Sunday, January 02, 2011
"Is GM Using Inventory to Fudge Earnings?"
They probably are, as do others, and it's probably legal.
As with many rules and laws, there are loopholes if they are written poorly.
People are paid well to find and exploit those loopholes...
As with many rules and laws, there are loopholes if they are written poorly.
People are paid well to find and exploit those loopholes...
Mark Modica posts at the National Legal and Policy Center:
"General Motors records revenue when vehicles are shipped to dealerships. While GM has technically sold these vehicles to the dealerships, retail customers haven't yet purchased the vehicles. This stresses the dealerships as they are paying for vehicles that have not yet been sold. There are usually incentives (paid by GM) for dealerships to accept the inventory. Once shipped, the inventory is financed (in most part) by government owned Ally Financial. It is probable that in an effort to pad their earnings prior to their IPO, GM made sure they shipped as many vehicles to dealerships as possible and continues to do so going in to fourth quarter earnings. These revenue figures would not give an accurate picture of their sales strength, or more accurately, weakness. Just as concerning is the spin that GM executives put on the reasons for building inventories. Once again, this company does not seem to be honest with investors or the general public."
