The phrase “Socialism with Chinese characteristics in a new era” is hardly catchy, but wields immense power. Xi Jinping became the first incumbent leader since Mao to have his name and thought added to the Party’ guiding principles, symbolising a major elevation in his power.

Bloomberg reports “China’s ruling Communist Party approved a revised charter that enshrined President Xi Jinping’s name under its guiding principles, elevating him to a status that eluded his two immediate predecessors. The amended constitution voted on by the Communist Party in Beijing listed ‘Xi Jinping thought on socialism with Chinese characteristics for a new era’ alongside the theories of Mao Zedong and Deng Xiaoping. While presidents Jiang Zemin and Hu Jintao also secured contributions to the document, neither was featured by name. The revisions confirmed Xi’s rapid consolidation of power and will reinforce speculation that he might seek to stay on after his second term ends in 2022.

No Chinese leader since Mao has managed to put his stamp on the party’s prevailing ideology in its foundational document before stepping down. ‘Enshrining ‘Xi Jinping thought’ in the Constitution will ensure that Xi Jinping is considered one of the great transformative leaders’ of China, said Elizabeth Economy, director of Asia Studies at the New York-based Council on Foreign Relations.

The move ‘again puts him on par with Mao Zedong and Deng Xiaoping.”

Chinese media and state officials had been signalling Xi’s elevation since his opening speech at the 19^th Party Congress, as the BBC explains “The unanimous vote to write in ‘Xi Jinping Thought’ took place at the end of the Communist Party congress.” The congress began last week with a three-hour speech by Mr Xi where he first introduced his philosophy called ‘socialism with Chinese characteristics in a new era’. Top officials and state media then began repeatedly mentioning this ideology, calling it ‘Xi Jinping Thought’, in a sign that Mr Xi had cemented his influence over the Party. The BBC’s China editor Carrie Gracie says enshrining ‘Xi Jinping Thought’ in the party constitution means rivals cannot now challenge China’s strongman without threatening Communist Party rule. Previous Chinese Communist Party leaders have had their ideologies incorporated into the party’s constitution or thinking, but none, besides founder Mao Zedong, have had their philosophy described as “thought”, which is at the top of the ideological hierarchy.

Leading party bosses have been positively gushing in their praise of Xi during the congress. The party chief of Xinjiang, Chen Quanguo described Xi’s teachings as “intellectually incisive, visionary and magnificent”. Mr Bayangolu, who heads up Jilin province fawned “General Secretary Xi Jinping is the party’s helmsman”, using a term often used to describe Mao. The Guardian reports that Xi gave a short and glowingly optimistic address to delegates.

“Our party shows strong, firm and vibrant leadership,’ Xi said in a brief address to more than 2,200 delegates. ‘Our socialist system demonstrates great strength and vitality. The Chinese people and the Chinese nation embrace brilliant prospects. Today we, more than 1.3bn China’s people, live in jubilation and dignity. Our land … radiates with enormous dynamism. Our Chinese civilisation… shines with lasting splendour and glamour.”

The question now is whether this increased power is also a stepping stone to extending his reign beyond 2022. The Guardian delves into this question “Bill Bishop, the publisher of the Sinocism newsletter on Chinese politics, said the birth of ‘Xi Jinping Thought’ confirmed the rare levels of power and prestige enjoyed by its creator. ‘It means Xi is effectively unassailable … If you challenge Xi, you are challenging the party – and you never want to be against the party’. Jude Blanchette, an expert in Chinese politics from New York’s Conference Board research group, said: ‘This is about amassing power and credibility and legitimacy and authority within the system to drive through more effectively what he sees as the right path for China. If you tower above the party, then it is very difficult for anyone below you to decide they don’t want to implement your commands.’ Writing in the Financial Times, Australia’s former prime minister Kevin Rudd said the fanfare around China’s leader suggested Xi, who took power in 2012 and had been expected to step down in 2022, would in fact rule well into the next decade. ‘Five years ago I said he would be China’s most powerful leader since Deng Xiaoping. I was wrong. He is now China’s most powerful leader since Mao Zedong,’ Rudd wrote.

