GM Going Dark on Monthly Sales Won’t Stop Reporting Shenanigans

(Bloomberg) -- A few years ago, BMW AG and Nissan Motor Co. were in heated races with their rivals, looking for buyers anywhere they could find. They found them all right -- in dealers’ corner offices.

The automakers padded their numbers by coaxing retailers into purchasing cars for their own demo and rental fleets. Dealers griped that the industry’s immense competitive pressures were distracting the companies from the goal they should have been focused on: getting actual consumers to buy new vehicles.

This episode helps explain why General Motors Co. is abandoning monthly sales and reporting them only quarterly instead. Analysts expect the pace of industry sales may have slowed this month to an annualized rate of 17 million, in line with a year earlier. GM posits that the industry would be better off getting these readings every three months: The cutthroat nature of the auto business contributes to short-term fluctuations that aren’t indicative of legitimate trends.

Antics of the sort BMW and Nissan were engaged in became part of auto sales after GM’s legendary leader Alfred Sloan pioneered the practice of regular reporting almost a century ago. Contention for best-selling car, truck or luxury brand can translate into marketing muscle that some automakers think spurs even more sales. And executives’ bonuses often depend on meeting or beating targets, adding to the rationale for unhealthy practices. An old automotive scribe once coyly cribbed Mark Twain to describe the phenomenon: There are lies, damn lies and auto sales.

Close observers of the car market are skeptical that quarterly reports will provide a higher-quality snapshot of the market.

“It won’t put an end to some of the creative counting,” said Jeff Schuster, senior vice president of forecasting for researcher LMC Automotive. “You’ll still see those shenanigans at the end of the quarter, instead of every month. It minimizes how often it happens, but it doesn’t eliminate the manipulation.”

With two fewer selling days on the calendar in April, all major automakers are projected to report sales dropped for the month, with affiliates Hyundai Motor Co. and Kia Motors Corp.’s combined deliveries leading declines, according to a Bloomberg News survey of analysts. GM’s absence from reporting Tuesday will complicate efforts to gauge the health of the market.

“When you’ve got the biggest player stepping back, it is going to really mess up the metrics,” said Michelle Krebs, senior analyst for researcher Autotrader. “They’re being less transparent.”

GM may be reporting less frequently, but it’s going to be more transparent than most other automakers, spokesman Jim Cain said. Ford Motor Co. is the only other carmaker that breaks down its retail and fleet sales mix and details on inventory, pricing and incentives.

“Quarterly reporting makes it easier for people to spot trends because monthly sales are inherently volatile,” Cain said in an email. “Eliminate the noise and you minimize the risk of confusion.”

Chrysler, Cadillac Antics

BMW and Nissan aren’t alone. In 2016, Fiat Chrysler Automobiles NV revised years of sales results after the U.S. Securities and Exchange Commission began investigating allegations that the company had been inflating its figures. The restatement cost the company some bragging rights -- it turned out that a six-year streak of rising deliveries that Fiat Chrysler boasted about had actually ended after less than 3 1/2 years.

Back in the 1970s, Chrysler parked newly built models in empty lots around Detroit, known then as “sales banks,” and unloaded them at deep discounts to dealers. The practice nearly bankrupted the company before CEO Lee Iacocca brokered a government bailout.

Ford’s Lincoln line was denied a moment of glory in 1998, when GM’s Cadillac claimed to have pulled out the annual luxury sales win with an improbable 38 percent jump in December sales. Five months later, GM admitted it had inflated its numbers in what the New York Times called “the Cadillac of overstatements.” The head of GM’s premium brand apologized to the head of Lincoln, which hasn’t won a luxury sales crown since.

Who’s Next?

Now that GM is going dark on monthly sales, some analysts believe it won’t take long for others to follow. After all, what automaker wants to reveal more than rivals?

“From a competitive standpoint, the other guys certainly don’t want to have to explain things that GM doesn’t,” LMC’s Schuster said. “They don’t want to be putting their strategy out there.”

Read more: Ford mulls following GM in ditching monthly sales

GM still plans to supply monthly results privately with the Federal Reserve, which uses the data to help calculate the U.S. gross domestic product. The automaker also has been negotiating to provide limited monthly data to several research firms, while requiring them to sign non-disclosure agreements.

That sets the stage for media outlets making efforts to unearth less-public monthly numbers, as they have for years with information on costly sales incentives, discounted deliveries to rental-car companies and other details.

Let the games begin.

©2018 Bloomberg L.P.

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