GM Sales Up with Employee Discount - Good News?

[mchastek]

GM's sales apparently rose a healthy 46.9% in June (vs June 04), due to their "everyone gets the employee discount" promotion.

Is this just another incentive, which ends up killing any hopes of increased profits, or is this really good news for GM?

Article from Auto News: http://www.autonews.com/news.cms?newsId=12702

Thoughts?

[mchastek]

Here are some interesting quotes, taken from Automotive News, July 1, 2005, Detroit Free Press, New York Times, July 2, 2005:

"If, in fact, GM stops the program, then there will be an instant stop to the floor traffic [and market share will plummet]." -- Art Spinella, president, CNW Marketing Research, Bandon, OR

"G.M. [will] use its employee discount promotion until it stops working...[will] lead to further erosion of domestic brand values in the long term." -- John Casesa, analyst, Merrill Lynch

"...aggressive pricing and marketing and incentives and so on are a reality we all have to deal with and it's going to be here as long as we're all in this business." -- Paul Ballew, chief industry sales analyst, General Motors

[Auto Negotiator, LLC]

Can GM financially end the employee prices for everyone and still survive. They have not had any really hit models lately, and on top of that the gas prices are certainly hurting them a great deal. The other thing that has happend is since the employee priceing started, the resale value of there cars and trucks has dropped tremendiously.

Thoughts!

[mchastek]

I agree with you. It seems like they are only postponing the inevitable. There are other threads here on the forum about the same topics. Offering more incentives (which is all the employee pricing is) only hurts resale and devalues their new cars even more. In my opinion, they'll really need to step up to the plate and build some cars that consumers will want. The market speaks for itself. The fact that GM is hurting means that consumers are casting their votes elsewhere.

[Viper 10]

The bottom line to succeeding in the car, or any other business is that you cannot grow by cutting prices. They need to develop innovative and unique products to lead or define new markets. GM just has too many brands to manage and they overlap many of their own markets.

IMO, this industry is in dire need of guys like Lutz need to be the leaders and the visionaries (and not scapegoats for GM's mistakes). I don't know of any other car industry executives who is more of a car guy than Lutz. The bean counters are running these wonderful companies into the ground.

Won't it be ironic if GM gets sold to a foriegn company (like Toyota) and Ford becomes the last American car company standing in the marketplace (where American innovation and vision invented/created and revolutionized the industry)? All of this happened when bean counters took over and kicked the car people out.

At that point, the American's became followers instead of leaders in the car industry. Chrysler during the ninties was a glimmer of hope among the geriatric Americans (until Eaton sold his soul to the German's). The fact that any for of the Aztek is still on the market shows you where GM's innovation and vision are... in the toilet without a life preserver. Everything that the bean counters are doing is in reaction to the Asian and Euro manufacturers success. It is completely reactionary and tactical. They will live (inthe short term) by the sword whcih will eventually kill them.

I really hope that I am wrong, but when you look at GMAC doing things like selling off its loans to B of A to keep the lights on, it's not hard to read between the lines.

I am in the process of considering a move to the sales side of this industry, but I find it difficult when prices are set with these discounts and margins are almost gone.

Brad

[kristi]

All this GM business seems vaguely familiar to the crisis Mitsubishi was struggling through in recent years past. Trying to move lagging inventory, drastic marketing measures were taken. Zero down, zero % financing...sadly this equates to your cars worth very close to zero.

In the end, this whole "move the cars" scheme nearly ran Mitsubishi into the ground. The 18 through 25 year old customers on which this kind of marketing actually works couldn't pay payments, and the fate of all those Eclipses? In the hands of the local repo-man. That certainly didn't help in turning Mitsubishi around. They were on shaky ground for a bit, but it looks like they're turning that ship around.

An interesting article from AutomotiveDigest regarding how VW is dealing with slow inventory turn over besides selling their cars at no profit (smart):

http://www.automotivedigest.com/view_art.asp?articlesID=16346

Let's hope Bernhard's inspirational words and plan can do it for VW.

[bobcooke]

It just means that the MSRP is too high to start with and
consumers would rather purchase at a reasonable price without
all the smoke and mirrors that rebates create

[Auto Negotiator, LLC]

What is the the overall feeling, do you think that GM is going to have to file for bankruptcy? I personally believe all though this sale as help is certainly as hurt them. I strongly believe that is is only prolonging the evil certain. that is bankruptcy almost certainly. Please respond, Would like to know what the rest of the automotive industry feels.