August 3, 2012

Never News: GM’s Ongoing Tax Break From Uncle Sam, Continued Dealer Channel Stuffing

GovernmentMotorsSmallGeneral Motors didn’t have a very good second quarter, as the Associated Press’s Tom Krisher duly noted on Thursday.

What Krisher didn’t note, and what almost no one in the establishment press ever notes, is the fact that the company doesn’t have to pay any income taxes on its U.S. profits until it uses up losses carried forward from before its 2009 bankruptcy filing accompanied by at least $50 billion in government capitalization — something other companies emerging from bankruptcy are almost never allowed to do. Based on the company’s reported North American income for the quarter of $2 billion, most of which would have been realized on U.S. business, taxpayers subsidized the company to the tune of several hundred million dollars in just three months.

Another item the press routinely ignores is how high its dealers’ inventories are, as seen in the company-published graphic which follows:


Calculated strictly on GM’s June sales of 201,137 while assuming that the next several months may end up no better, the days’ the supply on hand at dealers might be more like 99 days instead of the 79 listed. This is a level of supply not seen at most of GM’s domestic or North American transplant competitors.

This is significant for two reasons. First, since the company, in accordance with generally accepted accounting principles, recognizes a vehicle sale when it leaves the plant, it’s booking revenues far in advance of when a consumer actually ends up buying it. Second, if the vehicle market heads south in the coming months, and there is some reason to believe this is already happening (GM was down 6% year over year in June, and Ford was down 4%; most other makers did well, but GM and Ford may be bellwethers), dealers will be forced to slash prices to move their merchandise, and will push back hard if the company tries to force too many vehicles onto their already crowded lots.

Don’t ever expect the press to spend a lot of time on this — at least while President Obama continues to tout the GM bailout as one of his administration’s signature achievements.

Cross-posted at



  1. Question: IF GM dealers were allowed to NOT to be forced to accept excessive inventory to levels that are currently customary by competing dealers, how much of hit would GM US take on the sales? Several hundred million? A billion?

    So in addition to the several hundred million it doesn’t have to pay in taxes due to an accounting gimmick of free money credit by the government, GM US may actually only be posting a profit of a billion at best. Sounds to me that the GM BOD should use that fake tax credit to buy back shares in order to increase the share value but then only they, the government and the union pension fund would be the sole owners of the company. Such a situation would confirm what most Americans intuitively know, that GM does stand for Government Motors and intensify their dislike of a government enterprise competing with honest harding working people who took all the risk versus a group of self serving slackers who only could stay in business using tax payer dollars.

    GM has failed as a viable company and it’s existence serves only to limit the actual net positive tax revenue and profits that would have been realized by viable concerns without their (GM) parasitic existence.

    Comment by dscott — August 3, 2012 @ 3:02 pm

  2. A conservative $20K per vehicle (true dealer cost) times 200K vehicles in overstuffing is $4 billion in sales and about $1 billion in operating profit (at $5K profit per vehicle).

    Comment by Tom — August 3, 2012 @ 10:33 pm

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