GM's empoyee discount and its effects - General Forum

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GM's empoyee discount and its effects
Tuesday, June 07, 2005 10:16 AM
First the good news. Struggling auto giant General Motors (GM) appears to have hit on a way to sell more cars and trucks. The bad news: It's an incentive program. After a weak sales month in May, GM announced on June 1 that it would give anyone the same generous discount on its 2005 models that its employees and their families get. That means GM will sell any of its vehicles for something close to the invoice price paid by dealers.

The deal varies. But GM says a base-model Chevrolet Silverado pickup stickered at $21,765 would sell for $16,226. Even Cadillac offers the employee deal. A $30,885 Cadillac CTS sedan will go for $27,790.

GM's plan so far is having the desired effect. Not only is it driving June showroom traffic dealers say but it's also getting shoppers who were thinking of buying from someone else to look at GM's models. Says Steve Hill, GM's director of retail markets and an architect of the strategy: "The early results have been outstanding." A survey done this week by CNW Marketing Research shows that 21% of buyers who intended to buy from another company will consider a GM model under the incentive deal.

The auto giant sure needs the sales. At the end of May, GM had 1.2 million vehicles on dealer lots -- about 10% more than usual, says Merrill Lynch analyst John A. Casesa. Worse, GM's biggest money makers -- the Silverado and GMC Sierra pickups and large SUVs like Chevy Tahoe -- account for more than one-third of the bloated stock.
But GM faces a huge downside with this. The obvious problem is that it's losing money, and jacking up rebates only makes it tougher to stanch the red ink. Even worse, GM has reset the clock on its efforts to pull back on incentives and stop consumers from waiting for the deal. Now buyers will continue to wait to see ads in newspapers and on TV for GM's next big offer before shopping. And by cutting prices, GM just ensures that it will need more deals down the line to close a sale.

The profit impact is huge. GM's automotive operations lost $1.3 billion in the first quarter, and in North America the company lost $2,300 per vehicle sold. One big reason is that GM's average sale price, after all the rebates and 0% financing deals are taken into account, is just $20,659. That's the lowest among major carmakers. Toyota (TM) is tops with $26,514, according to Harbour & Associates, a Troy (Mich.) consulting firm.

This program won't help with that. GM already spent $5,100 per vehicle in incentives last month, according to CNW. The new program, while not hugely expensive, could add a couple hundred dollars to GM's incentive spending, says Art Spinella, president of CNW Marketing Research

Plus, buyers will need big deals for a long time to come. Here's why: When GM discounts a new car, that also cuts the prices on used cars. The vehicle's residual value -- or resale value after three years -- also drops. So when a buyer returns to the dealership in a few years looking to trade in for a new model, the used car is worth less than he thought because even new cars have lower prices. Sometimes the owner will owe more on the loan than the car is worth. Dealers call this being "upside down" on the loan. So the customer may need a big rebate just to pay off his old loan.
GM's chief market strategist, Paul Ballew, says the company has been able to manage this. "We don't see customers being so upside down in the note that we can't make the transaction work," he reports. Sure -- GM makes the deal work by spending enough to get the buyer in a new car.

The new incentive deal poses a marketing challenge, too. GM buyers already expect a discount of more than $4,400 per vehicle, says CNW's Spinella. Now, GM will have to spend just to keep showroom traffic going. "Buyers expect a deal," says Spinella. "I don't know what GM will do on July 6 when this program expires."
So why would GM embark on such a strategy? There's a reason. Mark LaNeve, who took over as GM's vice-president for sales and marketing on Mar. 1, wants to switch to a new pricing structure. GM currently slaps inflated sticker prices on its cars, knowing that soon enough it'll offer a huge rebate. The rebate acts as a come-on in the market.
By pricing cars closer to what they think customers want to pay, GM could get away from the rebate game. When the 2006 model year cars hit dealerships in late summer, the carmaker will price some nameplates closer to the forecasted transaction price, says GM's Hill.
But until then, GM will be cutting huge deals. And its profits will keep taking a big hit.

The AP.