Some commentators are reserving judgement on Xi’s leadership ambitions until the announcement of the all-powerful Politburo Standing Committee. It currently consists of seven people and meets weekly to set policy. “Susan Shirk, the head of the 21st Century China Centre at the University of California, San Diego, disputed the portrayal of Xi as an almighty Mao-like figure. ‘He’s ruling differently, for sure, and people are intimidated by him because of the anti-corruption campaign.’ But Shirk said she was reserving judgment on whether Xi was attempting ‘a real dictatorial play’ until the new line-up of China’s top ruling council, the politburo standing committee, was announced on Wednesday. If that committee included at least one of three possible successors – Hu Chunhua, Chen Min’er or Zhang Qingwei – that would signal Xi’s intention to step down in 2022, she said. If no clear successor emerged, however, it would fuel fears that Xi was ‘going for broke, all-out to be a dictator’ and planned to remain in power indefinitely. ‘I’m prepared to call him a dictator after that. But I am waiting to see,’ said Shirk, US deputy assistant secretary of state under Bill Clinton.”

These were Bloomberg’s thoughts on the succession question:

Here are the key scenarios to watch for on Wednesday:

• No Obvious Heir – Xi walks out with six other men who were born before 1960. That would leave nobody young enough to rule for 10 years after 2022, according to current retirement conventions that mandate stepping down at age 68. By not clearly signalling an heir apparent at the middle part of his term, Xi would be departing from party traditions in place since 1992. That would fuel speculation that Xi wants to stay on as party leader. ‘Most likely he won’t appoint clear successors at the party congress,’ said Minxin Pei, professor of government at Claremont McKenna College in California and author of the 2016 book ‘China’s Crony Capitalism: The Dynamics of Regime Decay.’ ‘The safest thing to say is Xi has a lot of flexibility.’
• Successor Emerges – Xi walks out with two officials born in the 1960s, young enough to stay in power through 2032. Many analysts view the most likely successors as Chongqing’s new party chief Chen Miner, 57, and Guangdong party chief Hu Chunhua, 54. It’s important to see who walks out first, signaling a higher rank. Hu was appointed by Xi’s predecessor, former President Hu Jintao, while Chen once worked under Xi as a provincial propaganda chief. Hu is the leader of Guandong province, which has a population of 104 million people and an economy larger than Mexico’s. He’s an advocate of automation as a solution to slowing growth and rising wages, and has urged factories to ‘replace humans with robots.’
• Standing Committee Shrinks – Xi walks out and only four people follow him on stage. Cutting the Standing Committee to five members from seven would put Xi in charge of China’s smallest leadership group in three decades. The move would continue a shift to smaller leadership bodies that began five years ago, when the committee was slashed from nine members. Another reduction would make it less likely that potential successors are among the new members. ‘A smaller Sanding Committee grants more power to the party chief because he can quickly convene a top meeting and needs fewer support votes to push through his agenda,’ said Gu Su, professor of Philosophy and Law at Nanjing University. ‘A bigger standing committee, like a nine-person committee, runs the risk of policy stagnation because the decision-making process is longer.”
• Retirement Norms Shattered – Xi walks on stage followed at some point by anti-corruption chief Wang Qishan, 69. Keeping the anti-corruption chief in the Standing Committee would remove an age limit in place since 2002, setting a precedent for Xi to do the same after he reaches the same retirement age in 2022.

https://www.bloomberg.com/api/embed/iframe?id=3f66f30d-edbc-4551-a5ea-459203937c3f

By George Friedman of Mauldin Economics

A delegation of executives from major German corporations recently met with Russian President Vladimir Putin.

Such delegations are not unusual. Sometimes it is routine, sometimes a courtesy. But occasionally, it has significance. In the case of Russia-Germany relations, such meetings are always potentially significant.

Germany’s Unsteady Relations

Two relationships are critical to Germany.

One is with the European Union, the other is with the United States. Neither relationship is stable right now. Brexit, the Spanish crisis, Germany feuding with Poland and the unsolved economic problems of southern Europe are tearing the European Union apart.

