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Advertisement J.D. Power: GM hits market share gold
Employee discount incentive driving June sales

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WESTLAKE VILLAGE, Calif. -- General Motors' "Employee Discount for Everyone" incentive has pushed its U.S. market share to 30.3 percent through the first 12 days of June, a study by Power Information Network shows.
The study shows GM taking share from the Chrysler group, which has lost more than two points, and Ford Motor Co. and Toyota, which have each lost more than a point. American Honda, Nissan Motor and Hyundai Motors have lost smaller amounts of share, the study shows.
GM's share is up seven points from June 2004, and has not been above 30 percent for a month since September 2004, a PIN release said.
The employee discount program "is substantially moving the needle for them," said Tom Libby, senior director of industry analysis at PIN, a unit of J.D. Power and Associates. The PIN study is based on retail transaction data from more than 6,000 automotive franchises.

 

Chalk this up to LaNeve?

I wonder if the buzz can last the rest of the month?

 

I was reading about this this morning.

Looks like "Wags" and the marketing team hit on something here that not only increased showroom traffic dramitically, but it has resulted in a huge increase in sales.

Amazingly enough, they are back to a 30% market share (for a month anyway) and somehow they managed to do it without buying that 20 step plan.

Hopefully they will be able to carry some momentum when they lower MSRP's and such...

 

First things first, let's hope they continue the momentum through the rest of the month. It is mid-June, afterall.

 

Maybe make the GMS discount standard? I'm sure there's still margins to give for employee's.

 

Ford is in on this employee discount game too now.
There is no doubt that this will move some new vehicles, but what will be the long-term costs to these companies?

I'm no bean counter (heck, it is against the laws of physics for an engineer to be a bean counter!), but all of the amortization of tooling, assembly line labor, loaded hourly rates, shop expenses, etc, etc are based on selling cars at a nominal markup over loaded manufacturing costs. Employee discounts usually are not far above actual loaded costs, and are often at or below dealer invoice. Not a big deal if 10-20% of the cars produced are in this margin - you can even plan for that. But when 80-90% of the cars you put out are now simply paying your power bill and salaries... not good. You are now reducing the money generated for new product development, testing, designwork, marketing, etc.

In my eyes, this will make their market share rise, and cars sales volume rise, but the bottom line net-profit will likely diminish instead of rising proportionately with sales. It's like fool's gold. What good did it do GM to sell 15% more cars, if their profits fell by 20% doing it? Just saying "we sold more vehicles than we expected" won't pay any bills.

I see this as risky business for GM and Ford both. Maybe not risky like cash-back or incentives, because those give people a mindset that the car is cheap or inferior, the company has to pay you to take it, and the company's reputation becomes cheapened and questionable whether deserved or not. This employee discount approach definitely has a better spin on the quality and product - they make you feel like you are an insider, getting the best available at the best price - which is probably a good thing.

Again, I see it working short-term, no doubt. I just wonder what the price for this short-term success will be in say 2007 and beyond?

 

I can say , when I bought my Cobalt ...the chevy dealer I was at was jam packed full of people looking cars , both times I was there .

 

Selling a vehicle for less money is better than not selling one at all.

Didn't GM lower rebates for the month too?

May = $3000 + invoice
June = $2000 + GMS

So wouldn't GM be making more $$ and selling more cars.

....also the program worked, my Father bought a 2005 Colorado

 

Perhaps a move like this will also benefit GM by getting people into the dealerships and having them see that their cars are much better than even just a few years back. That in itself could play a large role in getting people's opinions of GM up.

 

While the program is great and is definitely helping traffic (its put more $$ in my pocket by helping me sell a few!!), I'm with Proud on this one. I love seeing GM share at 30%, and indeed it is getting people into GM car's drivers seats...but what is it doing for profitability?

GM needs profit as much or more so than it needs market share. Discounting the hell out of new cars is hurting resale as well. Granted, GM did drop the rebates on most cars for June, thereby making the transaction prices nearly the same as May. However, I thought GM was trying to roll back incentives and give more "value pricing"????

I like the program and I hate it, at the exact same time. It speaks of deperation...but to be honest, I don't have a better answer. So...go GM

 

When you're paying your hourly employees 95% or so of their wages to sit at home paying them 100% to build a car you can sell makes a lot of sense to me. I think this is a great step in moving to a price structure that more reasonably reflects transaction costs and keeps staff working until they become part of the 25,000 reduction. I think they should make this "the program" for the next few months at least.

It was posted or written someone .... "the sleeping giant is waking" .... I'm glad I never got off the GM bandwagon.

 

Isn't there different levels of GM employee discounts??? I thought that their was and they were giving the LEAST amount typically given for "employees". I could be wrong.

Without knowing the profit margins it's hard to say where they stand. If you sell 15% more cars, but at a 10% profit cut; you will make more money. Reverse that and you will lose money. But their are also other factors as well: more vehicles on the road = free advertising; repeat business from satisfied customers.

It looks like to me GM might not only be using this for a marketing gimmick, it might use the sales data to try and determine what the market will bear for what price. Especially since we hear that they are goign to drop MSRP's in the near future. Could be a big market study?!

 

No there used to be two employee discount pricing options, one if you ordered the car, and one if you bought it off the lot. A few years back, GM went with straight GMS pricing whether you ordered it or not, and it's all the same. The other discount you might be talking about is a supplier discount, which I believe is only 5%, but that's not what this promotion is about.

Regarding the profitability, yes, selling cars at GMS pricing brings in less $$$/vehicle. The big thing to consider is the market share. I think it's a great move! More market share gets more butts into GM cars, to see how nice GM vehicles really are, and start gaining loyalty again. Stealing market share is something GM isn't used to lately, and I'm excited to se how this works out for them.

Go GM.

Dan

 

Sounds good.

 

Just wanted to quote this because it is so key.

Even if you make less per unit, you are probably SAVING money by keep the factories moving and actually selling something, than paying nearly all the salary to the worker to stay at home and build nothing... when that happens, you are literally giving money away.