By David Magee: Subscribe to David's RSS feed
July 6, 2011 5:44 PM EDT
Don't believe the hype, where General Motors is concerned anyway.
The company was notorious in the years leading up to its bankruptcy for manufacturing and shipping product that wasn't in demand to manipulate numbers.
Some of us watched and wondered for the longest time when that game would finally catch up with GM (NYSE: GM). Finally, it did, though it was only by the forced hand of Uncle Sam that made the company deal with reality at some levels. Right up to bankruptcy and U.S. government bailout, GM executives maintained things had changed and a plan was in place to turn GM around.
After the company emerged from bankruptcy, it quickly began to peddle that everything had changed.
Some of us have also wondered how GM could have gotten everything so right, so quick. Bankruptcy cleans up a balance sheet, and that always helps. But culture and practices and ego so deeply embedded at a company as old and large and bureaucratic as GM had become takes time to change.
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Seems soon as the company came out of bankruptcy, though, all eyes from the company's Detroit headquarters were focused on the public stock offering, and making sure everybody believed the compay was rock-solid strong in every conceivable way.
The plan worked, as GM's stock went public again with the largest-ever U.S. IPO. Uncle Sam got paid back a big chunk of its bailout investment, and everybody said how great it was that GM was a new company operating in a new way.
Certainly GM learned that building cars that are affordable and get good fuel economy is a good idea, politically speaking at least. The company is having success with the Chevrolet Cruze and the Chevrolet Malibu, cars that meet that demand which was made of the company by the president himself -- U.S. President Barack Obama.
So giddy about car sales is GM that CEO Dan Akerson said last month that his company would be helped by a dramatic gasoline tax increase, forcing U.S. consumers to buy GM's small cars in greater number. Never mind that a gas tax increase in a sluggish economy with high unemployment and low wage increases would seriously harm the very consumers GM sells to.
But as GM has been talking about cars, it's truck sales have been flat. The company's response is apparently to do business as it did before -- before bankruptcy. Known over the years for pushing vehicles upon dealers when demand wasn't there and into fleet sales when the profits weren't there, GM is apparently repeating its history of late by pushing trucks onto dealer lots that consumers aren't ready for.
GM is 'Pushing' Trucks Onto Dealer Lots
Ideally, the automotive industry would operate as Toyota long preached and practiced before it abanded the strategy a few years back and got into similar trouble -- the pull system.
In the pull system, customer demand dictates production so a company can operate profitably and sustainably. Bloated inventories lead to a dangerous cycle that eventually catches up with a company, after all. Sooner or later, it always does.
But GM is apparently operating with a push system these days when it comes to trucks. Because automakers book sales when vehicles are shipped to dealers, the old trick is to shove inventory onto dealers when they want to pad sales numbers, working out the terms with dealers later through lax collection practices.
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