AUBURN HILLS, Mich. - DaimlerChrysler AG's Chrysler Group is considering a nationwide discount promotion to match a similar one by General Motors Corp. that extends employee discounts to ordinary customers, according to a published report.


Chrysler told leaders of its national dealer council that it could implement an employee-pricing program as early as July 6, but wouldn't make a final decision until it knows whether GM will extend its promotion through July, The Detroit News reported Wednesday, citing "sources familiar with the matter."

Chrysler spokesman Jason Vines would not confirm the report, but said the company has been talking continuously with dealers about what it can do to counteract GM's program and remain competitive.

"We're contemplating everything right now. Do you go that route, do you do something else, do you do something more?" Vines said Wednesday, adding the company expects to make an announcement Friday or early next week.

"After we close out this month and see how everything shaped up, how GM did, what our competitors are doing, we'll decide," he said.

Automakers report June sales figures Friday. In a recent note to investors, Merrill Lynch analyst John Casesa predicted June will be GM's best month since the post-Sept. 11 incentive blitz in October 2001.

Casesa said GM could grab as much as 30 percent of the market, up from its 25.4 percent share in the first five months of this year.

But the program also will cut into the automaker's profits and will lower resale values down the road, Casesa said. And another analyst predicted GM's total incentive spending per vehicle in June will be an industry-high $4,300.

GM launched the employee-pricing program in an attempt to clear 1.2 million unsold 2005 vehicles from dealer lots before 2006 models arrive this fall and to win over customers from other vehicle brands.

The program allows GM customers to pay what GM employees pay, which is about 3 to 4 percent below dealer invoice.

GM's employee-discount offer on new autos pays off By James R. Healey and Sharon Silke Carty, USA TODAY
Thu Jun 30, 6:40 AM ET



General Motors (GM) has hit upon a possible escape from the big sales incentives that have ruined its bottom line without boosting its market share.


The strategy is akin to one-price selling, minimizing distasteful negotiation. GM doesn't call it one-price, but that is at the core of GM's current promotion - selling anybody a vehicle for the price an employee would pay. (Related: Chrysler may match GM deals)


Preliminary June data from analysts show that the program, which grew out of employee suggestions, is wildly successful. It appears to have boosted GM sales 20% to 30% compared with recent months and pushed June market share to 30%, from 25.4% the first five months. And it isn't costing GM much more than its previously ineffective rebates.


"Our share the first five months has been abysmal. June, it'll be good," says Mark LaNeve, GM vice president of sales and marketing. He did not give numbers. Automakers report sales Friday.


"The No. 1 reason this promotion is succeeding is not that people are getting great deals, but that they don't have to negotiate. They know they paid the same price their neighbor did," says Jesse Toprak, analyst at Edmunds.com, an online car-shopping service. "People tell us they'd rather have root-canal work than negotiate for a car."


"The price is the price, and our customers seem to like that," says Jim Brasher, a Chevrolet dealer in Weimar, Texas.


Paul Ballew, GM's head of market and industry analysis, says the promotion is part of GM's move toward "simple pricing and incentives" to stand out in "a very difficult, and at times muddled, environment for consumers."


GM's employee price is what a dealer actually pays for a vehicle, about 4% less than the dealer's invoice price. The invoice includes a profit, called holdback.


To compensate dealers for selling vehicles at no profit, GM gives them 5% of the window-sticker price, an average of about $1,500 a vehicle.


Dealers can use the 5% to give additional discounts. And some models have rebates that push prices even lower than employee discounts.


GM is paying for that 5% dealer compensation by cutting incentives. Toprak says GM's average per-vehicle June incentive cost is $3,714, slightly less than May's $3,729.


"Alert visitors to GM showrooms are discovering that prices in June are actually little different from prices in May," says David Healy, Burnham Securities analyst, in a note to investors.


Though not "the deal of a lifetime," the appeal is strong, he says.


True one-price selling involves cutting dealer profit margins slim enough that they have to sell at or near window-sticker price. GM won't discuss whether it intends to do that.


Chrysler is considering a similar promotion if GM extends its program past the Tuesday deadline.