WSJ Confirms Earlier NLPC Story on Plummeting Chevy Volt Resale Values

The Wall Street Journal recently reported that electric car resale values are plunging. The report confirms what I had reported back in August of last year when I examined auction sales for the rapidly depreciating Chevy Volt. The resale values of cars like the Chevy Volt continue to suffer, further bringing in to question the wisdom of government subsidies for green vehicles that are unable to succeed in the free marketplace without the taxpayers' support.

A recent search of Manheim’s auction site gives the best indicator of Chevy Volt’s wholesale value. A whopping 138 model year 2012 Volts sold in just one week at the auction. That’s about the same amount of NEW Chevy Volts that are sold by General Motors in a week!

The news for Volt owners is not good. The average sale price for a 2012 Volt at auction was below $12,000. That’s about $3,000 less …

SIGTARP: Excessive Pay at Bailed-Out GM

GM money bagsA special inspector general report on compensation for executives at General Motors and Ally Financial blasts the Treasury Department for allowing excessive pay at the companies as taxpayers lost billions of dollars on the auto bailouts. The watchdog group issuing the report monitors the Troubled Asset Relief Program (TARP), which was set up to save financial corporations deemed “too big to fail” due to systemic risk to America’s financial system. The program was expanded to allow for the bailing out of the auto industry, despite the questionable use of funds specifically designated for financial institutions.

A NY Times piece states that the report criticizes the Treasury Department for loosening restrictions on TARP program pay limitations as follows:

Top executives at General Motors and Ally Financial, both of which received bailouts from the United States Treasury Department in 2009, were paid excessively even as taxpayers lost money, according to a special

Hidden Incentives Help Drive GM Sales

Impala photoThe auto industry, including Detroit manufacturers, reported strong sales numbers for the month of August. Sales for the industry rang in at pre-recession levels hitting over 16 million units on an annualized basis. While General Motors got its fair share of the wealth, one unusual tactic to drive sales stands out. That is the use of “stair-step” incentives which are paid to dealerships in the month following the reported sales.

Stair-step programs pay dealerships based upon predetermined sales goals being reached at showrooms. As higher goals are attained, more incentive money is allocated towards each vehicle sold. Automotive News reported last week that GM has been “running an unusually broad” level of the incentives. It also seems “unusual” that the brand new Chevy Impala has been included in the program.

Using the stair-step tactic allows GM to report a lower amount of incentive spending for the month. As GM …

GM’s Hypocritical Embrace of Free Enterprise

sushiThe US Chamber of Commerce’s “On the Road with Free Enterprise” tour has quietly entered its second month. The main story currently on the “Free Enterprise” website is a piece titled “First Ever Sushi Tech Combats Fish Fraud.” The fact that General Motors is hypocritically co-sponsoring a free enterprise tour might bring to mind the words fishy and fraud as well.

“Beneath the deep purple cuts of healthy tuna and the smell of fresh wasabi, there lies a sushi underbelly in America that will make your stomach turn,” reads the first line of the all-important “fish fraud” story. Likewise, GM’s anti-free enterprise bailout process exhibited an underbelly of political cronyism that turned the stomach of those (like GM bondholders and Delphi non-union retirees) who saw there rights subordinated to the politically-favored UAW.

Merriam-Webster Dictionary defines free enterprise as: “freedom of private business to organize …

Will GM Earnings be Driven by Channel Stuffing?

GM logo and ObamaEarlier this year, I reviewed General Motors’ first quarter earnings report and annual results. My take-away from the report was that GM relied upon shady accounting techniques and a build-up of US dealer inventories to produce some rosy-looking results. Channel stuffing to the tune of an over 20% increase in inventory from year end 2011 provided for GM’s revenue growth. The trend continues as GM has further pumped-up inventory for quarter one.

The reason that dealer inventory figures are so important is that automakers record revenue when vehicles are shipped to dealerships, not when they are actually sold to consumers. It becomes fairly easy for a company like GM, which operates more with an eye on perception and politics rather than on sustainable profits (why else would they focus so much on the money-losing Chevy Volt?), to manipulate revenue and earnings by getting vehicles into dealerships’ lots. The first …

Will GM Buy Back Ally Financial on the Cheap?

