Now that Barack Obama is safely ensconced in the White House for another four years, several items which should have been noticed or revealed before Election Day have come to the fore. Collectively, they tell us two things: that the pre-election economy was worse than voters were led to believe, and that the prospects for meaningful improvement under the current regime are bleak at best. Additionally, in at least one instance, economic activity itself was likely manipulated.
The probable gamesmanship occurred at Government/General Motors, which is still effectively under Obama administration control, still on track to saddle U.S. taxpayers with a loss of $25 billion or more, and still losing market share.
Despite already-bloated inventories at its dealers, GM’s production lines ran full throttle during September and October. Thanks to that ramp-up and unimpressive sales growth, retail inventories grew by an astonishing 99,000 in October and November. Dealers received five vehicles for every four they sold during those two months, bringing their on-hand stocks from an already unsustainable 689,000 in September to an absolutely ridiculous 788,000. GM estimates that its dealers have a 4-1/2 month supply of full-size pickups — if the economy doesn’t tank.
It seems all too likely that a presidential campaign which used “GM is alive, Osama is dead” as its campaign theme ordered or pressured GM executives to keep the assembly lines running all-out regardless of the business consequences. The campaign of challenger Mitt Romney should have been paying closer attention, as half of GM’s inventory spike occurred and was reported before Election Day. But instead, it let itself get distracted by mostly irrelevant noise about Chrysler’s plans for its Jeep brand in China. It even missed touting Chrysler parent Fiat’s announcement that it plans to manufacture a new Jeep model for the North American market in Italy.
Earlier this week, almost a month removed from election-related visibility, the Wall Street Journal reported that the company “is taking steps to cut excess production,” specifically citing a plant in the critical swing state of Ohio, and “signaled there may be more to come.” Imagine that. If the economy sputters badly, layoffs could easily begin occurring at GM and throughout its supply chain.