Erick G

And of course they discount all the cars nobody wants.

mmarshall

Well, that's just it. After they are discounted people all of a sudden find they DO want them.

You gotta remember, we here at CL are for the most part car people and generally know what we are doing when we look at a car...and we at CL are part of a larger group of car people nationwide both in and out of the auto press that generally know what THEY are doing with cars, too.
But there are millions of car shoppers who are not like us. They could not care about the details of a vehicle, as long as it has four wheels and will get them where they want to go. Unlike us, they are not particular about what they drive. They will look for the cheapest price wherever they can find it, often without checking with Consumer Reports, J.D Power, Consumer Guide, Edmunds, etc......or people like us. They will look at a POS Dodge Stratus or Pontiac Grand Am (now the G6), note that the asking price is only a fraction of what some other (and much better) mid-sized cars will cost, and scoop them right up. And, of course, there ARE some people who DO know what they are doing but simply cannot NOW afford the car they really want, so they settle for a second-class one until they CAN.

LexFather

Wow, I just saw the Ford ad on T.V. Incredible. I mean these are some great deals on these cars.

DrDrilZ

im in the market for a full size truck. i went to a few dealerships today (ford, chevy, nissan). they all are claiming the biggest discounts ever! full size trucks are going for about 25% off. thats a great deal. now the question is, which one to buy? sierra, f150, or the titan?

Gojirra99

Sunday, July 10, 2005

If Big 3 can't wean themselves from costly incentives, vehicle value, profitability will suffer.

By Christine Tierney / The Detroit News

By offering employee discounts to all comers, Detroit's automakers are luring back customers who had grown numb to their zero percent financing and generous cash rebate offers.

But the gains for General Motors Corp., Ford Motor Co. and DaimlerChrysler AG's Chrysler Group will be short-lived unless they can wean customers off ever-growing discounts and shift their focus to the vehicles' features and qualities, industry experts say.

That won't be easy. In the four years since GM launched its "Keep America Rolling" discounts after the September 11 attacks, U.S. automakers have grown reliant on incentives to sell vehicles. Efforts to curtail discounts have led to sharp sales declines, followed by splashier deals.

Wall Street analysts worry the latest plan will only take automakers further down an infernal spiral of price cuts, falling profitability and market-share losses.

"We fear Detroit will have once again simply set a lower price level for all of its products going forward, lowering the structural profitability of the industry," Merrill Lynch auto analyst John Casesa said.

After losing $1.1 billion in the first quarter, GM is cutting production and jobs. Its recovery effort also includes a new pricing strategy that mirrors the practice of its Japanese rivals.

Starting with its 2006 models, the world's biggest automaker plans to narrow the gap between sticker and actual selling prices to strengthen its brands, damaged by years of discounting.

But experts question if GM can kick the incentives habit. "How do you go from the biggest sale to 'now we have products on which we don't have rebates'?" says Mark McCready, pricing strategy director at Carsdirect.com, an online car-shopping site. "That's certainly a challenge for them."

GM originally scheduled the employee-discounts-for-all program to run for a month, through July 5, to clear out its large inventory of 2005 models. But it extended the plan, prompting Ford and Chrysler to follow suit last week.

"The simplicity of their message was driving a lot of traffic, and they were taking a lot of market share," said George Murphy, senior vice president of global brand marketing at the Chrysler Group.

Michael McClellan, a mortgage broker in Birmingham, says he reduced his monthly lease payment by around $100 by turning in his 2004 Buick Rainier three months ahead of schedule and leasing a 2005 model in June. "It was an absolute no-brainer for me," he said.

Buyers of 2005 GM models saved between $500 and $750 in June, on average, McCready estimates. "But GM got better results than if they had thrown another $1,000 rebate," he said.

GM's June sales surged 47 percent, its biggest monthly increase in 19 years.

Art Spinella, president of CNW Marketing Research in Bandon, Ore., says the plan succeeded beyond all expectations because it offered one low price to all, eliminating the haggling that goes on between dealers and customers. "They felt the price GM had set was fair. That's what consumers want. They don't want to find out tomorrow that their neighbor bought the same car for $1,000 less," he said.

So far, Japan's biggest automakers are watching the latest outbreak of the price war from the sidelines, but sticking with their approach. That has been to hold prices steady and offer customers value in the form of additional equipment as they replace models or new features at no extra cost.

In June, GM's super sale sapped demand for Ford and Chrysler vehicles. But Toyota Motor Corp.'s sales rose 14 percent, although its incentives were down slightly from May levels, according to Autodata Corp. Nissan Motor Co. and Honda Motor Co. also posted higher sales.

