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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?)

Pricing coup proves it's too early to discount GM
Jim Mateja

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.

1,844 Posts
related article in Autoweek:http://autoweek.com/printwindow.cms?newsId=102711&pageType=news

GM's sales jump 46.9 percent in June, best month since '86; Chrysler to offer employee pricing
DALE JEWETT | Automotive News
Posted Date: 7/4/05

DETROIT -- Giving everyone the employee discount had the effect of running General Motors' sales engine on high-octane racing fuel.

GM posted a huge 46.9 percent U.S. sales gain in June compared with June 2004. Dealerships moved 550,829 units during the month -- nearly twice as many sales as rival Ford Motor Co. It was GM's best sales month since September 1986.

GM's U.S. market share for June was 32.8 percent, up 6.9 percentage points from June 2004. For the year to date, GM gained 0.1 percentage points of share to reach 27.1 percent.

The program was so successful that the Chrysler group said Friday that it would launch a similar promotion starting on July 6. The GM promotion is scheduled to end on July 5, but may be extended.

GM pulled the entire industry along in its wake. Ford Motor Co. and DaimlerChrysler posted sales gains in June, as did Nissan, Toyota and Honda.

June sales totaled 1.67 million units, up 15.9 percent from June 2004. The month's sales translated into a seasonally adjusted annual sales rate of 18.13 million units. That was up from a rate of 15.90 million units in May.

Many of those GM buyers rolled out in new pickups and SUVs. GM's truck sales for the month rose 75.8 percent from a year ago. Car sales rose 8.5 percent, a gain that was limited by a large drop in fleet sales.

The month's performance also was a testament to the power of a well-crafted, simple marketing message. While consumers flocked to take advantage of insider prices, GM said its spending on rebates for the month was flat to slightly up compared with June.

Most buyers in July also opted to buy the vehicle instead of leasing, GM said.

With the strong June, GM's sales for 2005 are now up 2.1 percent compared with the first six months of 2004. Its sales totaled 2.32 million for the period.

GM's sales include the Chevrolet, Buick, Pontiac, Cadillac, Saturn, GMC, Hummer and Saab brands.

DaimlerChrysler sales rose 5.1 percent in June to 238,282 units. For the year to date, sales are up 3.8 percent to 1.28 million units. The sales data includes the Chrysler group and Mercedes-Benz.

Hyundai Group sales, covering the Hyundai and Kia brands, rose 1.7 percent in June to 70,146 units. After six months, group sales are up 7.8 percent to 367,523 units.

Nissan, Toyota remain strong

Nissan North America continued its growth in June, as combined sales of the Nissan and Infiniti brands jumped 18.8 percent to 92,781 units.

The Nissan division got a boost from the redesigned Pathfinder SUV, which nearly tripled its sales from June 2004. The Infiniti luxury channel got a bump from strong sales of the redesigned M sedan.

Through the first six months of this year, Nissan North America sales are up 14.8 percent to 542,723 units.

GM's big month didn't diminish sales at rival Toyota Motor Sales U.S.A. Inc. Toyota's U.S. sales arm posted a 14.4 percent gain in June with 194,875 units. After six months, Toyota's sales stand at 1.11 million units, up 10.9 percent compared with the same period in 2004.

The Toyota Division got a boost from the redesigned Avalon sedan, while luxury division Lexus was propelled by the redesigned GS sedan.

Ford posts slight gain

Ford Motor Co. eked out a 0.3 percent sales gain in June, as the automaker got a boost from car sales.

Ford said its car sales rose 8.5 percent for the month, compared with June 2004, to slightly more than 100,000 units. Truck sales for the month fell 3.0 percent to about 189,000 units.

Through the first half of this year, Ford's sales are down 4.6 percent to 1.60 million units. Ford's sales numbers include the Ford, Mercury, Lincoln, Aston Martin, Jaguar, Land Rover and Volvo brands.

Mazda, in which Ford owns a controlling stake, saw its sales fall 18.2 percent in June to 22,063 units. Mazda's high-volume Mazda3 and Mazda6 lines both posted declines for the month. For the year to date, Mazda sales are down 3.9 percent to 134,988 units.

BMW, VW see declines

BMW group sales fell 3.3 percent in June to 27,034 units, due in part to the changeover to a new generation of the BMW 3-series sedan.

After six months, BMW group sales are up 0.8 percent to 145,053. The group includes the BMW, Mini and Rolls-Royce brands.

An uptick in Volkswagen Jetta sales and the contribution of the recently introduced Audi A3 hatchback were not enough to counteract sales drops of the VW New Beetle and Passat in June.

Total VW sales -- covering the VW, Audi and Bentley brands -- fell 11.0 percent in June to 26,620 units, according to the Automotive News Data Center. Through the first six months of this year, VW sales are down 17.3 percent to 136,236 units.

Among other automakers reporting:

>> The bleeding at Mitsubishi slowed to a trickle in June. The automaker sold 10,621 units during the month, down only 13.7 percent from June 2004. Mitsubishi's monthly sales drops have been in the 25 to 30 percent range over the past several months.

For the year to date, Mitsubishi sales are down 35.4 percent to 65,753 units.

>> Isuzu sales dropped 49.6 percent from a year ago in June to 1,289 units. After six months, Isuzu sales are down 47.9 percent to 7,599 units.

>> Porsche sales fell 9.1 percent in June to 2,551 units. Through the first half of this year, sales are up 2.7 percent to 16,126 units.

>> Suzuki sales totaled 7,449 units in June, down 0.5 percent from a year ago. After six months, sales totaled 42,014 units, up 5.5 percent.

