GM kicks off another national incentive program

Jamie LaReau




DETROIT -- General Motors is starting a national incentive program to run through Jan. 3 despite claims that it would hold to its value pricing strategy.

The program, called GM Red Tag Event, starts Monday, Nov. 14, auto dealers say.

A GM spokeswoman declined to comment on Friday, Nov. 11.

Under the program customers can get any 2005 or 2006 Buick, Pontiac, GMC or Chevrolet car or light truck at the supplier price plus $100, several dealers say. The exceptions to the sale are the Pontiac Solstice, Chevrolet Corvette and new Buick Lucerne, they say. The supplier price is the price offered to employees of GM suppliers.

For example, a 2006 Buick LaCrosse has a sticker price of $23,595, says a Buick dealer who asked not to be named. The supplier price is $21,996, he says. Customers also can use any applicable incentives. GM offers a $1,500 rebate on the LaCrosse. Therefore, the vehicle would cost $20,596, the dealer said.

Value pricing?

GM's last big national incentive program, Employee Discount for Everyone, ended Sept. 30.

Mark LaNeve, GM's vice president of vehicle sales, service and marketing, had insisted that GM would stick to a value pricing strategy for 90 days and offer no big national incentive programs. But the automaker reported a 23 percent sales drop in October from the year-ago month, and dealers have been pleading for more incentives.

Dealers asked GM executives about value pricing during a closed-circuit broadcast on Friday, Nov. 11. Executives told them that there are two big selling seasons -- summer and year end. Dealers say GM executives told them GM would be "crazy not to have a promotion" during the year end because "all the competition will."

GM's value pricing strategy consists of lowering sticker prices on the base models of certain vehicles. The program is designed to move the stickers closer to the transaction prices.

Dealer profits

GM told dealers that it will start a national advertising campaign on Sunday, Nov.13, using the slogan, "See some red. Save some green."

GM will send red tags to dealers to hang in the vehicles' windows with the revived advertising phrase, "The price you see is the price you pay, not a penny more."

"It's not nearly as good as GM's employee pricing sale," says Ken Fichtner, owner of Fichtner Chevrolet in Laurel, Mont. "It's 2 percent higher for the customer than GM employee pricing was."

Fichtner says GM will give dealers $400 gross profit per vehicle under the promotion. He says the $400 will be less than the profit per vehicle he received with employee pricing, which was 5 percent of the sticker minus the destination charge.

But Buick dealer John Rogin says his sales staff broke into applause and cheers when GM said the salespeople's bonuses would be $150 for each vehicle sold in November and $100 for December.

GM ran a Red Tag sale at this time last year. Under it, dealers set a vehicle's price by combining previously announced incentives with a cash bonus between $500 and $2,000 when buyers financed through General Motors Acceptance Corp.

Many dealers were lukewarm about that program, and GM's December sales in 2004 fell 3.2 percent despite the program.

GM will end any other existing incentives on many of the 2005 vehicles with the new Red Tag Event.

 

at least the people who bought during employee pricing will still feel they got the better deal.

 

You know, this is truly a bad sign. a VERY bad sign.

If GM can't stick to it's "Value Pricing" strategy, and has to continually return to money eating incentives, combined with the snailspace new product seems to be coming out, it doesn't seem to proving Wall Street's prediction wrong.

The LeCrosse just came out, and it's part of the program. The story did say any car or light truck, right?

I really have to ask if the guys pushing GM for more incentives are really bright. If you are selling vehicles at employee discount levels, you are going to be pulling sales from people who were likely to buy in the coming months. Of course when the program ends, you're going to see a couple of months of seriously depressed sales, and Mark LaNeve was 100% right in planning to stick to value pricing for at least 90 days.

GM needs to be prepared for 2 or 3 months of depressed sales, but they also have to have great priced vehicles or at least great styled vehicles.

 

Jesus...the public is officialy hooked on heavy discounted pricing.
I fear there is no turn around for GM. This could be the last straw. Things like this scare me for future cars, scares me a lot.

 

This is very poor for GM. I agree that it is a very bad sign. Seriously, why didn't GM exclude the newer cars, and not just the Lucerne, but the Impala as well and the stronger selling cars? I don't understand why GM continues to chip away at the image of their cars, and any new car they release is hurt by these insane sales. I don't know how much longer this can go on for.

