GM Still Channel Stuffing

General Motors (NYSE: GM) is perhaps the best example of governrnment intervention and the great, growing divide between a lackluster economy and rising stock prices.

After enjoying a taxpayer-funded bailout in June 2009, General Motors went on about its business… of fixing its business. It restructured debts, streamlined business processes and cut costs to the bone.

Then in late 2011, General Motors’ stock re-debuted with a $20 billion IPO (initial public offering), the biggest in U.S. history.

Shares opened at $35 but quickly dropped below $20 a year later. Since then, GM’s stock has treated investors well, doubling in value in the last two years.

Here’s a chart of the stock price, showing it’s on the verge of making a new, post-IPO high. Take a look…

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GM’s turnrnaround has indeed been a success story worthy of celebration. Yet, trouble may be brewing under the surface if the company’s doesn’t keep its inventory levels in check.

To Harry’s and Lacy’s points above, increases in inventory build-up are warnrning signs that demand for the company’s products is waning. And as inventory grows, companies like GM will be pressured to lower prices, damaging the growth in profit margins they’ve worked tooth and nail to increase over the last few years.

Here’s a chart of General Motors’ dealer inventory, which has ramped higher in the last two months. More troubling though is the long-term trend, as inventory has actually been increasing since 2009.

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So has GM’s resurrection been a complete farce?

I wouldn’t go as far as saying that, but if GM can’t move these cars off dealers’ lots the company’s turnrnaround story could be short-lived.

The growing divide between economic growth (or lack thereof) and rising stock prices is tough to deny… and GM’s channel stuffing habits is the proof in the pudding.