June June Pct. 6 mos. 6 mos. Pct.
2005 2004 chng. 2005 2004 chng.
BMW* 27,034 27,943 –3.3% 145,053 143,850 0.8%
DaimlerChrysler** 238,282 226,746 5.1% 1,286,591 1,239,124 3.8%
Ford Motor Co.*** 288,353 286,340 0.7% 1,609,022 1,686,817 –4.6%
General Motors**** 550,829 374,970 46.9% 2,320,621 2,271,926 2.1%
American Honda† 126,416 116,101 8.9% 692,364 686,024 0.9%
Hyundai Group†† 70,146 68,972 1.7% 367,523 340,912 7.8%
Isuzu 1,289 2,557 –49.6% 7,599 14,575 –47.9%
Mazda 22,063 26,962 –18.2% 134,988 140,536 –3.9%
Mitsubishi 10,621 12,301 –13.7% 65,753 101,802 –35.4%
Nissan††† 92,781 78,108 18.8% 542,723 472,784 14.8%
Porsche 2,551 2,807 –9.1% 16,126 15,709 2.7%
Subaru 17,946 16,217 10.7% 93,303 88,227 5.8%
Suzuki 7,449 7,485 –0.5% 42,014 39,807 5.5%
Toyota‡ 194,875 170,366 14.4% 1,114,070 1,004,637 10.9%
VW‡‡ 26,620 29,926 –11.0% 136,236 164,790 –17.3%
Other (estimate) 386 215 79.5% 1,917 1,311 46.2%
TOTAL 1,677,641 1,448,016 15.9% 8,575,903 8,412,831 1.9%
Numbers in this table are calculated by Automotive News based on actual monthly sales reported by the manufacturers and may differ from numbers reported elsewhere.
Source: Automotive News Data Center
Note: Other includes estimates for Ferrari, Lamborghini and Lotus
*Includes Mini and Rolls-Royce
**Includes Mercedes-Benz
***Includes Aston Martin, Jaguar, Land Rover and Volvo
****Includes Saab
†Includes Honda Division and Acura
††Includes Hyundai and Kia
†††Includes Nissan Division and Infiniti
‡Includes Toyota Division and Lexus
‡‡Includes VW, Audi and Bentley


2,153 Posts
I'm not typically a pessimist, but what does this mean for the UAW? Now they have leverage to tell GM they CAN, in fact afford to keep up the cush health care plans and other benefits they were cutting. Anyone else see a potential for a UAW strike soon?

1,487 Posts
WaitingForBoost said:
I wouldn't assume that GM is making money just because they're moving product. We'll have to wait for the results of the fiscal quarter before the UAW will be able to make claim that cuts to benefits are unnecessary.
:agree: They may be moving lots of cars, but it's unlikely they're making an acceptable profit on those cars. It's not a long-term solution. Most likely the thought is that they can get more people to buy their products and hopefully get some good word-of-mouth advertising that will send more customers in down the road. It will also boost their sales numbers, which will make the company look more impressive and may have the psychological effect of boosting customer sentiment about GM. Might also move some old inventory and give the car lots a new look with fresh cars.

Mod Emeritus
7,468 Posts
On the flip side, they may be making some profit too. On average, they really are not discounting their cars any more than they were before this promotion. When they went to GM employee pricing for everyone, they scaled back their rebates, and removed them in some cases. The promotion has been successful, but not because the deal on the cars is significantly better than it was.

Also, GM sold an industry record number of trucks in June, and they do make money on truck sales. So profits for June may be fairly good.

However, it still may not mean a great quarterly report, or even a good year end report at the end of the year, since this one good sales month gets balanced out by the first 5 months of poor sales. Also, there is a fear sales will be down in July, and maybe August too since inventories are getting light on some dealer lots and buyers who may have waited to July or August went and purchased cars early.

It is one good sales month, but declaring that GM is back, profitable, or otherwise healthy is still VERY premature.

144 Posts
I wonder how badly dealers are hammering people on trade-in values. I can hear the salespeople now: "Since we're giving you such a good deal on the new car, we can't possibly give you a great trade-in value...." :brentil:

350 Posts
Soul Stiz said:
I wonder how badly dealers are hammering people on trade-in values. I can hear the salespeople now: "Since we're giving you such a good deal on the new car, we can't possibly give you a great trade-in value...." :brentil:

:cuss: :brentil: Are you a "glass is half empty" type of person?

19 Posts
About Chrysler offering the discount, just so a commercial for it. It had the George guy from Seinfeld. They were taking shots at ford and GM. It almost seems like the American companies have given up on attacking the Asian manufacturers. Whenever in a commercial I see Ford or Chrysler criticize other companies, its always the other two of the big three, never a Japanese manufacturor.

Premium Member
8,901 Posts
Chrysler isn't American anymore though. They're German now I believe since they're owned by Diamler.

Mod Emeritus
7,468 Posts
castleking said:
About Chrysler offering the discount, just so a commercial for it. It had the George guy from Seinfeld. They were taking shots at ford and GM. It almost seems like the American companies have given up on attacking the Asian manufacturers. Whenever in a commercial I see Ford or Chrysler criticize other companies, its always the other two of the big three, never a Japanese manufacturor.
Was that the one with Lee Iacocca in it? They are bringing him back in commercials this month to promote the employee pricing.

Premium Member
8,901 Posts
skyhigh said:
I know for a fact that the dealers aren't offering very good resale. I tried, and they told me that because of the whole employee pricing, that my (GM) car wasn't worth anything.
The Solstice however is not permitted under the new Everyone gets Employee Pricing. Therefore it should retain good resales down the road.
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