GM swerves, revives March discounts

[Variance]

GM swerves, revives March discounts

Despite its strategy to limit rebates, automaker adds bonuses to clear out slow-moving inventory.

Brett Clanton / The Detroit News

DETROIT -- General Motors Corp. has told dealers it will launch a nationwide discount promotion next month that could spark sales but detract from its long-term goal of steering away from big incentives.

The "March Madness" event, tied to the NCAA men's basketball tournament, will run from March 15 to April 4.

It will be similar to a promotion GM ran last March that included temporarily lowered sticker prices on select models across GM's eight brands and cash bonuses of $500 to $1,500 on models that had been on dealer lots for more than 125 days.

While details of the new program have not been announced, internal GM documents obtained by The Detroit News indicate the promotion will kick off with a mass mailing to current and former GM customers early next month, offer customers a chance to win a 2007 Chevrolet Tahoe SUV and give dealers incentives to clear out older inventory.

Under a separate program, GM is offering between $150 and $700 in cash incentives to dealers who accept extra vehicles during the last week of February, according to another internal GM memo obtained by The News.

In an apparent bid to boost sales before the month closes, GM is making the offer on select models by its Chevrolet, Hummer, GMC and Cadillac brands.

GM and other automakers are scheduled to report February sales on Wednesday.

The programs could be viewed as a step backward for GM, which in January announced a sweeping effort to move away from profit-eating incentives by cutting the price of most of its vehicles to reflect what consumers actually pay for them.

GM clarifies its plan

GM never intended to drop incentives altogether, company spokesman Deborah Silverman said. Rather, it is trying to use them in a "more targeted fashion" than in the past.

"We'll continue to look at opportunities where they give us a competitive advantage," she said.

Silverman would not discuss the March Madness program, but said the automaker was not planning to announce any new incentive programs on Wednesday.

GM may not need a new discount program now as much as it has previously.

Although the automaker saw sales decline 4.4 percent last year, it increased sales in January and is expected to be up again or flat in February.

"Early reports show that consumers have been attracted by GM's lower prices, helping the company to gain market share from Ford and Chrysler," Merrill Lynch analyst John Murphy said in a recent report.

Vehicle stockpiles shrink

With just over 1 million vehicles on dealer lots at the end of January, GM's stockpiles are smaller than a year ago. And the automaker has cleared out most 2005 model-year vehicles. That means there could be less of a need to pare down inventories with steep discounts.

"There are no '05s out there," said John Rogin, who owns GM dealerships in Michigan and Ohio. "It's a non-issue within GM right now."

Yet a new incentive program, backed by national and local advertising, could shine a light on GM products as customers get in the mood to shop for vehicles after months of winter.

And a tie-in with the NCAA tournament is in keeping with the automaker's strategy of aligning itself with premier sporting events such as the Olympics and Super Bowl.

Rogin had not heard details of GM's March Madness program, but said it is common for manufacturers to roll out new incentives in the spring.

GM, which lost $8.6 billion in 2005, has made a priority of returning its North American auto business to profitability. Central to the effort is the launch of 19 new cars and trucks this year, including a new lineup of full-size SUVs, the Pontiac G6 convertible and its first mass-market gas-electric hybrid, the Saturn VUE Green Line.

After earlier announcing it will cut 30,000 U.S. hourly jobs by 2008, GM in January said it would lower the sticker prices of 57 models by $1,300 on average.

GM said the move was mainly designed to put the focus back on its product and move away from making discounts the centerpiece of promotions.

Jesse Toprak, an industry analyst with Edmunds.com in Santa Monica, Calif., said GM has managed to stay with the plan so far, tweaking rebates only in highly competitive categories such as full-size SUVs.

"Last month, they really stuck to it," Toprak said.

GM can't break the habit

In January, GM dealers sold vehicles at an average of 15 percent off sticker price, down from 20 percent a year ago, he said. And they have reduced incentive spending in recent months.

But GM is still far from breaking the habit.

Last month, the automaker's incentive spending was second only to Chrysler, at $3,177 per vehicle on average, and was about three times what Toyota Motor Corp. used to lure buyers, according to Autodata Corp.

