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GM gives employee deals to all
As sales continue to slide, consumers can enjoy employee discounts this month.
MSRP, including $850 destination charge
$47,890.00
Invoice price
$43,585.93
Minus employee discount (5.3 percent)
$2,319.50
GM employee price
$41,266.43
Minus public cash rebate
$3,000.00
Final price
$38,266.43
Note: Typical employee discounts average 3 percent to 4 percent, but vary by model.
Source: GM
GM sales promotion
GM is offering all customers the cut rate employees pay for cars and trucks. Combined with current rebates, consumers will be able to save more than $10,000 on some vehicles. Will this tempt you to buy a GM car now?
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General Motors Corp. has tossed aside a promise to back off sweeping national discounts by taking the unprecedented step of extending employee discounts on new cars and trucks to all consumers.
Combined with current rebates, consumers will be able to save more than $10,000 on some vehicles.
The deals -- available through July 5 -- are aimed at boosting the automaker's sagging sales, clearing many of the 1.2 million vehicles sitting on dealer lots, and above all, keeping GM's assembly plants operating.
Analysts said GM's move could further escalate the industry's simmering incentive war that has drawn in foreign automakers over the past year.
GM led the industry in incentive spending per vehicle -- $4,009 -- in May, according to Autodata Corp.
"Our challenge in the marketplace is breaking through with consumers," said Paul Ballew, GM's executive director of market and industry analysis. "We view it as a marketing program attempting to break through the clutter."
GM will launch a multi-media advertising blitz Friday spotlighting its quality improvements in recent independent studies. Some of the ads will carry the tag line "you pay what we pay and not one cent more."
"We have a lot to be proud of. Now it's time for a really big play," Pete Gerosa, vice president of field sales, service and parts for GM North America, told dealers Wednesday during a teleconference.
The deal is good on every 2005 GM car and truck except the Chevrolet Corvette and GMC medium-duty trucks. It can be combined with most other incentives. GM employees typically pay 3 percent to 4 percent below the dealer's cost for a vehicle, but the discount can be greater on some more expensive models.
GM is shipping hundreds of thousands of special window stickers to dealers that will show the actual price consumers will pay for vehicles, including the employee discount and applicable incentives.
"It's a very aggressive move," said Tom Libby, senior director of industry analysis at the Power Information Network. "They believe they have competitive products in many segments and they seem determined to do what ever it takes to improve their share."
Springfield, Mo., Pontiac-GMC-Cadillac-Saab dealer Lynn Thompson, whose lot is jammed with unsold vehicles, welcomed the program.
"I need to clear out my 2005 (models) now," Thompson said. "It's very proactive from the standpoint they're addressing it now and not waiting for July."
Other automakers aren't immediately ready to follow GM's lead in extending employee discounts to the public.
Ford Motor Co. raised rebates Wednesday $500 to $1,000 on several of its slower-selling vehicles. The discount on the Ford Expedition was increased by $1,000 to $5,000 with rebates on the four-door Explorer hiked by $500 to $3,500. Discounts on the Focus sedan and Ranger pickup truck were also raised by $500. The total rebate available on the Focus is now $2,500 and $2,000 for the Ranger. Ford said the move was not in response to GM's program.
"We want to understand GM's offer a little bit more," said Ford spokesman David Reuter. "Our inventories are at a reasonable level right now."
DaimlerChrysler AG's Chrysler Group has no intention of matching GM's program. But Gary Dilts, senior vice president of sales, said the GM deal could boost industry sales, which have dipped 1 percent this year.
"If it creates traffic and raises the industry level out there, we feel very good about it," Dilts said. "If the traffic gets stirred up, we will score."
For GM, which posted a 13 percent decline in May sales and has seen its U.S. market share drop to 25.4 percent from 27 percent, the program represents a desperate and necessary measure for desperate times, say analysts.
While incentives eat into profits, the alternative is temporarily shutting down factories and paying workers 95 percent of their base pay. GM also need steady revenues to offset huge retiree and health care obligations. And clearing out inventories would trigger new dealer orders for 2006 model vehicles.
"This is a cash flow business, partially," said Jack Nerad, editorial director at Kelley Blue Book. "With their labor contracts, they have to keep those plants going."
Analysts expect GM to burn through $5 billion in cash this year and the automaker is looking for every means to improve cash flow. It posted a $1.1 billion first quarter loss and abandoning earnings guidance for the remainder of the year.
GM is in talks with the United Auto Workers union to help reduce spiraling health care costs that are expected to reach $5.6 billion this year.
GM's Ballew says despite the deep discounting, the automaker will still make a profit on its vehicles.
"When you do the math you'll find it to be a good compelling offer for the consumer while trying to strike the right balance from a financial standpoint," Ballew said.
For many of GM's approximately 7,000 dealers suffering through a lean year, the automaker's bold gambit is coming just in time.
"This should work, it's exciting," said Paul Rubin, a White Bear Lake, Minn., Pontiac-GMC dealer who heads the GM dealer council. "It's not that easy to duplicate. All the pieces of the puzzle are there."
GM emphasized that dealer participation is voluntary but Rubin said the promotion is so good it's "inconceivable" that a dealer wouldn't join in.
Rochester Hills Pontiac-Buick dealer Russ Shelton has no thoughts of sitting on the sidelines and called the promotion "encouraging." He's also looking forward to an influx of trade-ins as a result of increased sales the offer is likely to spark.
"We could use some used cars," said Shelton. "With all our leasing business, there are no trade-ins."
Rubin looks at the expected glut of late model used cars as a sign of success, along with valuable new inventory to sell.
"Asking me about too many used vehicles is like asking me if I have too much hair on my head or too much money," said Rubin. "There's just no downside to this deal."
Detroit News staff writer Eric Mayne contributed to this report. You can reach Ed Garsten at (313) 223-3217 or egarsten@detnews.com.
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The Detroit News.
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