GM's massive incentives explained.
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Joined: Mar 2001
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From: The Golden State
GM's massive incentives explained.
They may end up destroying Chrysler & Ford, and you may not agree with them, but they do have solid reasons & do make alot of sense (coming from me, an anti-incentive guy
)
http://autoweek.com/cat_content.mv?p..._code=01563206
)http://autoweek.com/cat_content.mv?p..._code=01563206
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Joined: Feb 2003
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Originally posted by WERM
I think their pension costs are a lot of the reason. They currently average over a thousand dollars a car. Sell fewer cars and that number goes up...making it harder to sell cars...
I think their pension costs are a lot of the reason. They currently average over a thousand dollars a car. Sell fewer cars and that number goes up...making it harder to sell cars...
...health care costs add as much as $1,200 to the price of a Big Three vehicle. GM's U.S. retirees now out number actives 2.5:1, and it's worldwide global pension and health care obligation reportedly totaled $92.2 billion and the end of 2002. Toyota's tab is $13 billion by comparison.
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Joined: Jun 2000
Posts: 3,463
From: SoCal
Its really not a bad strategy when ya think about. Because GM feels that if they can undercut the competiton and keep productivity up they can raise there market share. Now in the past say the 1980's had GM done this it wouldn't have done them as well as it will now. Why becuase of better quality and better customer satisfaction ratings GM is getting there vehicles out there and keeping more customers. So while I'd rather GM beat up on the foreign competition, its making GM stronger for now.
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Joined: Dec 2001
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Very good article....Makes a lot more sense now.
But when business picks up again you have to retrain and rehire and this undoubtedly increases cost in the future....not to mention benefit of increased company loyalty of employees.
From Article: "But many analysts counter that GM would have done better if it had slashed production to meet demand. "
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Joined: Jan 2003
Posts: 562
From: Mich.
You know whats extremely funny about this.A couple of months ago I recall reading (i believe auto insider) that GM couldnt afford to keep going with incentives.You may recall guionM "Ford has the money in the bank to keep going" ring a bell?I personally dont mind it.Its giving thousands a chance ot buy a car they normally couldnt afford to get.But to say that GM is going to run Ford or DC in the ground is the same as speaking out of your rearend.
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Joined: Mar 2001
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Originally posted by cmc
This method of increasing market share seems to lead to GM becoming the Wal-Mart of automobile manufacturers... (in my opinion)
This method of increasing market share seems to lead to GM becoming the Wal-Mart of automobile manufacturers... (in my opinion)
After years of the consumer being conditioned to this, what will their (consumer) reaction be when incentives are no more? The cars will seem overpriced.
I like your example. I certainly wouldn't spend 40 bucks on a pair of jeans from Walmart regardless of how good the quality is. Will the consumer that's used to spending 20 bucks on a pair of jeans be willing to spend 30 or 40 bucks on the exact same merchandise? If they're smart, no. It’s probably the same case with cars and GM.
This will hurt GM more than help. The japs are not only gaining ground (their market share still increases even w/o incentives), but they’re making more $$$ per vehicle, therefore becoming more profitable.
There's also this perception that Domestics (with their sub-par quality) need incentives to compete with the imports and that they wouldn't sell as much without them. This incentive frenzy only feeds into this perception. It comes off as some desperate sales gimmick.
I knew that the main reason behind GM’s crazy incentive binge is to make Ford/Chrysler broke. Without even knowing it, GM just may be setting themselves up in the process.
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Joined: Feb 2001
Posts: 681
From: Houston, TX USA
The incentives are not for us. They are for them.
Wal-Mart is the biggest company in the world. But is there anything at all good that they sell?
GM is heading in that direction quickly with these incentives.
Wal-Mart is the biggest company in the world. But is there anything at all good that they sell?
GM is heading in that direction quickly with these incentives.
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Joined: Feb 2003
Posts: 209
Originally posted by RiceEating5.0
I know. Discounted GM cars have/will become the norm.
After years of the consumer being conditioned to this, what will their (consumer) reaction be when incentives are no more? The cars will seem overpriced.
I like your example. I certainly wouldn't spend 40 bucks on a pair of jeans from Walmart regardless of how good the quality is. Will the consumer that's used to spending 20 bucks on a pair of jeans be willing to spend 30 or 40 bucks on the exact same merchandise? If they're smart, no. It’s probably the same case with cars and GM.
This will hurt GM more than help. The japs are not only gaining ground (their market share still increases even w/o incentives), but they’re making more $$$ per vehicle, therefore becoming more profitable.
There's also this perception that Domestics (with their sub-par quality) need incentives to compete with the imports and that they wouldn't sell as much without them. This incentive frenzy only feeds into this perception. It comes off as some desperate sales gimmick.
I knew that the main reason behind GM’s crazy incentive binge is to make Ford/Chrysler broke. Without even knowing it, GM just may be setting themselves up in the process.
I know. Discounted GM cars have/will become the norm.
After years of the consumer being conditioned to this, what will their (consumer) reaction be when incentives are no more? The cars will seem overpriced.
I like your example. I certainly wouldn't spend 40 bucks on a pair of jeans from Walmart regardless of how good the quality is. Will the consumer that's used to spending 20 bucks on a pair of jeans be willing to spend 30 or 40 bucks on the exact same merchandise? If they're smart, no. It’s probably the same case with cars and GM.
This will hurt GM more than help. The japs are not only gaining ground (their market share still increases even w/o incentives), but they’re making more $$$ per vehicle, therefore becoming more profitable.
There's also this perception that Domestics (with their sub-par quality) need incentives to compete with the imports and that they wouldn't sell as much without them. This incentive frenzy only feeds into this perception. It comes off as some desperate sales gimmick.
I knew that the main reason behind GM’s crazy incentive binge is to make Ford/Chrysler broke. Without even knowing it, GM just may be setting themselves up in the process.