The Germans and the EU apparatus claim that none of these threaten the bloc. In fact, almost a decade after 2008, Europe appears to be achieving very modest economic growth. But the Germans know the dangers that lie ahead, even if Brussels does not.

Many of the EU’s problems are political, not economic. (I wrote about the inherent weakness of Europe in my free e-book, The World Explained in Maps, which you can find here)

Poland and Germany have butted heads over the tension between the right to national self-determination and EU rules. This is also what Brexit was about.

Spain is locked in a dispute over the nature of a nation and the right of a region to secede, while the EU considers what role it should play in the domestic matters of a member state. And although southern Europe’s problems are economic, the fact that Europe has eked out minimal growth means neither that such growth is sustainable nor that the growth rate comes close to solving the Continent’s deep structural problems.

As the de facto leader of the EU, Germany has to appear confident while considering the implications of failure.

The German relationship with the United States is unsettled—and not just because of President Donald Trump’s personality.

The strategic and economic situation in Europe has changed dramatically since the early 1990s—when the Soviet Union fell, Germany reunified and the all-important Maastricht treaty was signed—but Germany’s structural relationship with the US has not.

Both are members of NATO, but they have radically different views of its mission and its economics. Germany has the world’s fourth-largest economy, but its financial contribution to NATO doesn’t reflect that.

Then there is Russia. The American policy toward Russia has hardened since the Democratic Party adopted an intense anti-Russia stance following the presidential election—more intense even than that of the Republican Party, which has always been uneasy with Russia.

The Ukraine crisis continues to fester while US troops are deployed in the Baltics, Poland, and Romania. This has widened rifts within the EU. Germany isn’t interested in a second Cold War; Eastern Europe believes it’s already in one.

The Eastern Europeans are increasingly alienated from the Germans on the issue and more closely aligned with the Americans. At a time when German relations with key Eastern European countries are being tested, the added strain of US policy in the region is a threat to German interests.

Germany wants the Russia problem to subside. The US and its Eastern European allies think the way to accomplish that is through confrontation.

An Alternative That Germany Doesn’t Want

Germany’s foreign policy has remained roughly the same since 1991, even as the international reality has changed dramatically. This is forcing Germany toward a decision it doesn’t want to make.

It must consider what happens if the EU continues to disintegrate and if European countries’ foreign policies and politics continue to diverge.

It must consider what happens if the US continues to shape the dynamics of Europe in a way that Germany will have to confront American enemies, or refuse to do so. This isn’t just about Russia—we can see the same issue over Iran.

Germany can’t exist without stable economic partners. It has never been self-sufficient since it reunified. It must explore alternatives.

The most obvious alternative for Germany has always been Russia, either through alliance or conquest.

Germany needs Russian raw materials. It also needs the Russian market to be far more robust than it is so that it can buy more German goods.

But Russia is incapable of rapid economic development without outside help, and with the collapse of oil prices, it needs rapid development to stabilize its economy. Germany needs Russia’s economy to succeed, and what it has to offer Russia is capital, technology, and management.

In exchange, Russia can offer raw materials and a workforce.

An alignment with Russia could settle Eastern Europe in Germany’s orbit. With the way things are going, and given Germany’s alternatives, the Russian option is expensive but potentially very profitable.

But Germany has a problem with Russia. Every previous attempt at alignment or conquest has failed. Building up the Russian economy to create a robust market for German goods would certainly benefit both countries, but it would also shift the balance of power in Europe.

Right now, Germany is militarily weak and economically strong. Russia is moderately powerful militarily and economically weak. An alignment with Germany could dramatically strengthen Russia’s economy, and with it, its military power.

Having moved away from the United States and de-emphasized military power in the rest of the European peninsula, Germany could find itself in its old position: vulnerable to Russian power, but without allies against Russia.

On a Lookout for New Allies

The corporate chiefs’ trip to Russia is not a groundbreaking event, nor does it mark a serious shift in German policy. But it is part of an ongoing process. As the international reality shifts from what Germany needs, Germany must find another path.

