Anyone can give them away. Dealers and saleseople are screaming bloody murder, no profit. News sounds great, but it reminds me of announcing pro forma financials. Headlines look good until you read the later disclosed adjustments.

 

So, in your view, it's better to let stock build up on dealer lots and/or shut down plants and pay your workers to build nothing, and presumably lose more money than you are by having the promotion (which probably still turns a profit, though smaller)...

Pure genius.

Oh, and they're not "giving them away"... otherwise I'd have a driveway full of free vehicles right now

 

When you sell below invoice, pay salespeople, advertise, pay floorplan, and overhead, it's impossible to turn profit at the dealer level. GM contiues to pay millions in SFE money and other spiffs. When you sell at a loss, you can't make it up on volume. The program looks good on paper, but in reality it's a disaster with long term damaging results. The glee is not for me.

 

Good news I guess, but everybody knows its not sustainable. GM has to be loosing its shirt on this deal.

 

Who makes money on parts?

For any vehicle, on warranty or out, if a customer brings the car to the dealership, who makes the money on the parts the customer has to order?

We know that assembling the entire car by ordering individual parts will send the price of the car into the stratosphere, so there is some crazy money made somewhere by someone. If it's GM, I don't see any problems. If not, then who makes the money? The dealer?

 

This is what I am saying. Thanks guys.

I tried to point out in my previous post that this is indeed a short-term fix that will gain GM market share - but that's it. I don't think this will save GM ANY money at all... from furloughed workers to reduced electric bills. In fact, I think it will cost them more $ due to the elevated advertising, additional workloads in the entire pipeline, and the reduced revenue per vehicle sold.

But more improtant to me than GM's "buying marketshare" is the reduced capital and funding that would be used to develop tomorrow's cars and trucks. The testing, R&D, studies, etc... these things will all grind to a painful halt when the profitability goes to nil - I can promise you that.

All-in-all, this is really no different than if GM tried to drive up the price of their stock by buying a ton of it off the market. They'll get it, and the price will go up today making them look good on Wall Street, but what benefit will it give them next year to do that today? Is it worth the investment? I don't have the data to say if it is or not, but methinks probably not.

It will do you absolutely NO GOOD to have 31% of the market this month if you cannot sustain it and have 31% of the market buying your vehicles at normal prices next year, the year after that, etc.

I do have to admit though, that this is an excellent way to get people into the showroom to see American cars and trucks that probably would never do it otherwise, and that alone may bring some good benefit to GM and the American car companies as a whole for the long term. Credit where it's due.

 

Selling cars vs not selling cars...

Keeps the factories moving, which in turn keeps the economy moving... parts suppliers, janitors, the Pepsi machine in the lunchroom... etc.

Again, why pay all your workers to not do anything? This si ONE HUNDRED PERCENT lost money. At least if they are working, they are being productive. If you lose a bit on a vehicle, it's STILL probably not as bad as GIVING the money away.

From a dealer's standpoint... obviously Buickman can speak from experience, where I can't) but it moves my product... I can get new customers I never had before... I move OLD STOCK from my lot that I've been paying or will pay taxes on... the more cars I sell, the more cars I service... which makes me more money down the road.... probably a lot of other benefits to higher volume as well.


Obviously this is a short term fix. I doubt anyone would say other wise... but there are a lot of GOOD things that can come out of this... both short term AND long term.

 

I do not work in a union shop - never have, never will. So I need someone to help me here...
When workers get sent home or "furloughed", do they get to draw 100% regular hourly payrate? If so, I'm doing something wrong!

At the last 2 huge companies I have worked for, when your plant gets shut down for a furlough, they don't get paid... period. In North Carolina, you have a 1 week exemption, then you can file a claim for workman's comp for everything else after the 1 week, but that money comes from NC-SEC, not the company. The company pays unemployment benefits to the state regardless of whether you are working, disabled, furloughed, or MIA.
I have been there, done this. I was furloughed 5 weeks back in 1997, and again in 1998 and 1999.

So I don't understand where this "paying them to sit at home" argument is coming from.

He'p me out here!

 

Actually we already have GM dealers here in central NC advertising on the radio that they are out of room for used vehicles coming in as trade-ins. There are "$29 aquisition fee" sales, "auction-on-the-lot" sales, and "no reasonable offer refused" stuff going on everywhere right now.

Jason E was spot-on with his comment about what this will do to resale values and the used car market - it's gonna tank. So I'm not too sure that moving old stock (new or used) is going to pan out for the dealer's advantage this way.

 

Well, like poSSum said, "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 don't know that the 95% is right on the money, but I am pretty sure they get assembly line workers get a SUBSTANTIAL amount of their pay when they are shut down.

I had this conversation at a poker game with a friend who works at Lordstown, and remember him saying they LOVED shutdowns because they are basically paid vacations.

I want to say he said eh got 85% of his pay...... but this conversation took place a year or two ago, so I could be wrong... maybe someone can clarify further.

 

The used car market already took the bulk of it's drop a few years ago when the incentive games all started.

Dealers make more money on used cars than new cars most of the time.

Anyway, yes there could be an effect, but I think it will be minor to unnoticeable.

 

You can't give $10,000 off a Tahoe and return to normal pricing next month. Again, finance folks trying to make numbers and save face. It's like the lease deal offered dealer employees on Cobalt and LaCrosse. Lease the ride for $200 per month 12 months. Dealer had to take $100 flat and give back holdback. After floorplan, the dealer loses money. GM can't take in $2400 for 12000 miles 12 month lease and not lose their shirt, impossible. Don't believe what management puts forth. Paul Ballew."The price of gas isn't effecting our business". Over night test drive promoted as huge success. BS! Puppydogging the customer in a ride they like, but won't close, is a great tool. They wake up and see in driveway as do neighbors. Under GM's plan you had to take a certain plated and insured unit, not the one you'd buy. Dealers had to register so many drives to get their reimbursement money, so whoever came in to buy was registered as having driven. GM claimed something like 70% effective closes. Complete crap. Program was phony. Once again, people who have never sold a car making decisions with no clue as to the impact or long term implications. GMS for everyone is BAD BUSINESS.

 

You're right.... however, GM *HAS* inflated MSRPs considerably while the incentive game has been going on. They also said they are going to LOWER MSRP's for MY2006, and finally, the GMT-900's will be out within a year, and then that "washes away" most of the pricing history since it's an all-new model. SO, I agree it DOES put you in a bit of a "situation", but it's not quite as dramatic as it may seem... at least with the GMT-800s, and from my researching of the GMS discounts+rebates, they are the vehicles getting the big $10k discounts... most of the fresh, new models aren't even close to that.

How many people can get this offer? "Dealership employees"? I don't remember any of this being pulicly available, so I doubt it accounts for anything close to the majority. Maybe GM should cut back on it's perks for dealership employees? Nah... if I worked for the dealership, I'd enjoy getting offers like this!

Guess what.... if the dealerships played by the rules, instead of SKEWING the statistics... maybe they wouldn't be spouting it off as a huge success?!

 

Right..on...the money. Its a great way to get people in your cars and expose them to your current quality levels, and it creates a smooth transition to more "actual transaction based" pricing for '06 and beyond. Buickman, you should win out on this in the near future with more traffic and lower MSRPs and Invoice prices on the 06's.