GM Ally logosI recently wrote about how government-owned Ally Financial was the only big bank that failed the Federal Reserve’s stress test and how that ties in to General Motors’ operations. The bailed-out bank formerly known as GMAC received about $17 billion of taxpayer money as part of the auto bailout (aka bankruptcy) process. It is now possible for GM, which relies on the auto lending unit of Ally Financial, to buy back the best segment of the bank on the cheap after taking advantage of the taxpayer largesse that saved the lender.

The Obama Administration has received criticism for its lack of vision for Ally as Treasury has given no indication that it would end the government’s intrusion into the private sector by selling its Ally stake. Since GM sold off most of its Ally / GMAC holdings (which was required for Ally to get a taxpayer handout) and the government …

Bailed-Out Ally Financial Only Bank to Fail Stress Test

GM Ally logosThe Federal Reserve’s latest round of stress tests for the banking industry showed only one bank remaining on a shaky financial foundation. That bank was government-owned Ally Financial (the bailed-out company formerly known as GMAC), which also happens to be General Motors’ prime source for financing.

GM divested itself of GMAC so that the struggling lender could be classified as a bank holding company and receive billions of taxpayer dollars. In a move to distance itself from GM, the company was renamed Ally Financial. The government maintains majority ownership of Ally Financial, which in turn has helped GM by financing retail sales and dealership inventories.

GM is the only major automaker without its own captive financing arm. Bailed-out Chrysler recently cut the umbilical cord which maintained the flow of taxpayer-funded financial assistance from government-owned Ally by reaching a deal with Spain’s Banco Santander so that it could have in-house …

More on GM’s Non-GAAP Earnings and $35 Billion Tax Benefit

GM logo/ObamaYesterday’s earnings’ report by General Motors threw up some red flags that I reviewed here. In recent quarters, the media seemed to give quite a bit of coverage on GM’s earnings, but not so this time. I wanted to follow up and discuss what the financial news networks obviously will not.

The most glaring number that warrants further discussion was the $35 billion deferred tax valuation allowance. This tax credit is not allowed under GAAP (Generally Accepted Accounting Principles) but that does not stop many companies from using it as they tout non-GAAP earnings. It is the huge amount of GM’s credit that makes it worthy of scrutiny. Let’s look at what other sources have to say about this confusing accounting strategy that saved GM from having to explain its GAAP earnings loss of about $30 billion.

From Investopedia:

The amount of deferred income tax is based on

GM’s Mysterious Earnings Report

General Motors reported earnings today that appeared non-eventful on the surface. Upon further inspection there are some underlying concerns, including a glaring one-time event that stands out. That is an adjustment to earnings with a tax benefit (as opposed to paying taxes) of $35 billion for a “deferred tax valuation release.” This was coupled with a goodwill impairment charge of about $27 billion, which allows GM to reduce the previously unusually high goodwill assets that were recorded on its balance sheet.

GM uses non-GAAP (Generally Accepted Accounting Principles) to calculate its calendar year operating income of $7.9 billion. The GAAP number does not allow the tax benefit and is a bit more troubling at a LOSS of $30.4 billion. I do not claim to be an accountant, but the huge numbers thrown around here could be a concern and should be further investigated. My understanding of the tax benefit, in …

Dismal Sales for Chevy Volt in January

Chevy Volt Akerson photoJanuary’s dismal numbers for Chevy Volt sales may give a clue as to how successful (or not) President Obama will be in reaching his goal of having a million electric vehicles (EVs) on American roads within the next few years, a goal that is increasingly becoming unlikely. It also gives us a glimpse into a bizarre strategy General Motors has had by focusing so strongly on plug-in cars while they lose market share elsewhere. The numbers are in, and GM can proudly say that they are the market leader in an insignificant field with a paltry 1,140 Volts sold in January. The best selling passenger car on the road, the Toyota Camry, sold 31,897 during the month, giving an indication of how illogical GM’s misguided focus has been.

GM’s lame reasoning for the post-election lows (actually, the lowest since February of 2012) for Volt sales is that consumers pulled sales …