Tuesday, July 10, 2012

Government Motors Fudges Numbers to Help Obama Campaign

If you're Barrack Obama and you want to convince everyone that your bailout of the auto industry was a good idea.  To do that, you need auto manufacturers to show they have turned around.  You need them to show they are increasing sales.

So, when they reported last week that year over year sales have exploded you know it is going to help you out.

In what is going to be the last financial reporting from GM and Chrysler before the November election, both have reported double digit growth in sales.  GM showed a 16% gain in June and Chrysler a 20% gain.  By comparison, the one US auto manufacturer that did not take a bailout, Ford, showed a meager 7% growth.

Why the discrepancy?  Was it the reforms put in place by Obama?  UAW's new found influence on the board?

Nope.  Quite simply, it was cooking the books.

What went unreported about the June climb in auto sales is two very important pieces of information.  First, the federal government increased vehicle purchases for the period by 79%.  That's a dramatic increase and represents another unreported bailout of the auto manufacturers.

Second, the companies increased production of their most expensive vehicles to pad sales data.  For example, GM records sales on vehicles when they are shipped to dealers, not when they are sold to consumers.  During the period GM increased their normal truck inventory of 60 per dealer, to 135.

To push these inventories, in the next quarter GM will have to offer huge rebates and other incentives which will drive down profits for the quarter reporting AFTER the election.  This negative news will in turn cause GM's stock price to fall, increasing the loss tax payers are facing because of the bailout.

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