Article on the success of the employee discount program. In general the article says GM cars look much better at lower prices. Also no-hassle buying experience seems to have helped (maybe Saturn had it right all along?)
http://www.orlandosentinel.com/business/chi-0507010133jul01,0,2585524.column?coll=orl-business-headlinesPricing coup proves it's too early to discount GM
July 1, 2005
When the numbers are tallied Friday, it's expected that General Motors' offer to give the employee discount on cars and trucks to all comers will prove a whopping success.
Paul Ballew, executive director of global market and industry analysis for GM, reportedly is poised to reveal that sales and market share increased in June.
And that's not all. He's expected to report even more significant numbers: How many bought a Chevrolet, Cadillac, Buick or Pontiac who otherwise would have bought a Ford, Chrysler, Toyota, Honda or Nissan.
While several consumers have griped that GM vehicles aren't attractive or lack the quality of the competition, it appears the cars don't look or act so bad if priced low enough.
(Those gripes may be unfounded. In its Vehicle Dependability Study released this week, J.D. Power and Associates said GM vehicles ranked No. 1 in eight, Ford No. 1 in five, and Toyota No. 1 in four of 19 market segments.)
Rather than wait for Ballew's report, we called Art Spinella, general manager of CNW Marketing/Research, the Bandon, Ore.-based company that studies why people buy the vehicles they do.
According to monthly CNW consumer surveys, of those who bought GM in May, 60 percent already owned a GM vehicle and 40 percent a rival brand. But in June, when the employee price program began, 60 percent of those who bought a GM product owned a rival brand.
That, Spinella said, means owners of rival brands switched allegiance based on price. Ford lost the most intenders, followed by Chrysler, but the Japanese suffered, too.
"The number of Toyota owners who normally intend to buy a GM vehicle is 4 percent, but rose to 8 percent when the sale started, while the number of Honda owners rose to 4.5 percent from 3 percent and Nissan owners rose to 5 percent from 2 percent," he said.
(Edmunds.com, an automotive Web site, estimates that Chrysler will lose 0.9 percent market share, Ford 0.4 percent, Toyota 1.2 percent and Honda 0.5 percent for the month. GM is expected to be the beneficiary.)
"Even more intriguing, 70 percent of those who buy a new vehicle typically say they'd recommend the dealer to another buyer, but during June, 90 percent who bought GM said they'd recommend the dealer to others," Spinella said.
"That's huge because if those who bought GM have a good experience it's likely they'll come back again," he said.
Another interesting number is that those who had no intention of buying a GM vehicle but did hadn't owned one in 16 years.
"So not only did GM bring in people from other domestic as well as Japanese brands, they brought back people who hadn't owned one of their vehicles since 1990, when it could have been a Chevy Citation," Spinella said.
The sale also helps reduce GM's inventory to clear the decks for the 2006 models such as new or redone Chevy HHR and Impala, Buick Lucerne, Pontiac Solstice and Hummer H3.
"That means they don't start '06 with a backlog of vehicles requiring a fire sale," Spinella said.
"The idea of selling at employee prices had been kicked around at GM for some time," he said. "The key now is what to do as the sale draws to a close [set to expire Tuesday] to turn pricing into a long-term strategy and not a flash in the pan."
Spinella suggests GM simply make employee pricing consumer pricing permanently.
"GM was hoping to make sticker prices closer to transaction prices, and this sale is a good starting point," he said. "They could say the sale has worked so well they'll go with it through July and then make employee prices the new sticker prices starting with the '06s.
"It would force all automakers to do the same thing, which they'd all love because then they could get rid of incentives so people don't have to argue over $1,000 or $2,000 rebates," he said.
Of course, the only loser is the GM employee who now shares the hefty discount.
"If you ask employees, they'd probably say if it saves their job, so what?" Spinella said.