June 1, 2017

The GM Bailout Utterly Failed to Impose Financial Discipline on The Company

Filed under: Business Moves,Economy,Taxes & Government — Tom @ 3:42 pm

We’re told today in its monthly sales release (found in the “Deliveries” PDF at the link, which only downloads) that General Motors had over 936,000 vehicles sitting in dealer inventories at the end of May.

The company says that represents 101 days of sales, miles above the industry standard of 60-70 days. GM sold 3.04 million U.S. vehicle in 2016, and is running behind that level so far this year.

Zero Hedge reports that GM’s dealer inventories are the highest since November 2007, before the recession.

In 2007, based on this press release on worldwide sales, GM sold 3.87 million vehicles in the U.S. (9.37 million worldwide minus 5.50 million non-US).

So annual sales are below 78.6 percent of what they were a decade ago (somewhere below last year’s 3.04 mil divided by 3.87 mil), and inventories at the company’s far fewer dealers are basically unchanged. 40 percent of dealers were cut out post-bankruptcy, and very few new ones have been started up since. This means that the dealers which remain are sitting on acres and acres of unsold vehicles. If there are still 3,600 dealers (6,000 in 2009 trimmed by 40 percent, that’s a whopping 260 vehicles per dealer.

This seems very unlikely to work out well.

But hey, at least they kept the production lines humming while Chief Bailout Officer Barack Obama was president, which I believe was a key unspoken strategy.



  1. What did you expect from Government/UAW Motors? I believe that the UAW is still the largest shareholder in GM; it certainly profited handsomely from sending GM (and Chrysler) into bankruptcy.

    Comment by steveegg — June 1, 2017 @ 10:24 pm

  2. Hi Steve. Obama made sure the deal gave the company enough raw cash (like, $50 billion, IIRC) that there was virtually no way it wouldn’t survive his (hoped-for) two terms. There are already signs of trouble on the balance sheet, even though it still has $24 billion in cash and equivalents: a below-1 current ratio, below-1 quick ratio, 4 months of sales in inventories (which has nothing to do with the bloated inventories at dealers, given that those have already been recorded as sales), etc.

    Comment by Tom — June 2, 2017 @ 8:05 am

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