GM Promotes Gay Rights as Company-Wide Problems Mount

General Motors continues to find innovative ways to make political points while losing market value. The company continues its heavy ad spending, this time at the Olympics. The marketing wizards at GM are trying to tap into the LGBT consumer market, which equals approximately 3.5% of the total population. At the same time, GM shares are getting hit once again as higher inventory levels are leading to heavy discounting. The company still looks a lot like Government Motors.

The main problem for GM regarding inventories centers on the very important (and most profitable) truck segment. The WSJ reported that truck discounts are growing as a result of a 151 day supply of Chevy Silverados and a 131 day supply of GMC Sierras. A 60 day supply is considered to be ideal in the auto industry. GM has had a history of stuffing inventory channels to prop up revenue. Revenue is recognized as dealers receive vehicles as opposed to when actual sales to consumers are made.

If sales increase as a result of the higher incentives and lowered profit margins, the company (along with Mainstream Media) can proclaim that GM is hitting on all cylinders with the genius new gay marketing campaign and new female CEO Mary Barra being the reasons for growing sales. But while the LGBT community may welcome GM’s affirmation of its political power,  GM shareholders do not have much to celebrate.

GM seems determined to impress its political masters in Washington, rather than investors. If that is not the case, GM shareholders should be even more worried about management credibility as the company continues to focus on all the wrong things. I doubt that heterosexual, tax-paying, truck buying males — GM’s most important consumers — are going to be swayed by GM’s gay Olympics ads. Nor does the company’s reliance on tax subsidies to promote the pseudo-green Chevy Volt make them any points.

GM’s last earnings report was a disappointment. Some unusual trading activity masked the obvious bad news at GM as share price rebounded after initially falling when earnings were digested. It will take major improvement to the economy or some very creative accounting to mask the problems at GM when next quarter’s earnings are announced.

Mark Modica is an NLPC Associate Fellow.

 

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