Thursday, July 13, 2006

GM won't return to employee pricing to boost sales

Friday, July 07, 2006
GM won't return to employee pricing to boost sales
Brett Clanton / The Detroit News

After letting a no-interest financing promotion expire Wednesday, General Motors Corp. is resisting the temptation to roll out another big summer sales promotion -- for now.

GM told dealers this week it will reinstate until July 18 the rebates and low-interest financing deals that were in place before the automaker’s “GM 72 Hour Sale” launched nationwide on June 27.

The automaker has not said what it will do after that. But officials are clear on one point.

“We have no intention of going back to employee pricing,” said GM spokesman John McDonald.

Last summer’s employee-pricing-for-everyone promotion was hugely successful for GM. But the automaker said in January that it wants to move away from big discount programs, which erode resale values and confuse consumers. Instead, its goal is to price vehicles closer to what customers actually pay.

But sticking to the strategy may prove difficult this summer.

DaimlerChrysler AG’s Chrysler Group has a new employee-pricing deal that offers zero-percent financing and a 30-day return guarantee. And Ford Motor Co. has a program that offers cash rebates, no-interest financing and free fuel for six months on most Ford vehicles. Both programs expire at the end of July.

Some GM dealers wonder whether GM will be forced to offer a more aggressive discount plan in coming weeks if Ford and Chrysler draw buyers with their promotions.

But Tom Waurishuk, sales manager at a Saturn dealership in Stamford, Conn., hopes GM sticks to its guns and tries to get off the incentive roller coaster.

“You can’t keep doing it,” he said, “because it’s a never-ending cycle.”

GM’s lower-rebate strategy has had mixed results so far this year. While customers are paying slightly more for GM vehicles and residual values of some models are improving, the company’s sales are down more than 12 percent through June.

Yet the automaker may have gotten a boost from its 72-hour sale, which expired July 5. That program, which offered zero-percent financing for 72 months on most 2006 models, was a runaway success, said GM dealers.

Steve Cook, owner of Cook GM Superstore in Vassar, Mich., said the program turned what is traditionally a slow week into a hot one. Cook said he usually sells about eight new vehicles during the first week of July.

“This year, I’m pretty darn close to 40.”

And while the campaign has expired, it is still luring buyers, he said.

Tammy Hess, 30, said the promise of a good deal helped sway her to purchase a 2006 Chevy Malibu sedan on Friday.

“I had been looking for a while,” she said, “and then I heard about the deals.”

GM will continue to offer zero-percent financing for 72 months on select 2006 model-year SUVs, including the Chevy Trailblazer and Chevy Trailblazer. Cash rebates or low-interest rate deals are also available on most 2006 models, and some 2007 vehicles.

The automaker is trying to reduce its overall incentive spending as part of a sweeping turnaround plan. But GM’s McDonald said the company will keep offering “tactical” rebates in competitive vehicle categories as needed.

Detroit automakers all increased their incentive spending in June as they entered the busy summer selling season, according to Santa Monica, Calif-based industry research firm

Compared with the month before, GM’s spending rose by $424 to $3,185 per vehicle sold. Chrysler's incentives spending was up $100 to $3,768, and Ford's was up $438 to $3,647 per vehicle sold.

But industry wide, the firm said, incentive spending is down 9 percent from a year ago.

You can reach Brett Clanton at (313) 222-2612 or

© Copyright 2006 The Detroit News. All rights reserved.


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