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Re: GM's empoyee discount and its effects
Tuesday, June 07, 2005 10:51 AM
i still say alot has to do with them not giving us the cars we want back


and them making 20 versions of the same dam suv with a different name plate on it


only reason suv sales are up is BIG V8 POWER







Re: GM's empoyee discount and its effects
Tuesday, June 07, 2005 10:57 AM
^^^ I agree a full 100%^^^



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Re: GM's empoyee discount and its effects
Tuesday, June 07, 2005 11:35 AM
Mr.Goodwrench-G.T. wrote:

GM's automotive operations lost $1.3 billion in the first quarter, and in North America the company lost $2,300 per vehicle sold. One big reason is that GM's average sale price, after all the rebates and 0% financing deals are taken into account, is just $20,659. That's the lowest among major carmakers. Toyota (TM) is tops with $26,514, according to Harbour & Associates, a Troy (Mich.) consulting firm.


Ouch

Rob




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Sold 2/2/05
Re: GM's empoyee discount and its effects
Tuesday, June 07, 2005 4:22 PM
they need to rethink their whole lines from top to bottom




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Re: GM's empoyee discount and its effects
Tuesday, June 07, 2005 4:31 PM
^^^exactly. but i think they should only rethink their current lines. Planning to bring back the camaro, chevelle, gto,.... is a bad idea. those cars stopped produciton for a reason, GM killed them in their final years. what they need to do is come up with a new car or two that is innovative and not overpriced. maybe then they will be up their sales.



"Official Jewish J-Body"
Re: GM's empoyee discount and its effects
Tuesday, June 07, 2005 4:56 PM
Quote:


Planning to bring back the camaro, chevelle, gto,.... is a bad idea.


Dunno about you, but the gto has been re-released for a while now. Hell Rob up there has one, and has one in his sig





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Re: GM's empoyee discount and its effects
Tuesday, June 07, 2005 7:18 PM
i meant brought back/bringing back.....you get the point though



"Official Jewish J-Body"
Re: GM's empoyee discount and its effects
Tuesday, June 14, 2005 9:38 AM
Don't agree about the GTO Camaro ext........I think they do need a a sports car that is not as expensive as the Vette and better than the colbot

Pat
Re: GM's empoyee discount and its effects
Tuesday, June 14, 2005 11:08 AM
actually if they brought back the chevelle and it looked good, that would be sick! i would buy one. lol




Re: GM's empoyee discount and its effects
Tuesday, June 14, 2005 12:46 PM
One thing I've noticed a lot of comments on is how cheap most GM cars feel. Until you get into the Caddies and higher end brands you get cheap plastic materials and poor build quality on most models. Japanese car companies are starting to overtake the American's because they're building more solid cars that tend to last for longer periods of time.

Case in point: My 2001 Cavailer has a cheap ass interior, which is no secret here. My friend's 97 Civic has a much more solid interior (it's not luxury by any means, but it doesnt rattle and crack). My girlfriends 2000 Grand Prix has a rather cheaply made interior as well, but the 2000 Camry my mother used to own was built 10x better.

GM is starting to produce better quality cars, like the Cobalt, but it's a little late when other car companies have been doing the same quality job for the last few years.

The above is just my opinion, and I'm sure some people will disagree, and that's cool with me.

Re: GM's empoyee discount and its effects
Wednesday, June 15, 2005 6:36 AM
First off I work at a GMC, Pontaic, and Buick dealership. I really think that due to the stock that is left on the lots from the GM headlights this is a way of cleaning the lot. Because we are over I think 90 sales as of today and it is the middle of the month. I can't wait for my extra money from these sales. Thought I might also add these prices are only for buy outs. If you are going to be leasing or taking a loan out you have to add in those fees, and also some of the price disscounts are taken back out. Also no GM employee can get lower then they have before the deal.





Re: GM's empoyee discount and its effects
Saturday, June 18, 2005 11:25 PM
Rodimus Prime wrote:

they need to rethink their whole lines from top to bottom


... that is such a meaningless statement ... especially when
the people you're asking to do the re-thinking are barely one
evolutionary notch above actual brain-eating zombies. Ask
a GM zombie to re-think its strategy, and the response will
remain the same: "re-think car, sell incentive, eat brain !! "








