GM warns allocation scammers

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Updated: February 1, 2012 11:21AM

DETROIT – General Motors is cracking down on dealers who it says are “gaming” its vehicle-ordering system to finagle more cars and trucks than they deserve — a problem that has grown as retailers struggle to get popular models in light of GM’s tighter production schedules.

In a Jan. 9 memo to its 4,500 U.S. dealers, GM said it has uncovered “significant ordering and reporting abuses” by some dealers trying to snag more vehicles. GM acknowledged that a shift to a “lean-inventory environment” is prompting some dealers to break the rules.

The memo threatens to punish violators with fines of $500 per incident, cutting off incentive cash or terminating their dealer agreements.

One practice cited by GM: “false transfer of products,” which can inflate dealers’ sales figures or artificially shrink their inventory. Both result in a higher number of units being allocated under GM’s so-called turn-and-earn system, which parcels out vehicles based on past sales volumes and inventory levels.

A sham transfer could work like this: A dealer moves five GMC Acadias from one of his stores to another, or even to a fellow dealer’s lot, just before GM takes its monthly survey of his inventory. The dealership’s inventory will appear smaller than it truly is, so GM will direct more Acadias his way the following month.

Saab’s U.S. arm will be liquidated

The administrator handling Saab Cars North America’s finances recently told creditors that the company will be liquidated.

“We notified creditors that it is our opinion that there is no way to salvage the company,” said Jim McTevia, of McTevia & Associates, the administrator appointed to operate the U.S. distribution arm.

Parent company Saab Automobile filed for liquidation Dec. 19 in a Swedish bankruptcy court. Saab Cars North America suspended operations that day.

Saab Cars North America “laid off probably 80 percent of the employees” on Jan. 13, McTevia said.

He said he is seeking a buyer for the U.S. parts distribution business, which he described as the only meaningful asset.

Tim Colbeck, president of Saab Cars North America, expects a buyer for the parts business will be found by the end of February.

“There still will be a market for parts,” Colbeck said. “The question is whether there will be a U.S. distributor for parts.”

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