 

Just for the record, GMS and the supplier discount isn't the same thing. The supplier discount is GMS plus 4 or 5%. So the supplier price plus 100 bucks isn't as good a deal as GMS was. The good news for me, is that if I get this deal, I can now use my $2000 in GM card points, which I normally cannot do w/ straight GMS. WHOO HOO

 

Seriously, this does seem to be the end.

If they can't just set a price and stick to it, there's no reason to buy until the next sale. I'm officially worried.

 

Looks like all of Cadillac and all of Hummer and all of Saab and all of Saturn are also all excluded in addition to Lucerne, Solstice and Corvette.... since they are not specifically mentioned like Chevy, Pontiac, Buick and GMC.


Does anyone (Jason E, or Lew, maybe?) know if the Lease Pull Ahead date will move ahead with this promo too? Last I heard it was and lease scheduled to end before April 30th, 2006.

 

Yup, GM definitely blinked first on this. Again.

Surely GM realizes that they're going to have to stick out a few tough months if they are to convince the public that they're done with lavish incentives. By giving in so quickly, they just reinforced the public's behaviour that if they just wait a bit, GM will toss more money at them.

It's too bad, because GM had a fair bit of publicity about switching over to value pricing, and had they stuck with it, people might have believed it. Now buyers realize it was just BS and GM probably won't get another chance to 'start new'. So all of the pain for the last month or so was just wasted.

Caveat: I realize that's easy for us arm-chair quarterbacks to say when we're not on the dealership floors suffering. But the dealers made damn good money all summer (5% of sticker!) and should have been prepared for this. And if they had any long-term vision at all (I know, we're talking about dealership here) they would see the potential benefit beyond the short term suffering.

 

Remember this is not GMS. They will be making money. I don't know if it's good or bad. Most auto mfg's have rebates, it's just the way it is.

Think about it? You rush into Sears on the day after thanksgiving for the sale of the year. Nearly every retail mfg has "Sales", it's not a bad thing. Taking it to the extreme like GMS although I think is, but this is not GMS... ... ...

 

I'll let you know as soon as I get more information, Darth. According to my files so far, it looks as if Lease Pull Ahead will still end on the 14th of November (monday) unless something else comes out in between time. I'm hoping it does, and would assume so, but not sure as of yet.

You are correct on which leases qualify, being ones that end before 04/30/06.

 

They'll try anything BUT Return to Greatness. Their loss, and ours.

Have you noticed the increased calls for Wagoner to be removed?

How about that stock price?

See www.autolinedetroit.com archived show 922.

 

Congrats on going back to absolute square 1 . The Doemestic auto industry got the buying public used to heavy discounts . For lack of a better term really , if there not gonna let the buying public get thru the withdrawls of no incentives replaced with value pricing how are they ever gonna out of incentive selling . What did GM think , people were gonna respond overnite . All they just did is justify for all those people who waited to buy , that there is in fact more deals around the corner .

And actually , the fact that you can couple all applicable incentives and rebates with the new plan , I could have actually got a better deal I think a 06 Cobalt SS than I did with just straight GMS and thats it .

Ford on the other hand really did value price the new Fusion and 500 , and the dealer right by house seems to be selling them( Fusion ) at the pace of the 05 mustang when it came out .

 

You have a very good point.

The Five Hundred started off pretty slow in sales, but Ford excluded them from incentives. They are now selling pretty well (around 7K per month, vs Lecrosse's 5K).

I can see GM using incentives to move GMT800s that need a boost, or vehicles like the Grand Prix that are still a part of the old GM. But if GM has to use incentives to move the new cars like Malibu, Impala, Lecrosse, Cobalt, etc... this isn't good news at all for GM and it's new focus on products.

 

Well, the thing is, Value pricing sucks for two reasons-

#1- They may have reduced prices $600-$1500...but considering most GM cars sold at $3-5,000 below MSRP before value pricing, it is not enough. It makes GM car look expensive...which doen't fly when your cars have a negative rep with some of the public anyway.

#2- GM dealers like to sell cars to people who are upside down, and bury the negative equity using the rebates. Value pricing takes that tool away.