In the short term, the United States is vulnerable to a cyclical recession, and hostility toward Germany is increasing in Europe—particularly in Eastern Europe. China is facing internal challenges of its own. There are few other options than Russia, and Russia is historically a most dangerous option for Germany.

Don’t celebrate quite yet…

Thanks to MMM and CAT (150 of The Dow’s 170 points today)…

The Dow is massively outperforming today…

And even more so on the year…

In fact this is the great Dow outperformance over the S&P since 2008… and that did not end well…

VIX ended the day higher closing above 11 for the first time in 6 weeks…

So if everything’s so awesome… explain this? Panic-buying demand for calls?

Markets were a little chaotic in the last hour as Flake’s headlines (along with McCain and Paul) crushes the tax plan and then a Senate straw poll signaled John Taylor as the preferred head of The Fed…

FANG Stocks bounced back after the longest losing streak since the election…

Treasury yields spiked today… hurt towards the end of the day John Taylor topped The Senate’s straw poll

With 10Y closing above the crucial 2.40% level…highest since April

The yield curve actually flattened into the close and financials (while higher) underperformed the market…

The Dollar Index ended higher but saw some chaos surrounding the Flake/Taylor headlines…

Despite a roundtrip today, copper continues to surge along with crude as PMs retrace some of yesterday’s gains…

But there’s just one thing odd going on with regard commodities…‘futures’ are massively outperforming ‘physical’ raw commodities…

The blue dotted line shows where China began its intervention this year. which is ironic as the last time China ‘intervened’ – Shanghai Accord in 2015 – the same decoupled pattern emerged… and commodity futures plunged…

Finally, as ForexLive reports, his chart, from Stephen Jen, is doing the rounds and it argues that asset prices are unsustainably high.

US Household Wealth – stocks, bonds, housing etc… – is now 5 times greater than Nominal GDP – something Greenspan and Bernanke never managed.

Submitted by Charles Ortel and Ekaterina Blinova

Hillary and Bill Clinton could have been involved in “pay-to-play” schemes, while transferring money through their charity in a non-transparent manner, according to Wall Street analyst and investigative journalist Charles Ortel who believes that the uranium deal may become the trigger for an all-out inquiry into the Clinton Foundation.

The Clintons’ “modus operandi” is first, to lie under oath, and, second, to obstruct justice from within government and even from outside government, Charles Ortel alleged, commenting on investigations launched by the Senate and the House of Representatives into the Obama-era uranium deal. It was rumored that as secretary of state Hillary Clinton approved the agreement benefiting Russia in exchange for donations to the Clinton Foundation (CF) from Canadian mining industry leaders involved in the deal. Clinton refuted the claim that she helped support the donors’ interests.

Hillary’s Uranium Case: Why Now?

Answering the question why of all times Hillary Clinton’s uranium case has surfaced now, Ortel noted that it was Senate Judiciary Committee Chairman Chuck Grassley who kicked off the initiative following the release of reports by US journalists John Solomon and Sara Carter.

Ortel believes that Attorney General Jeff Sessions “has been dragging his feet on putting resources behind a full and complete investigation of the network of charities operated by and for the Clintons that seems to be engaged in the largest frauds perpetrated in modern history, when one considers all the tentacles.”

While speaking to Alabama voters in late September, Donald Trump responded to their chant “lock her [Clinton] up” by saying: “You’ve got to speak to Jeff Sessions about that.” Then, during an October 18 congressional hearing, Attorney General Sessions dropped the hint that the Justice Department was looking into the alleged conflict of interest involving the former secretary of state.

Is the Clinton investigation launched by the US Congress, and, allegedly, Sessions, connected to the ongoing Trump-Russia probe?

Ortel assumed that the narrative concerning Trump’s supposed collusion with the Russians during the 2016 presidential elections, promoted by “Team Obama” and “Team Clinton,” is nothing but an attempt to prevent the US president from disclosing “potential criminal activities involving government officials, donors and others [who] might get prosecuted once the Trump administration finds its feet.”

