Volvo Dealers In China Caught Cheating

joey645 · 22nd March 2013, 13:07

Looks like the "This happens only in India" motto is now spreading to China!

http://economictimes.indiatimes.com/...w/19122058.cms

Swedish auto maker Volvo has uncovered widespread cheating by its car dealers in China, where retailers inflated sales to win cash rebates from the company for hitting volume targets.

An investigation by the struggling, Chinese-owned car maker uncovered thousands of fake sales booked in 2011 -- but also an under-reporting of sales in 2012 to make the books balance. That meant it actually performed better last year than it had thought, according to a senior Volvo executive.

The executive asked for anonymity because of the sensitivity surrounding the findings of the recent investigation.

Volvo Car Corp, wholly owned by China's Zhejiang Geely Holding Group Co. since 2010, had reported an 11-per cent slide in 2012 sales in China, fuelling doubts over its ambitious strategy for the key growth market.

In fact, sales rose -- by 15 per cent from a year earlier -- after it uncovered what the senior Volvo executive described as "widespread falsifying" of retail sales volume by a number of its Chinese dealers. He said his best estimate was "half of the dealers" were involved in falsifying retail sales volume.

A Volvo spokesman acknowledged the company had discovered a "transparency issue" with the reporting of sales, but said it would not hurt earnings.

Volvo told dealers in its network of 151 retail sales outlets in China earlier this month that it had begun cracking down on the sales-inflating practices. The message was delivered at a meeting in Taipei on March 7 as part of an internal presentation on the state of its business. Reuters has viewed the presentation slides Volvo used in the Taipei meeting.

"We believe we fixed the problem, but it was a painful process," the senior Volvo executive told Reuters.

He said the over-reporting of sales by dealers made it hard for Volvo to assess the popularity of models and made the automaker less responsive to swings in demand for its cars -- in some cases forcing the company to over-deliver to showrooms.

However, there was little material impact on Volvo's bottom line, he said, since the company books sales when it ships cars to dealers, not when consumers buy the vehicles at dealerships.

pganapathy · 22nd March 2013, 14:32

This is what they call smoothing out the cash flow, except they did it with sales numbers. Overall does not have too much impact cos the numbers moving out is the same, but it does affect planning and production schedules.

Easily done anytime there is no direct supervision of the actual stock.

My only question is how does the dealer pay Volvo for cars he hasn't sold yet. Must eat into his profits and reserves.

joey645 · 22nd March 2013, 14:58

Quote:

Originally Posted by pganapathy

This is what they call smoothing out the cash flow, except they did it with sales numbers. Overall does not have too much impact cos the numbers moving out is the same, but it does affect planning and production schedules.

Easily done anytime there is no direct supervision of the actual stock.

My only question is how does the dealer pay Volvo for cars he hasn't sold yet. Must eat into his profits and reserves.

Good question, that. Seems a bit like cutting your nose to spite your face, it does.

Unless of course, he's milking off a price hike by buying at the old price and selling at the new one. I'd think it can't be that simple though, could it?

pganapathy · 22nd March 2013, 15:16

Quote:

Originally Posted by joey645

Good question, that. Seems a bit like cutting your nose to spite your face, it does.

Unless of course, he's milking off a price hike by buying at the old price and selling at the new one. I'd think it can't be that simple though, could it?

Maybe his numbers are always the same. Just enough to get the bonus amount. Of course credit is there but am guessing can't be more than a month or two.

Is actually not a big deal if monthly sales are there or thereabouts. It is when it is constantly lower than you book when reserves and profits take a hit. Of course, the bonus they get for meeting targets means money for them so that helps

22nd March 2013, 13:07	#1
joey645 BHPian Join Date: Jan 2013 Location: Bangalore Posts: 75 Thanked: 141 Times	Volvo Dealers In China Caught Cheating Looks like the "This happens only in India" motto is now spreading to China! http://economictimes.indiatimes.com/...w/19122058.cms Swedish auto maker Volvo has uncovered widespread cheating by its car dealers in China, where retailers inflated sales to win cash rebates from the company for hitting volume targets. An investigation by the struggling, Chinese-owned car maker uncovered thousands of fake sales booked in 2011 -- but also an under-reporting of sales in 2012 to make the books balance. That meant it actually performed better last year than it had thought, according to a senior Volvo executive. The executive asked for anonymity because of the sensitivity surrounding the findings of the recent investigation. Volvo Car Corp, wholly owned by China's Zhejiang Geely Holding Group Co. since 2010, had reported an 11-per cent slide in 2012 sales in China, fuelling doubts over its ambitious strategy for the key growth market. In fact, sales rose -- by 15 per cent from a year earlier -- after it uncovered what the senior Volvo executive described as "widespread falsifying" of retail sales volume by a number of its Chinese dealers. He said his best estimate was "half of the dealers" were involved in falsifying retail sales volume. A Volvo spokesman acknowledged the company had discovered a "transparency issue" with the reporting of sales, but said it would not hurt earnings. Volvo told dealers in its network of 151 retail sales outlets in China earlier this month that it had begun cracking down on the sales-inflating practices. The message was delivered at a meeting in Taipei on March 7 as part of an internal presentation on the state of its business. Reuters has viewed the presentation slides Volvo used in the Taipei meeting. "We believe we fixed the problem, but it was a painful process," the senior Volvo executive told Reuters. He said the over-reporting of sales by dealers made it hard for Volvo to assess the popularity of models and made the automaker less responsive to swings in demand for its cars -- in some cases forcing the company to over-deliver to showrooms. However, there was little material impact on Volvo's bottom line, he said, since the company books sales when it ships cars to dealers, not when consumers buy the vehicles at dealerships.
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22nd March 2013, 14:32	#2
pganapathy Senior - BHPian Join Date: Jan 2012 Location: Bangalore,Coorg Posts: 1,088 Thanked: 765 Times	Re: Volvo Dealers In China Caught Cheating This is what they call smoothing out the cash flow, except they did it with sales numbers. Overall does not have too much impact cos the numbers moving out is the same, but it does affect planning and production schedules. Easily done anytime there is no direct supervision of the actual stock. My only question is how does the dealer pay Volvo for cars he hasn't sold yet. Must eat into his profits and reserves.
	() Thanks