"After September 11, it was necessary to provide stronger incentives, and they worked in the short term. But over time, they undermine the value of the product," said Jim Press, president of Toyota Motor Sales USA. "You're selling the deal instead of the hardware, and that erodes brand equity."

The Japanese automakers also have increased incentives -- but far less than their Detroit rivals.

At the same time, they have moved slower to increase prices. Transaction prices on Toyota vehicles declined between 2002 and 2005, according to auto research site Edmunds.com, although they have risen at other major brands. But the Japanese automaker generates profits by whittling down its production costs.

"Generally, we try to pass on savings to our customers so that they get better value," Press said, although Toyota has increased sticker prices on some 2006 models.

Toyota and Honda incentives remain less than half of the industry average of $3,269 per vehicle. In June, GM's incentives totaled $4,458, a 9 percent rise over last year, according to Autodata.

Dean Sellers, general sales manager of Dean Sellers Ford in Troy, was relieved that Ford matched the GM plan. "At least now we're back on a fair playing field," he said.

But deals are only a short-term fix. "Manufacturers have to concentrate on building exciting products and gain market share that way," Sellers said. "It's a shame they have to give thousands of dollars away to gain market share."

With its 2006 lineup, GM is setting what it considers fair sticker prices -- mostly unchanged or lower from 2005 levels. For instance, the manufacturer suggested retail price on the 2006 Saturn Ion sedan is $12,825 -- or $2,455 less than the comparably equipped 2005 model.

Overall, however, GM's 2006 sticker prices are down only slightly. It has already announced rebates on some new models. Most industry experts and executives believe they will have to cut sticker prices more to reduce discounting.

Chrysler has tried to limit discounts by adding features while holding down prices since the early 2004 launch of the refreshed Dodge Grand Caravan with flat-folding Stow 'N Go seats. "It's hard to do it all at once," said Murphy.

"The success story is the 300," he said, "which has been out there for 16 months and only has $500 in incentives on it."

LexFather

Porsche has basically NO discounts, lol. And Toyota and Honda are just so desirable, they don't have to offer huge ones.

GFerg

I just saw a Chrysler commerical for their new Employee Discount, and I love how they show a 300C, but the 300 is excluded from the discount.

I love marketing. Gotta do what you gotta do I guess.

mjr24

Ha, I think that Porsche $245 discount is just a free oil change.

mmarshall

Don't laugh...... mjr is NOT far off.

mmarshall

Are we assuming here that they are talking about ALL 300's?

There are two regular 300's...the 2.7L V6 and the 3.5L V6. The 300C is the regular Hemi version with 340 HP. The 300 SRT-8 is the upgraded Hemi with 425 HP.

DrDrilZ

i got $4500 off my 997S back in feb. of course that was when the east coast was sitting on cars due to the weather. i dont think they are giving those kinds of discounts now.

videcormeum

Mmarshall - the 300 is definately NOT included (in any iteration) in the Employee discount. It's not just the 300C and SRT8 - it's all of them.

See Chrysler's website here for the vehicles that qualify.

http://www-5.chrysler.com/incentives...ode=&Year=2005

M.

mjr24

I don't blame them for not offering it on the 300. You put these kind of deals on cars that normally would not sell as well, just for that reason. The 300's and most of the excluded cars certainly do not need financial incentives to move. The 300 has been an amazing newcomer in the domestic market. I personally am only 25, but I cannot remember an American car in my time having more hype and popularity than the 300. The PT's were very popular too when they came out but that was more of a exterior styling kind of appeal. I am not a huge fan of many cars out today domestically (even despite my father being an AMC/Chrysler employee for 35 years), but I do like that 300.

mmarshall

No, I agree with you, whip....perhaps you misunderstood my post. In that post I was making the assumption that no 300's were included because the car sells so well as it it is. When the 300 was introduced in the spring of 2004 the Hemis went like wildfire while the V6's just sat on the lot and collected dust and bird droppings.....but by last summer-fall (2004) even the V6's were selling too......and, like the Hemi, have sold ever since. There is obviously no need for employee pricing.

Gojirra99

Employee discounts for all made sales soar, but most customers were already in carmaker's fold.

By Ed Garsten / The Detroit News

General Motors Corp. chalked up blockbuster sales in June through its employee-discount-for-all promotion, but the deal didn't help the automaker steal a greater percentage of customers from rivals and may cost future sales.

GM sales soared 47 percent in June, cleaning dealer lots of excess inventory, but most of those sales came from consumers who were already GM customers, according to sales data released Tuesday by the Power Information Network.

