TCC: GM Says Pricing Is Working

[VenSeattle]

GM Says Pricing Is Working

PR spin prefaces sales figures due out this week.

by Paul A. Eisenstein (2006-03-27)

The "top-line" story isn't a good one for General Motors. The automaker expects to report a one-percent decline in first-quarter U.S. market share when March numbers are tallied up at the end of this week.

But digging just a little deeper would reveal a more positive picture, senior company officials asserted during a Monday afternoon briefing for reporters. The decline in overall, or top-line, sales is largely the result of declining fleet sales, said GM's director of market analysis, Paul Ballew. On the retail side, he stressed, the automaker is actually showing some gains.

As company officials told their story, GM's new Value Pricing strategy is finally starting to gain some traction, and that not only means increased retail sales, but higher transaction fees and improved residuals - trade-ins, in layman's terms. Even so, the automaker is facing some enormous pressures to turn things around even faster.

"There's a strong sense of urgency to show improved results now," said Mark LaNeve, the automaker's head of sales, service and marketing for North America. "We have fixed many things, but we have to fix the rest on the run."

GM's share decline reflects a conscious decision to scale back money-losing daily rental fleet sales, with the automaker focusing on profitable retail business, both executives emphasized, during a nearly two-hour briefing. There is where the automaker claims to be gaining some traction as the result of its Value Pricing program.

Since the beginning of the 2006 model year, GM has cut prices on 66 of the 76 vehicles it sells in the U.S., representing about 90 percent of its overall sales volume. Since then, the automaker has been actively reducing its incentives. Overall, rebates and other givebacks have averaged $2702 so far this month. Though that's still $445 higher than the industry average, it's nearly $800 less than Ford has been spending and $1400 less than DaimlerChrysler. More significantly, GM's March incentives were down $1523 from where they stood in March 2005.

At the same time, two other key metrics are turning in GM's favor. According to the influential arbiter of used vehicle values, ALG, the average residual on a 36-month-old General Motors vehicle rose to 43 percent during the first quarter of 2006, up from 40 percent a year earlier. On a typical car or truck, that difference adds up to nearly $1000.

Meanwhile, noted Ballew, the average transaction price - the ATP, or actual selling price - increased by close to four percent during the quarter, roughly double the industry average. The biggest gains, not surprisingly, came on the newest vehicles in the GM lineup. A year ago, the typical Chevrolet Tahoe went for $33,394. So far this year, the newly redesigned version of the big SUV has commanded an ATP of $41,360. Other new models, such as the 2007 Cadillac Escalade, and the 2006 Chevy Impala, have scored similar gains.

Still, LaNeve conceded "We don't find it acceptable" for GM's U.S. market share to slip to 24 percent for the first quarter, down a point from the same three months in 2005, and 27 percent for all of last year.

But don't expect a return to heavy incentives, like those the automaker offered last summer, as part of its Employee Pricing program. "We're not going to gain share over the long run with incentives," asserted LaNeve. "We learned that lesson."

The GM executive has shaken things up quite a bit in his year on the job. Among other things, he's pushed for a realignment of the company's eight North American brands into four distinct marketing groups, such as Pontiac, Buick, and GMC. At the same time, LaNeve has been a strong proponent of hanging onto existing nameplates such as HUMMER and Saab, which he called "a vital part of the mix."

That runs counter to comments made by GM's newest director, Jerry York, the point man for the company's largest individual investor, Kirk Kerkorian. As part of a turnaround, York has suggested HUMMER and Saab be eliminated. LaNeve said he had not yet met with York to discuss his own strategies.

But the marketing chief said there is little doubt GM has to redouble its efforts to right its core, North American operations. Simply having its troubles aired on the front page is "having some effect out there," said LaNeve, with some motorists reluctant to buy from a company they aren't sure will survive.

[Newbiewar]

hrmm...

$1523 less per vehicle... and we are probably talking 300,000 vehicles maybe more maybe less...

$456,900,000 thats almost half a billion dollars in savings... so if they could continue that difference for all 12 months... and maintain same sales as previous year...

that would save the company a total of 6 billion dollars in rebates... thats more then the amount of money that was lost in at GM last year if you disregaurd delphi's portion...

sounds like a return to profitablity if they just do a more effective job at advertising to maintain marketshare...

[FUTURE_OF_GM]

But the marketing chief said there is little doubt GM has to redouble its efforts to right its core, North American operations. Simply having its troubles aired on the front page is "having some effect out there," said LaNeve, with some motorists reluctant to buy from a company they aren't sure will survive.

That paragraph right there says it all.... And it is yet another plea from GM to the press. They'll not stop until bankruptcy though, if then.

But I'm sure out of ALL the 'journalists' that went to the press event 95% will focus on the negatives and blow the effect up even more with SENSATIONAL headlines.

Anyway... Things are definitely looking up but GM still has a lot of work to do ESPECIALLY when it comes to share. I have no doubt in my mind that Toyota will surpass GM both globally and in the U.S. not to long from now. (Especially if the media rhetoric continues)

Either way though.... MY lesson hard learned is that a smaller healthier GM is better than a broken BIG GM.

Now if we could just fix Ford (Yeah right, the media nailed that coffin shut before they even started destroying GM, only the long slow free fall into death is left)

[daves87rs]

That paragraph right there says it all.... And it is yet another plea from GM to the press. They'll not stop until bankruptcy though, if then.

But I'm sure out of ALL the 'journalists' that went to the press event 95% will focus on the negatives and blow the effect up even more with SENSATIONAL headlines.

Anyway... Things are definitely looking up but GM still has a lot of work to do ESPECIALLY when it comes to share. I have no doubt in my mind that Toyota will surpass GM both globally and in the U.S. not to long from now. (Especially if the media rhetoric continues)

Either way though.... MY lesson hard learned is that a smaller healthier GM is better than a broken BIG GM.

Now if we could just fix Ford (Yeah right, the media nailed that coffin shut before they even started destroying GM, only the long slow free fall into death is left)

I have to agree with FOG on the smaller GM idea...

GM is going to lose more market share. There is no doubt about that.(though they

could get some as the new products roll out in the next few years)

This is important in the fact that they really need to make money on their cars and trucks....

Hmmm....