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Friday, July 6, 2012

Class Action Lawsuit Filed Against GM For Channel Stuffing (lying about sales figures!) Corporate lies - what a novel concept!

Blogman's Notes: Exactly one month ago I uploaded a video titled Auto Sales Crashing; the real title should have been, Auto market crashed in 2008 and never recovered! Plus the following articles addressed the subject of fraudulent sales numbers reported by auto companies, GM in particular. Now a lawsuit has been filed against GM that should bring this subject into the limelight. Banks lying, corporations lying, politicians lying, media lying, and yet people believe what they read in the papers and watch on TV - Go Figure!

·         Channel Stuffing At GM?
Class Action Lawsuit Filed Against GM For Channel Stuffing | ZeroHedge

In a classic example of "speak of the devil", we were barely done with hitting save on our earlier article (in a series going back to 2011) describing the relentless (and innovative) machinations conducted by GM to perpetuate the myth of swift sales absorption when in reality it is nothing the age-old gimmick of channel stuffing, that we got notice that General Motors was being sued by a group of IPO investors (nursing losses of about 40%), for precisely this: "In connection with the IPO, and in order to assuage concerns that GM was predicting revenue based on production rather than actual sales, GM falsely assured investors that it was actively managing its production by monitoring its dealer inventory levels. Additionally, GM assured investors that in 2011 it would improve inventory management, which would improve average transaction price. These statements were false when made. In July 2011, reports began to surface that GM had engaged in an extraordinary inventory build-up. In particular, an article published by Bloomberg on July 5, 2011 revealed that GM may have been unloading excessive inventory on dealers, a practice known as "channel stuffing," in order to create the false impression that GM was recovering and sales and revenues were rising." Luckily, since this is a class action lawsuit, anyone else out there who bought GM on the belief that the company would not engage in precisely the behavior that we have shown month after month to occur, is invited to enjoin the plaintiffs and to sue the company that exists only courtesy of taxpayer generosity (and more importantly, courtesy of labor unions subverting priority rights in bankruptcy, in exchange for presidential votes). Finally, and if nothing else, this lawsuit will certainly force the general co-opted media to pay some more attention to a topic that is quite sensitive for the administration: the business model of the one company that the president is so proud and happy to have saved from the clutches of evil bondholders.
From the lawsuit:
On July 5,2011, Bloomberg published an article revealing that in the months just prior to the IPO and thereafter, GM already was falling into "old, bad habits" by "channel stuffing," a practice whereby excess inventory is "sold" to dealerships so that the manufacturer, in this case, GM, can record those sales on its books, creating the false appearance of revenues, even while those cars remain unsold on dealer lots. The article stated that GM's truck inventory swelled to 122 days worth of average sales whereas, by comparison, GM's less profitable car inventory was limited to 60 to 70 days of average sales, Ford was maintaining only a 79 day inventory on comparable trucks, and GM's truck inventory during the years 2002-2010 had similarly averaged only 78 days of average sales. Read More: Class Action Lawsuit Filed Against GM For Channel Stuffing | ZeroHedge

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