 30, the most since June 2007.“
In short: GM “channel stuffing” just hit a new all time high for the restructured company, with the number of GM vehicles parked at dealer lots and patiently waiting for a buyer rising to the highest since the summer before recession officially began, when GM was still pre-bankruptcy GM, with far greater (if ultimately superfluous and in need of restructuring) production.

This post was published at Zero Hedge on Jul 3, 2017.