“When Trump shocked many by winning, Team Obama and Team Clinton must have realized that skeletons created and put in closets from January 20, 2009 onwards, might get exposed,” he explained.

“At first, it seems consideration was given to contesting the election result, and then to obstructing the inauguration. As these moves failed, the Trump-Russia collusion narrative ultimately triggered the appointment of [Special Counsel Robert] Mueller, and then of his team,” Ortel said.

The Clinton Foundation Brought Into the Spotlight, Again

The alleged conflict of interest has once again brought the Clinton charity’s murky financial activities into the spotlight. According to Ortel, who has been investigating the CF for the past few years, the Clintons have a long record of receiving grants, including from foreign nations, and not disclosing it in an appropriate manner.

“There are various laws that require a US charity to disclose its government grants, including those from foreign nations,” the investigative journalist explained. “When you look through the IRS tax forms from 1998 through 2007 for the Clinton Foundation, you will see that the line ‘government grants’ is not filled in for any of these 10 years.”

Ortel noted that “On December 18, 2008, the Clintons reluctantly provided a table that purported to show donor information concerning cumulative contributions, arrayed in a misleading fashion by category.” “This list includes numerous ‘governments’ so the CF and its trustees knowingly omitted crucial information on tax forms submitted for 1998 through 2007,” the analyst highlighted.

However, Ortel emphasized that the list is “misleading” because “the largest category $25 million and up failed to highlight that UNITAID had donated hundreds of millions by December 18, 2008, and had even advanced monies for 2009 to the CF in 2008.”

UNITAID, an organization aimed at providing access to drugs and treatment for AIDS, malaria and tuberculosis patients worldwide, was founded with the assistance of former US President Bill Clinton and then French President Jacques Chirac in 2006. The entity was officially established by the governments of Brazil, Chile, France, Norway and the United Kingdom while the CF was named as one of its key partners.

“These donations had gone to the Clinton Foundation HIV/AIDS Initiative, Inc., an AR [Arkansas] legal entity whose authority to operate had been revoked on March 31, 2008, with effect from December 31, 2007. Moreover, the French government and possibly other donors had grown quite concerned about this illegal activity around then,” the analyst surmised.

In addition to federal filings on government grants, New York and California require detailed disclosures that still have not properly been made by the Clinton charity concerning government grants,  amount and intended purposes.  “So, one issue that is deeply troubling for the Clintons and for the regulators who still seem willing to give the Clintons, lawyers, accountants, a pass is what purposes did the donors intend the Clinton Foundation to carry out in each year from 1998 forward. And exactly when, if ever, was the CF authorized by the IRS [Internal Revenue Service] and the states to be more than a Little Rock Presidential Records Repository and Research Center,” the Wall Street analyst underscored.

Given the fact that lots of data are omitted in the CF balance sheets the question arises what actually happened to these various government and other donations, Ortel asked.

How Clinton Charity Evolved Into Monstrous Non-Transparent Network

So, when did this trend start?

Citing Taylor Branch, the Pulitzer Prize-winning author and Bill Clinton’s secret diarist, Ortel said “Bill Clinton was thinking about his library immediately after he won his first presidential election.” However, the charity intended to gather money for the William J. Clinton Presidential Center in Little Rock has transformed into an enormous and non-transparent international network.

“Early on in Arkansas, [the Clintons] likely discovered that no one actually checks what really happens to sums spent by governments in the granular ways that forensic accountants and investigators can check, if they wish to,” Ortel remarked.

The investigative journalist elaborated that “with the ‘charities,’ operating without controls, the Clintons, their allies, and others can divert incoming funds to side accounts, and declare only a portion of the vast sums that actually are sent their way.” He highlighted that “with the balance of ‘revenues,’ they can claim expenses of any amount they wish, but ensure monies go to allies who can then kick back portions of sums actually sent.”

“Had the American public learned the truth starting in 2001, the Clinton Foundation long ago would have been shut down, and possibly trustees and Clinton family members, as well as executives would have been prosecuted, convicted, and incarcerated,” he alleged.