The study, which looked at the brands of vehicles swapped for new GM cars and trucks, found that 63.1 percent of the automaker's June trade-ins were GM models, compared with 64 percent in May. In auto industry parlance, GM was unable to "conquest" more customers from rivals.

"I would have expected them to have a higher conquest rate," said Tom Libby, senior director of industry analysis for the Power Information Network, a unit of consultants J.D. Power and Associates. "It's a very mild degree of conquest."

As some analysts have suggested, GM may have simply pulled sales from future months and will have to pay the price later in the year.

GM disputes the notion. The company said internal data shows the number of "conquest" sales rose by nearly 50 percent in June, compared to less aggressive incentive programs in the past.

GM spokeswoman Deborah Silverman says the automaker attracted more than 150,000 new customers in June, compared with 80,000 to 90,000 during a typical incentive campaign.

"We fell just a little short of doubling our conquest sales in June, which, from our perspective, is a very good result," Silverman said.

The automaker did win some new customers from domestic rivals but very few from foreign automakers.

GM was all alone in the marketplace with the deal in June. Ford Motor Co. and DaimlerChrysler AG's Chrysler Group, moving to stem additional customer defections, have rolled out their own versions of employee pricing this month.

"There's less reason for a Chrysler owner or Ford owners to switch to GM when they can get the same thing from their own company," Libby said.

In June, 13.4 percent of the trade-ins at GM dealers were Ford cars and trucks, and 10.6 percent were Chryslers. A year earlier, 11.6 percent of the cars and trucks taken in by GM dealers as trade-ins were Ford models and 9.4 percent carried a Chrysler brand.

But GM found it much more difficult to draw owners of vehicles built by Japanese automakers. Its so-called conquest rate against Toyota Motor Corp., Nissan Motor Co. and Honda Motor Co. rose at a slower pace than its ability to draw Ford and Chrysler buyers.

Since the 1970s, when GM's U.S. market share was more than 40 percent, the automaker has steadily lost sales to Asian and European rivals. It now controls 26.8 percent of the U.S. market.

Even with the latest promotion, GM dealers are having mixed results in winning over new customers.

Some say they are seeing dozens of new shoppers that never would have considered a GM brand. Others say they are seeing typical buyers, just more of them.

"At every one of my dealerships, conquest business is the majority of the business," said John Rogin, who owns GM dealerships in Michigan and Ohio.

He's said he's taking Dodge, Ford, Honda and many other brands for trade-ins. He reported "well in excess of 50 percent conquest at our (GMC) store and near 50 percent at our Buick store."

Mark Pawelski, the sales manager at Liberty Chevrolet in New Hudson, said "I haven't noticed this great conquest going on."

There's no doubt, however, GM helped dealers clear out hundreds of thousands of 2005 model year vehicles.

Before the promotion began in June, about 1.2 million GM cars and trucks sat on dealers' lots, but that dwindled to about a million vehicles at the end of the month.

GM and its dealers may have to pay a steep price in exchange for the success of the employee discount sale.

The promotion's success left many dealers with few vehicles to sell in July before 2006 models arrive.

Many customers who acquired a new GM model in June and July simply moved their purchase plans forward to take advantage of the discounts.

J.D. Power's Libby says it's too early to measure the effect of the employee discount offer on future sales.

And Rogin is discounting fears that future sales will fall off in the wake of such a blockbuster sale.

"Momentum is an incredible thing," Rogin said. "I don't see anything stepping in its way."

But in Reno, Nev., Chevrolet dealer Jack Stanko Sr. is braced for some sluggish sales ahead.

"Whenever you have a program like that, you pull sales ahead," Stanko said. "Time will tell."

Stanko didn't participate in the employee deal in June out of concern of thinner profit margins. He decided to participate this month after Ford and Chrysler joined the mix.

Stanko's sales staff threatened to revolt when the discounted transaction prices resulted in 50 percent lower commissions. So Stanko dug into his own pocket to make up some of the difference through a new compensation plan to prevent salespeople from quitting.

"It's definitely a situation where every deal is a mini-deal," Stanko said. "I don't expect to make any money in July."

GM's Silverman acknowledges some dealers have been unhappy with the promotion, but says 90 percent of GM's approximately 7,500 dealers have consistently participated since it began in June.

"The majority of those I spoke with have been very enthusiastic," she said.

Liberty Chevrolet's Pawelski is remaining upbeat and isn't hearing any complaints from his sales staff.

"The staff is just happy we're getting sales," he said. "Let's get 'em in the door and let's sell some cars."

source : detnews.com