[ o ][][][][][][][][ o ] coach built xj  ( o   \[][][][][][][]/  o ) hid wj
Re: GM's empoyee discount and its effects
Tuesday, June 21, 2005 9:48 PM
I dont care what they do cause I just got a new ION REDLINE with whe competition package at the employee discount!.....it was still pretty effen expensive though.....but im to excited to care!!!
Re: GM's empoyee discount and its effects
Wednesday, June 22, 2005 5:12 PM
Has anyone heard of any local dealership responses/retaliations to the GM Employee Pricing offer? In my area, there's a Dodge Dealership (infamous for wacky things such as having a gigantic inflated "Dodge-zilla" Dinosaur hover over it's Dealership) that's offering to give it's customers Dodge employee pricing, plus any applicable rebates plus 0% financing. I find that a little unbelievable but I'm guessing since must of their sales come from the Hemi-powered vehicles, they are able to do this. Another response to the GM Employee incentive has come via one of the largest Ford dealerships in the State. They have been running "breaking news" like commercials on GM's Employee pricing discount making such comments as what does GM have to hide, if the customer is really getting the lowest price with GM giving out this discount, plus something they call the "truth in pricing" which they claim (without actually saying) GM never gives out but they do because they list pricing for all cars on the windshield. In my opinon they pretty much attack and try to rip apart GM's current rebate.

I was just wondering if anyone has heard of any competitive offers to GMs's current offer.
Re: GM's empoyee discount and its effects
Saturday, June 25, 2005 10:56 AM
If I wasn't so damn broke, I'd use this opportunity to buy the LS2 GTO I really want


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Re: GM's empoyee discount and its effects
Saturday, June 25, 2005 11:12 AM
I want a Silverado SS



Re: GM's empoyee discount and its effects
Monday, June 27, 2005 10:17 PM
The GTO is so ragged on. It has way nicer interior than the old Camaro or Firebird with a superior engine!

I think the fact is that GM cars are built really well by UNION labor and people are too cheap to buy them. We are screwing ourselves with Capitalism and always paying the lowest price.


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Re: GM's empoyee discount and its effects
Tuesday, June 28, 2005 9:06 PM
whats this about the new hhr..... looks interesing
Re: GM's empoyee discount and its effects
Wednesday, June 29, 2005 4:53 PM
If they had called the Pontiac Monaro then people wouldn't rag on it so much. Most are still pissed the F-body got canned.



Re: GM's empoyee discount and its effects
Wednesday, June 29, 2005 5:33 PM
Davide wrote:

The GTO is so ragged on. It has way nicer interior than the old Camaro or Firebird with a superior engine!

I think the fact is that GM cars are built really well by UNION labor and people are too cheap to buy them. We are screwing ourselves with Capitalism and always paying the lowest price.


I like the GTO, and I support the rights of Unions. Trouble is, you have to make what an autoworker makes to be able to afford the GTO.

If American companies could pay better wages then people would not have to go to Walmart. Trouble is, Americans are competing with illegal immigrants and China. They have an unfair advantage. What has Bush done about it?

Re: GM's empoyee discount and its effects
Thursday, June 30, 2005 3:31 AM
Still a name is a name. Look at the Impala which has gone FWD. If they bought back a Chevelle there is no change it would share anything with a Monte Carlo like when it was all A body. It is just a marketing device to hide a group of completely different vehicles aimed at a target group.

People keep trying to see the new GTO as an ancestor of previous generations! WHY? None of the other cars are?

Maybe after 10 or so years there will be new leaders in our biggest corps and the automotive situation will look different. GM won't have a sequel until then.


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Re: GM's empoyee discount and its effects
Thursday, June 30, 2005 2:00 PM
I guess this is for Mr. Goodwrench-G.T. more or less...but I'm just wondering how has this incentive worked out for General Motors thus far? I read a couple reports on Yahoo! that stated other car manufacturers (namely Daimler Chrysler) are monitoring GM's current incentive plan and may implement it if GM decides to extend it after July 5th and after reading a couple of Yahoo! stories on this, it sounds like a strong possibility. Is this actually working for GM, if they extend it, how long do you think it'll last.

I'm sure I could search for this stuff, but at this time of day, I'm just too freakin' lazy to do so.
Re: GM's empoyee discount and its effects
Thursday, June 30, 2005 8:39 PM
I get that same discount all year round. I bought my cavy at the employee discount and my s10 b4 that, so I dont care when it expires. no Im not a GM employee either. Hopefully they raise the bar though.
Re: GM's empoyee discount and its effects
Friday, July 01, 2005 9:54 AM
Icee,
GM was selling more as of June then in May. Consumers are buying into the deal of "I am getting special treatment."
I have been doing some research and found out that it was cheaper to buy GM products with their rebates then with the employee discounts. Marketing scheme is all it is.
GM is talking of extending it, but it is not confirmed yet. After July 5 we will all find out.

Personally and an advice, I have found better prices looking at the local newspaper, then go through this haggling



>>>For Sale? Clicky!<<<
-----The orginal Mr.Goodwrench on the JBO since 11/99-----

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