In: Lower prices on most of its new models. Out: Employee deals for all, plus big rebates.

By Ed Garsten and Eric Mayne / The Detroit News


General Motors Corp. plans to outline a strategy next week to slash sticker prices on most of its 2006 models, a potentially risky departure from its successful employee discount promotion on 2005 models.

While GM is still nailing down the details, it plans to cut the prices on the majority of its 80 cars and trucks. And for some vehicles, GM will not only cut the price, but also add more standard features, according to company officials.

GM is betting it can wean customers from huge discounts by offering a low price and touting the value and quality of its vehicles.

The four-cylinder Pontiac G6, for example, will see a price cut of about $3,000, and the Chevrolet Malibu sedan's sticker price will drop about $1,300, company officials said.

The 2006 Cadillac DTS will be priced more than $5,000 lower than its predecessor, the DeVille.

The retro-styled Chevrolet HHR, making its debut for 2006, has already been priced to compete with the Chrysler PT Cruiser, with a base sticker price at $15,990.

With dealer inventories dwindling from the two-month employee pricing promotion, GM spokesman Jeff Kuhlman said the company intends to end the discounts on 2005 models Monday.

But GM left the door open to extend the promotion if market conditions and other factors warrant it.

While saying GM's "intention" is to end the program Monday as scheduled, Kuhlman said "it is also our intention to be competitive in the marketplace on both 2006 models and 2005 models that remain. What tools we'll provide the dealers after Aug.1 have not yet been decided."

Clearly, though, GM will not offer employee discounts on 2006 models now reaching showrooms.

Automakers are reluctant to announce future marketing moves in advance of expiring programs because they want to maintain the sense of urgency by consumers to get in on a good deal before it disappears. With June's sales momentum continuing in July, car companies are hoping for a big finish to the month this weekend.

Pulling the plug on the "you pay what we pay" program is a potentially risky move for GM, which has long relied on major discounts to attract customers.

"It had to happen sooner or later," said Steve Cook, owner of the Cook GM Superstore in Vassar, north of Flint. "We'll find out if we can sell cars beyond it."

The deals breathed life into GM's slumping sales. Prior to June, the automaker's U.S. market share plunged below 27 percent despite leading the industry in incentive spending. The lure of receiving the discount GM employees get was enough to bring consumers back to showrooms, boosting the automaker's sales by 47 percent in June.

The marketing program worked so well GM extended it past the original July 5 expiration date to Aug. 1, and Ford Motor Co. and DaimlerChrysler AG's Chrysler Group essentially matched the offer. Spokesmen for Ford Motor Co. and Chrysler said their companies were not ready to announce whether they will extend their programs.

"There's no doubt this program has been effective in cleaning up the inventory, and that's a positive," Goldman Sachs analyst Robert Barry said told Bloomberg News. "The next month and the month after are going to be very weak. Anyone who's wanted to buy a car from them has bought it now."

In the long term, GM's vehicles, not discounts, will have to attract customers, analysts said.

"The key for them is going to be product," said Mark McCready, director of pricing strategy and market analyst for Internet vehicle buying guide Carsdirect.com. Life after employee discounts is likely to mean lower prices, more features and skimpier cash rebates on many GM cars and trucks. The automaker wants to jump off the incentive treadmill it kick-started in the aftermath of the Sept. 11, 2001 attacks with zero-percent financing.

Ford is taking a similar path with some 2006 models.

The 2006 Ford Focus will come with a CD-MP3 player as standard equipment, but will sell for about $500 less than the 2005 model, which starts at $13,465. Other vehicle lines are expected to have similar pricing strategies.

"Realigning the price closer to the transaction price allows (shoppers) to better compare," said Ford spokesman Jon Harmon.

Indeed, that's a big part of why GM is cutting sticker prices. Since incentives are not taken into account when Internet buying guides create comparisons for consumers, GM vehicles often look more expensive than their competitors.

"We think when customers have the opportunity to a head-to-head comparison where there are competitive MSRP's (sticker prices), we will do very well," said GM's Kuhlman. "We're taking the incentive out of the equation."

Jim Sanfilippo of Bloomfield Hills-based Automotive Marketing Consultants Inc. believes the success of July's employee-discount programs could be a springboard to lower everyday prices in Big 3 showrooms. It's a strategy he has championed since GM's Saturn brand adopted a one-price strategy in the late 1980s.

"People see value based on the price," Sanfilippo said. "And when the price is muddied and it's not clear, you never know what the car's worth, you don't know what the deal is. Clarity adds strength and potency to a person's perception of a brand."

While the employee discount programs did create the same no-haggle environment that has endeared shoppers to the automaker's Saturn brand, GM's is not sticking to a one-price strategy.

"The MSRP is still the manufacturer's suggested price," Kuhlman said. "The dealer still has room for negotiation."

GM will continue to run regional incentive programs which may include rebates, dealer cash or cut-rate financing.

But, said Kuhlman, "there won't be these high numbers like before."



source : detnews

 

Lower prices eh, well Wal Mart did it and GM cars are Wal Mart like so they may be on to something here, that just may work.

 

lol
Well we NEED GM to sell cars, they are a huge employer in the USA and have huge impact on countless businesses, from local cafetarias who feed workers to suppliers.

 

so true... after my previous experience with GM's vehicles I wouldn't buy another one... but I'm glad someone does.

 

I was talking just a few days ago about domestic pricing. The prices rest on the concept of price discrimination - the idea that what one person can pay for a product isn't necessarily what the next guy can/will pay, thus increasing elasticity of demand while conserving a profit margin. Price discrimination clears inventory and helps to eliminate surplusses. But domestic companies applied this concept wrecklessly and now find themselves in the severely compromised position they're in now. Rebates and huge dealer holdbacks to facilitate this type of selling has cheapened domestic brands and created for them a negative bargain-basement identity. Anybody walking through Walmart knows that average Americans don't care about much more than bling-for-your-buck. And the bling, if you will, of the auto world, is brand cachet. Domestics don't have it - imports do.

Until domestic brands can recreate a positive brand image in consumer's minds - they will continue to flounder.

This pricing initiative is a good first step, in my opinion.

M.

 

GM 2 Offer Incentives in March

DETROIT -- General Motors has told its dealers it will launch a nationwide discount promotion in March, steering away from its goal of not providing big incentives, a newspaper said on Monday.

The Detroit News said the "March Madness" event, tied to the NCAA basketball tournament, will run from March 15 to April 4, and will be similar to a promotion GM ran last March that included lower sticker prices on select models across GM's eight brands.

Last year's program also included cash bonuses of $500 to $,1500 on models that had been on dealer lots for more than 125 days.

GM officials could not be reached immediately for comment.

In a separate program, GM is offering between $150 and $700 in cash incentives to dealers who accept extra vehicles in the last week of February, the paper said.

The programs come after the world's largest automaker in January announced efforts to move away from incentives by cutting prices on most of its vehicles to reflect the price consumers actually pay.

GM has been losing U.S. market share to foreign rivals as it struggles with high labor costs and declining sales. Automakers are expected to announce February sales on Wednesday.

 

Now if they would build something outside the Z06 or Vette I would actually like to own for more than a weekend..........