The March Madness program is likely to find GM shelling out again to get the attention of consumers.

And it is likely to bring a few headaches to dealers.

Dealers get extra work

Like GM's Red Tag clearance sale in December, the March Madness program requires dealers to append an extra sticker price onto each vehicle that is eligible for the discount.

Then, there are signs that go up in the showroom and hundreds of pamphlets to mail to customers.

"The administration of incentives can be a nightmare," Rogin said. "In a perfect world, we'd love not to have them."

Link: http://www.detnews.com/apps/pbcs.dll/artic...70345/1121/AUTO

[Newbiewar]

interesting... so... are their rebates or lowered sticker prices?

[regfootball]

i don't care....if you need to move product, you need to move product.

maybe with my top off GM earnings I can trade my 4 mo old 500 for a Maxx SS........hmmmmmmm

[FUTURE_OF_GM]

"Early reports show that consumers have been attracted by GM's lower prices, helping the company to gain market share from Ford and Chrysler," Merrill Lynch analyst John Murphy said in a recent report.

LOL.... And here we go again... The media/analysts are FENCING OFF the imports and trying to get the big 3 to cannabalize each other. This must be the newest fad, as it is happening in articles, comparisons, and general reference.

Like GM's Red Tag clearance sale in December, the March Madness program requires dealers to append an extra sticker price onto each vehicle that is eligible for the discount.

Then, there are signs that go up in the showroom and hundreds of pamphlets to mail to customers.

"The administration of incentives can be a nightmare," Rogin said. "In a perfect world, we'd love not to have them."

LOL, GIVE ME A BREAK!!!!

It's like a days work!!!

***Looks like GM is doing this for purely competitive reasons, which is a good thing. And the incentives are small, another good thing. I don't like it though..

Maybe, just maybe GM is doing this as a REACTION to Ford and Chrysler raising incentives.

[Newbiewar]

The problem I see... is that for every salesperson... IN a domestic store, the sales person needs to sell say 10 cars per month, to make a good living... but for any import dealership, the salesperson would need to sell 20-25 cars to make the same amount of income. thus Import brands thrive because of volume...

so... what i am here to say i surmise, is that there is too much profit, a Chevy salesperson is content selling 10 cars in a month... they are happy, they are making enough money to feed their family... they dont need more, but with import brands... the more you get the more is marrier... GM is just trying to show salepeople they have been spoiled with high profits per vehicle. where invoice and msrp is 3-4k away, where imports are lucky to see 1500 in total profit before any discounting...

[sciguy_0504]

The rebates appear to be small and, hopefully, limited. Anything under $2,000 (max) is fine for a very limited time with normal rebates in the $500-1000 range.

[Cadillacfan]

Ugh... back to old habits I see. These rebates may not be as widespread, but it's still showing that GM is producing more cars and trucks then it can sell and that most of the cars they are making are undesirable to a lot of the buying public.

Changes are coming.. but not fast enough. GM needs to speed it's Epsilon II and Zeta programs forward GMT-900 style.

Edited February 28, 2006 by Cadillacfan

[Northstar]

While it's not good news, at least the rebates aren't as big as they were. GM isn't going to get away from rebates overnight, and at least they are making some progress. In 2-3 years I think GM will "normal" rebates with all of them in the sub-$1500 range.

[turbo200]

Ugh... back to old habits I see.  These rebates may not be as widespread, but it's still showing that GM is producing more cars and trucks then it can sell and that most of the cars they are making are undesirable to a lot of the buying public.

Changes are coming.. but not fast enough.  GM needs to speed it's Epsilon II and Zeta programs forward GMT-900 style.

Wait until February sales before you give a dim outlook on sales now that reduced prices are in store. I understand that GM has to do incentive programs now and then, and that March Madness is a good opportunity, however, weaning customers off the incentive mindset gets harder and harder everytime you introduce a new program slashing the already low prices. I liked GM's low prices, and the current commercials from Chevy promoting them are terrific. I am even seeing a lot of Lucernes. I am expecting nice sales, meaning flat or slightly up, for the month of February. Needless to say, this is a little disappointing.