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What others are saying about the pricing and production...(note that over 9,000 orders is twice original anticipated demand and production....)

June 18, 2005
GM, dealers at odds over Solstice pricing

By Brett Clanton
The Detroit News

Jonathan Wollman confesses a bias for foreign cars.

That's why the 41-year-old software developer from Los Angeles is surprised to find himself so smitten with the Pontiac Solstice, a sleek two-seater coming out this summer from General Motors.

"I've never owned an American car," said Wollman, who is ready to trade in his Mazda Miata. "But this is really a beautiful-looking car. It's enough to really make me consider it seriously."

He's not alone. GM's performance brand already has piled up 9,000 orders for the sporty ragtop, about half the number it had planned to build this year.

But instead of celebrating, Pontiac is quietly -- and delicately -- addressing complaints that its dealers are asking "well above" the $19,995 base sticker price for Solstice, according to a memo sent to Pontiac's 2,700 U.S. dealers.

The letter underscores how much is riding on the Solstice for GM, which is reeling after a $1.1 billion first-quarter loss and is counting on new models to lift sales.

It also highlights the tension that sometimes develops between automakers and dealers over how to sell particular models. The practice, while within the dealers' rights, is angering some customers who were wooed by the vehicle's low price tag, and could sour customers' experience with Pontiac for years, the memo says.

"As you sell Solstices this year, please consider more than just the near-term," said the letter signed by John Larson, the general manager of Buick, Pontiac and GMC, and Mark-Hans Richer, Pontiac's marketing director.

"We are at a critical point in Pontiac's resurgence and encourage a long-term perspective of the total Pontiac opportunity."

But industry analysts say inflated dealer pricing on Solstice is a problem of GM's making. The automaker ran the first ad for the car in January during a college bowl game and has been running the ads since April after the Solstice appeared in NBC's reality program "The Apprentice." Yet the car still is not available in dealerships.

The ads have created pent-up demand for the Solstice and made it easier for dealers to play off the hype to boost prices, said Edmunds.com analyst Mike Chung. "Now the buzz has literally come back to haunt them," he said.

It is not uncommon for dealers to charge above sticker for a hot new model. In the 1980s, many Mazda dealers received more than $5,000 above sticker for another sporty roadster, the Miata. Some Chrysler dealers in 2000 charged above sticker when the PT Cruiser debuted. The fuel- sipping Toyota Prius hybrid also fetches sticker-beating prices.

But Pontiac contends that Solstice's $19,995 base price, including destination fees, is a crucial piece of its marketing efforts and that the rebounding brand cannot risk alienating buyers with inflated prices.

Jim Hopson, a Pontiac spokesman, said the letter came in response to complaints about "a very few offenders" and that overcharging for the Solstice is not a widespread problem. And it has not deterred customers from seeking out the rear-wheel-drive roadster with the eye-catching curves, he said.

The strong early response to the Solstice has convinced Pontiac officials that a boldly designed vehicle can win back American car buyers who may have opted for Hondas and Toyotas in recent years. It also could help improve the image of the Pontiac brand.

In March, GM Vice Chairman Bob Lutz described Pontiac as "damaged," along with Buick. The comment sparked speculation that Pontiac soon would be eliminated, a notion GM immediately dismissed.

The Solstice is scheduled to arrive in showrooms late this summer. But only a few customers will get them then.

GM will first deliver the car to a group of 1,000 people who placed orders on April 15 in conjunction with "The Apprentice" TV show appearance.

Then it will work on filling the remaining backlog of orders from dealers.

You can reach Brett Clanton at (313) 222-2612 or [email protected]
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