According to the analyst, there were many other scandals “that plagued the Clintons, while and after Bill was a president.”

“During and after the 1996 election, allegations were made and subsequently investigated that the Clintons and Democrats tapped foreign money sources, including possibly the Chinese and there were endless hearings,” he said, referring to the 1996 US campaign finance controversy — an alleged effort by the People’s Republic of China to influence domestic American politics.

However, Ortel stressed that “these hearings never seemed to go to the heart of underlying issues, possibly because both politicians in both parties (illegally) may have been engaged in the same bad behavior.”

Today is shaping up to be a fairly bad day for Hillary Clinton.  Just moments after the House Judiciary and Oversight committees announced an investigation into Comey’s handling of the Hillary email investigation, the House Intelligence and Oversight committees have also announced an investigation in the Uranium One deal which handed Russia 20% of America’s uranium reserves and landed the Clinton Foundation some $145 million in donations and a $500,000 speaking gig for former President Bill Clinton.

As we’ve pointed out over the past couple of days, the Uranium One deal has recently resurfaced in public discussion after a former FBI informant came forward suggesting that he personally witnessed Russian operatives in a massive bribery, extortion and money laundering scheme discussing efforts to curry favor with the Clintons. The informant has requested an audience with certain Congressional committees but has so far been silenced by an NDA he signed with the FBI.

Here are a couple of our recent posts on the topic as a recap:

• FBI Uncovered Russian Bribery Plot Before Obama Approved Uranium One Deal, Netting Clintons Millions
• Emails Reveal Bill Clinton Met With Vladimir Putin Just Before Uranium One Deal
• FBI Informant “Threatened” After Offering Details Linking Clinton Foundation To Russian Bribery Case

As the The Hill points out, the Uranium One investigation will initially look into whether or not the FBI bothered to investigate the circumstances surrounding the approval of the deal which occurred during their ongoing investigation.

Two powerful House committees on Tuesday announced a joint investigation into the 2010 sale of a U.S. uranium company to a Russian company.

 

The two panels, the House Intelligence and Oversight Committees, will first probe whether there was an FBI investigation into the deal, approved when former Democratic presidential candidate Hillary Clinton was Secretary of State.

 

Rep. Pete King (R-N.Y.) on Monday cited “very, very real concerns about why we would allow a Russian-owned company to get access to 20 percent of America’s uranium supply.”

 

“It’s important we find out why that deal went through.”

 

A confidential informant has come forward to the committees, according to Rep. Ron DeSantis (R-Fla.), and the two panels are currently in discussions with the Justice Department to release that individual from a nondisclosure agreement.

Meanwhile, House Intelligence Committee Chair Devin Nunes told reporters earlier that it’s too early to determine whether Hillary will be called to testify.

“It’s a little premature. Let us first determine whether or not there was an open investigation by FBI or DOJ and then we’ll get back to you with more information,”Nunes told reporters.

Of course, Hillary once againg reiterated that concerns over the approval of the Uranium One deal, a deal which netted her family foundation $145 million in donations, by a committee on which she served is nothing but “politically motivated baloney.”

Update (11:50 am ET): With just one hour remaining until Trump’s lunch meeting with Republican Senators on the Hill, Senator Bob Corker is apparently not yet ready to tone down his feud with President Trump having just told CNN that Trump will be most remembered for“the debasement of our country” after he leaves office.

Update (10:30 am ET): With just hours to go before Trump’s lunchtime meeting with Congressional Republicans, the president is heaping still more twitter scorn on one of his biggest perceived foes, Tennessee Senator and Senate Foreign Relations Committee Chairman Bob Corker.

This time, he’s focusing on Corker’s foreign-policy work. The president previously criticized Corker for helping create the Iran deal.

