GM employee discount might actually hurt them...

Discussion in 'Chit-Chat' started by mabrodis, Jul 7, 2005.

  1. mabrodis

    mabrodis

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    This is great...this was in the paper today (AP story, so lots of papers got it I'm sure)...

    "GM discount driving sales

    But employee prices at Big 3 carmakers may hurt long term

    By Dee-Ann Durbin, Associated Press
    July 7, 2005

    DETROIT - DaimlerChrysler AG's Chrysler Group became the last of the Big Three carmakers to slap employee discounts on its vehicles Wednesday, raising the stakes in a price war with a very uncertain outcome.

    Under the program, which runs through Aug. 1, Chrysler is offering some Chrysler, Dodge and Jeep vehicles at the employee rate plus up to $3,500 cash back. Chrysler is following the lead of General Motors Corp., which began offering an employee discount to customers June 1, and Ford Motor Co., which announced an employee pricing plan Tuesday.
    Chrysler also said Wednesday its former chairman and chief executive, Lee Iacocca, who led the carmaker's turnaround in the 1980s, is expected to appear in advertisements for the new promotion. Chrysler's program excludes the Chrysler 300, the Dodge Magnum, Sprinter and Viper and the Jeep Liberty Diesel. All 2006 models and SRT models also are excluded.

    GM's sales jumped 41 percent in June thanks to the discount, which allowed customers to buy vehicles for an average of [highlight]$400 to $500 less than they spent in May[/highlight]. Ford and Chrysler followed after lackluster sales in June.

    Quarterly sales results, which will be released in mid-July, will show how much the discount program has cost GM. But Jesse Toprak, an analyst with the automotive research firm Edmunds.com, said early signs indicate the program was cost-effective.

    In general, Toprak said, GM paid for the discount by taking away cash rebates and other incentives. GM said more customers were willing to buy rather than lease, which held costs down, and customers also bought more expensive vehicles than they might have because of the perceived savings.

    According to Autodata Corp., though, GM spent an average of $4,458 per vehicle on incentives in June, up $449 from May.

    Toprak said Ford and Chrysler could have the same success with minimal cost if they follow GM's strategy. Ford already has taken away some cash incentives to help pay for the program, he said.

    Still, Toprak said, the Big Three have reason to worry.

    Consumers might not continue to flock to dealerships as the summer goes on, especially when 2006 vehicles arrive in showrooms without big discounts attached.

    [highlight]GM's program "has further conditioned consumers to expect a big discount when they walk into a GM dealer," he said.

    Merrill Lynch analyst John Casesa agreed with that assessment in a note to investors.

    "We are concerned that this everyday low price strategy has only set the domestic industry's starting price point a notch lower and in the long run will further erode brand-equity and residual values," Casesa said.

    A discouraging sign for the Big Three is that the employee-pricing promotion did little to affect June sales of Asian brands, which continued to climb. Toyota Motor Corp. spokesman Xavier Dominicis confirmed Wednesday the company has no plans to match the Big Three's discount program. Toyota sales were up 10 percent in June.[/highlight]"

    So the savings is only $400-$500 per car, all this hoopla is over a $500 savings?

    I love how they say that it could further erode brand-equity..hahah...like it could go down anymore...oh and how Toyota sales are still climbing even though GM is doing all of this... :cool:
     
  2. Red Herring

    Red Herring

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    They were talking about this on the news yesterday evening, and the thoughts were that GM should file for chapter 11 while they restructure. Seems like an aging work force, sweet pensions, health care, boring products, and top heavy management is killing them. Scarry to see such a major corporation in such trouble.
     
  3. VTFJ40

    VTFJ40

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    I was just doing the math on a new F-350 with cash back that I looked at last month and compared it to this new deal, it came out $1200 less.
     
  4. tea LC

    tea LC

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    assuming they only sell one car at a discount, no big deal. but i'd get out my calculator for this one :rolleyes:
     
  5. cruise4070

    cruise4070

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    For the customer its alot more than $400-500.
    Priced out a 05 2500HD LS 4x4 XCab long bed w/Duramax ,Allison,Tow pkg.
    Sticker was $40,098. GMS price was $34,658.
     
  6. beaufort-fj60

    beaufort-fj60

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    saw a commercial yesterday saying Cadillac was also doing the discount, I would assume if the GM flagship is doing this they have hit bottom
     
  7. wesintl

    wesintl

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    Yep.. My buddy that bought one before the emp pricing lost out on about a 6k savings. :frown:
     
  8. mabrodis

    mabrodis

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    Hmm..but in the article they are saying that the extra 'employee' discount is only $400-$500, the other discounts and cash-back they would have offered anyway.

    I agree it totally distorts the value of a vehicle, since now the MSRP means nothing at all, with most vehicle (Toyota included) you are usually buying it for under that, but usually not way under it. I just see the dropping prices way down as a good way to get people excited about vehicles, but those that already have them pissed about newer discounts and newer pricing...

    Oh well...it's GM...screw 'em :D
     
  9. nyk438

    nyk438

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    Wish they'd do this on a new land cruiser :D
     
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