Catastrophic Volvo Order Numbers Are Fake
Mish headlines: Volvo Truck Orders Decline 99.63 percent; Auto Industry Faces Crash in US. Mish's Volvobit is based on a Bloomberg commentary which 'reports':
Picture a highway gridlocked by 41,815 abandoned trucks -- because Volvo's order book got destroyed to the tune of 99.63 percent, with customers signing up for just 155 vehicles in the three-month period, the Gothenburg, Sweden-based company said last week.
I tend to check the numbers I post and the number of 41,815 less orders certainly is suspect.
First: The 155 number Volvo announced was just for sales in Europe, not worldwide as the Bloomberg commentary makes one believe. Volvo truck orders worldwide in Q3, which include Mack in the U.S., were 32,072.
Second: Here is what the Volvo CEO actually remarked on the 3rd quarter Europe order numbers:
In Europe, customers are continuing to adopt a wait-and-see attitude to the ordering of new vehicles and equipment. Moreover, they have increasingly opted to cancel already placed orders. For our part, we have made sure to diligently go through and cleanse out orders in order to secure the quality in our order books. The same number of orders that have been received in Europe during the quarter have been removed from the order books, which contributed to a virtual standstill in net order bookings.
We fudged the order number in Europe over several of the last quarters but we have now decided to stop lying about these. Turns out we reported so many fake orders, that the total amount of fake orders we had to discard is just as big as all the real orders we got this quarter in Europe.
Here are the reported European order numbers for Volvo trucks picked from its various quarterly interim reports:
Is it not obvious that starting with Q4 2006 the numbers were somewhat unrealistic? Maybe people ordered two trucks to make sure that they got one on time? Or maybe there was some new sales incentive introduced in late 2006 that payed the Volvo salesmen per order instead of per payed delivery? Or maybe starting Q4 2006 the Volvo CEO got payed extra for each reported order?
We don't know.
But I am sure that Volvo got more than 115 odd orders for trucks in Europe in the third quarter of 2008. I would guess the total to be in the low 20,000 range. But last month Volvo checked their books and took out the over-reported orders from 2007. The numbers of fake or dubious orders they trashed were just as big as real orders from Europe in Q3 2008.
Maybe there are still more fake orders hidden. The numbers in that table above suggest that their might have been 5 quarters with 10,000 over-reported orders each half of which were 'cleaned' in Q3 2008. The rest will be subtracted from the real Q4 order numbers. Interestingly orders in other areas than Europe as reported hardly dipped in Q3-2008.
This was simply a management decision to pretend there is a catastrophic slump when there only was a reversion to mean and/or a big quirk in the numbers the Volvo management does not want to reveal in plain language.
A lot of this stuff is happening right now. With all the bad general news currently 'reported' it is very easy for any management to conceal previous misdeeds as current grand economic problems. What easier way to absolve yourself?
There is no catastrophe here and while I tend to be gloom and doom myself, Mish and others goe too far and with too little research into repeating sensational Bloomberg commentary.
Bloggers should do better.
Posted by b on October 31, 2008 at 04:29 PM | Permalink
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