GM ending 'employee discount' prices
No. 1 automaker will shift to lower costs rather than incentives next week -- report.
July 27, 2005: 8:16 AM EDT
NEW YORK (CNN/Money) -
General Motors Corp. is set to end its popular and successful "employee discounts for everyone" promotion next week, and move to more emphasis on permanently lower sticker prices instead of big rebates, according to a published report Wednesday.
GM's
strong sales in June and so far in July have left it with depleted inventories of the 2005 models that the offer applied to, according to company officials earlier this month, so the move is not a total surprise. But generally, summer sales promotions to clear previous model year vehicles remains through August and sometimes into September as dealers try to make room for the new models.
GM spokesman Jeff Kuhlman told the paper the employee discount offer will end Aug. 1.
It is not clear how Ford Motor Co. and Chrysler Group will respond. Both of them started their own employee pricing program in July, a month behind GM, and they have larger inventories of 2005 models. But the two have also generally followed GM's lead on incentives.
GM has been signaling plans to move to lower sticker prices rather than setting sticker prices high and using cash-back and other incentives to lure customers into dealer showrooms.
One dealer familiar with the automaker's 2006-model program told the Journal said
GM plans to lower prices on as many as 46 vehicles. For example, the dealer told the paper the 2006 Cadillac DTS be priced as much as $6,000 below the sticker price of the 2005 Cadillac DeVille model it replaces, even though the newer model has undergone a major redesign.
Kuhlman confirmed that GM will cut prices on many of its upcoming 2006 model-year vehicles. He said GM wasn't ready to announce which vehicles would be affected or what the new prices would be.
U.S. customers have generally come to expect cash back, below-market interest rates or other incentives when they buy Big Three vehicles. The challenge for GM from its new pricing program is to wean customers away from incentives. If it needs to offer incentives on top of lower pricing, it will mean more profitability woes for GM.
The prevalence of incentive offers in the past have limited the cost of the employee pricing program.
GM officials estimate that customers were paying $300 to $400 less per vehicle with the employee pricing offer than they would have paid with earlier incentive programs, even though the vehicles are generally selling for thousands less than list price.
But that cost is still expensive, since GM is likely to have
sold more than 1 million vehicles in the United States in June and July, a period during which the No. 1 automaker is losing money on its core auto operations.
The Journal reports that
part of GM's new lower-sticker strategy is attempting to extend no-haggle pricing -- a key element of its employee-discount promotion -- into its everyday selling strategy. GM has used this approach on its Saturn brand, but that nameplate makes up only about 5 percent of GM's overall sales.