The "Mysterious" Source Of Surging Demand For GM Cars, Revealed
For several years in a row, GM's favorite deus ex trick to "boost" sales and fool most of the people all of the time, also happened to be the oldest: channel stuffing. As we showed previously, as recently as year ago, GM had some 800,000 vehicles parked on dealer lots.
Click on picture to enlarge
Eventually, GM got enough questions from outside sources (here and here), to where it was forced to taper its aggressive channel stuffing only to find a second "deus ex" - subprime loans. This lasted for a little over a year before none other than the government itself yanked the subprime bubble from under the car-makers in the second half of 2014, leading companies such as Goldman to admit "subprime was responsible" for the subsequent collapse in auto sales.
So with both channel stuffing and subprime out of the window if only for the time being, GM, whose China sales are falling off a cliff, had to come up with some urgent source of end demand. A source which we would not have been aware of at all had outside pressure not once again forced GM to start breaking down its sales by customer type less than a year ago, in June 2014. Which sadly means that we barely have 10 months of data.
However, the 10 months may be enough: they show that "once a Government Motors, always a Government Motors", and in just the first quarter of 2015, the average annual increase in sales to Uncle Sam, aka the Government was a whopping 24%, roughly about 100% higher than GM's headline rate of sales increase!
So what's next: your friendly postman delivering your mail in a white and blue Escalade?
One wonders: just how much in actual revenue does GM make courtesy of the Obama administration whose actions previously prevented bankrupting GM from liquidating, and why are US government workers in an apparent need of brand new GM vehicles every single month?
Finally, if Obama is directly paying GM as an end client, how many billions in "sales" is the Government responsible for with other brand retailers: such as Amazon (AMZN), IBM (IBM) and of course, Apple (AAPL)? Because everyone knows that all those DMV workers are in dire need of the latest and greatest taxpayer funded iPhone 6...
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As a perk, Members of the House get a free new car every year, that is 435 we buy them because it is so hard to live on over $150,000 a year plus all the perks.
Richwood, because the GSA purchases the cars at such low prices they can actually sell them for a profit after one year of use.
Its simply payback time. Firstly during WW11 GM sent all of its trucks, both GMC and Chev to Russia minus nameplates since Stalin did not want the average Russian to know their factories were bombed into ruins and they in return took on 1/2 of the German army. Uncle Sam paid for all of this and never ever did pay for the trucks after WW 11 like they were supposed to. Michigan benefitted since most GM plants were there. UAW benefited since most were employed by GM. GM has contributed greatly to the over all US economy for many many years. And so why not continue to mutually back scratch and at the same time keep the IRS happy with all the payroll tax deductions sent to them?
GM needs support at this time and nothing wrong if Obama supports. If you look at US govt. has always come to rescue of its ailing industries. After all it makes economic sense to do that for a super power like US.
Chevrolet in Russia is shutting down its factories because of low sales due to the sanctions...
Chevy will do just fine without Russia.
"Once a government motors, always a government motors",...Love that statement.
Obama just promised Iran $1.3B in 'automobiles' in his 'deal framework', made me think of GM immediately