Corker was quick to respond himself – repeating his ‘Adult Day Care’ jab…

With pundits attributing the ongoing market rally, which last week manifested itself in a “perfect week” when every single day was a new record high, the first such occurrence in over two decades, to rising hopes that Trump’s tax reform will pass, the worst possible news for the market was that a blocking group of republicans – three or more – would emerge in the Senate, making tax reform impossible. Well, that’s precisely what CNBC reported moments ago when it announced that Republican senators Bob Corker, John McCain – i.e. the most ardent “never Trumpers” in the Republican party – along with Rand Paul may not support tax overhaul, citing an unidentified adviser to Senate Majority Leader Mitch McConnell. CNBC also notes that if he is elected in Alabama, Roy Moore may also not support the overhaul.

It is well known by now that two of the three Senators mentioned (Corker, McCain) have been sparring with Trump front-and-center in recent weeks, and as such their “nays” are hardly a surprise . As for Rand Paul, he’s been no secret skeptic. Paul was against the budget resolution vote last week but in recent days the press seemed to conclude that he and Trump were getting along great. This appears not to have been the case.

Adding to the confusion, there is growing concern about the upcoming Alabama Senate race on December 12, where frontrunning Roy Moore might not support the bill either if elected.

In response to the news, the dollars has slumped, with the USDJPY dropping nearly 40 pips back to the mid-113 area, while the EURUSD spiked from 1.176 to 1.179.

For now stocks are preparing not to notice that the catalyst for the entire move higher in recent weeks may have just been taken out back and shot.

Moments later, however, the move reversed itself if only briefly following a headline from Bloomberg that:

• TAYLOR APPEARED TO WIN SENATE GOP STRAW POLL, SEN. SCOTT SAYS

That move however has since been faded and the dollar slide continues.

Over the past two months, General Motors’ stock has rallied nearly 30% on the notion that hurricanes in Texas and Florida solved the company’s nagging inventory problem.  But, even after two of the most devastating hurricanes in U.S. history wiped out hundreds of thousands of vehicles and GM’s preemptive elimination of some 6,000 jobs, Automotive Newssays the company still has a ways to go at certain plants if they want to bring system-wide inventories down to healthy levels.

Even after cutting more than 6,000 jobs this year, General Motors might need to further shrink its manufacturing operations to address bloated inventories of some vehicles amid plateauing U.S. sales and pressure from Wall Street to avoid overproduction.

 

The majority of GM’s U.S. assembly plants, including some where a shift already has been eliminated, produce vehicles that on average have at least an 80-day supply, 33 percent more than what the industry generally considers healthy, according to estimates from the Automotive News Data Center.

 

“The danger zone is definitely consistently staying in that 80 to 100 days,” said Joe Langley, a senior analyst at economic forecasting and data company IHS Markit. “The ultimate red flag is when volume is at that 120 days or more consistently and incentives aren’t moving the needle.”

 

GM has at least seven U.S. assembly plants that on average produced vehicles with greater than an 80-day supply entering October, including four that have more than 100 days, according to the estimates. That does not include GM’s two U.S. plants for the Chevrolet Silverado and GMC Sierra, because pickups commonly have higher inventories to meet demand for a variety of trim and feature configurations.

Making matter worse, it’s not just small passenger cars where GM is currently oversupplied as the company is sitting on 125 days worth of GMC Canyons and roughly 80 days worth of other ‘popular’ pickup truck models.

Inventory numbers point to the potential for a cutback in Wentzville, which has run around the clock since spring 2015. It makes the Chevrolet Express and GMC Savana full-size vans and the Chevy Colorado and GMC Canyon midsize pickups. Slowing sales have left GM with an estimated 84-day supply of those vehicles as of Oct. 1, including 81 days’ worth of Colorados and 125 days’ worth of Canyons.

 

“The Colorado and Canyon have sold far better than they thought they would,” said Ron Harbour, a consultant with Oliver Wyman. “At this point, they’re trying to figure out if this is a long-term trend or not.”

 

Langley, the IHS analyst, said he thinks GM would need to cut a shift in Wentzville by next summer if inventories remain elevated.

 

“That’s the one big plant on the truck side that concerns me for getting a shift reduction,” Langley said. “That plant is running at a level it was never designed for either. That’s been the story for a lot of these factories.”

Of course, no matter how bad the company’s persistent inventory problem looks on paper, there is one group that simply couldn’t care less: GM shareholders.