Chevy to boost March incentives in 'unprecedented promotional assault'

Chevy's Truck Month promotion runs March 1 through March 31, offering the same price on 2014 light-duty and heavy-duty Silverados that GM offers to employees of its suppliers.
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Editor's note: An earlier version of this story incorrrectly described the change in GM's incentive spending, as tracked by J.D. Power, in the first two weeks of February compared to the first two weeks of January.

DETROIT -- Chevrolet will run a national promotion in March offering supplier pricing on all Silverado pickup models -- in addition to nearly every other vehicle in its lineup -- marking the second straight month of beefed-up incentives from General Motors.

The promotion comes as industry watchers are on high alert for an increase in profit-eroding incentives amid swollen vehicle inventories and forecasts of flattening industrywide sales growth.

Chevy's Truck Month promotion will run Saturday, March 1, through March 31, offering the same price on 2014 light-duty and heavy-duty Silverados that GM offers to employees of its suppliers, according to a summary of the plan sent to dealers Wednesday. Supplier pricing is the dealer invoice price, plus destination charge and a $150 program fee.

A GM spokesman declined to comment on the company's promotional plans for March.

The promotion appears to be the steepest and broadest discount that GM has offered yet on the redesigned 2014 Silverado. The light-duty pickup debuted last summer as the first redesign in seven years. The heavy duties are being phased out to make way for the redesigned 2015 models, which launched last month.

GM this month is offering supplier pricing only on pickups with V-6 engines as part of its Presidents Day sale, which also includes cash discounts on the Malibu sedan, Tahoe SUV and other models.

Combined promos

The March truck promotion will be combined with a Chevy Open House Event, which also offers supplier pricing, or less, on all 2014 cars except the Corvette and SS sports sedan.

Advertising for the promotion will include the line: "The price you see is the price you pay! Or less!" according to the summary sent to dealers. In the document, GM describes the sale as an "unprecedented promotional assault."

An example from the summary shows that a two-wheel-drive, double cab Silverado 1500 in the All Star Edition package, which normally carries a sticker of $37,520, can be had for $30,828 after applying the March discounts.

"It's no secret that Silverado sales are vitally important to our mutual success," the summary reads. "Dealers everywhere want and need Truck Month to win against Ford and Ram."

Participation in either the Truck Month or Open House event is optional for dealers. Those who participate will be encouraged to host gatherings at their dealerships or tie the promotion into other local events, such as garden shows and boat expos, the summary says.

GM plans to back the promotion with heavy advertising, including direct mailings to existing Silverado owners and commercials that will air during the NCAA men's basketball tournament that begins March 18.

Buick and GMC also are running the Open House event but not the Truck Month sale. It's unclear whether supplier pricing will be offered on GMC Sierra pickups under the Open House promotion.

Since the launch of the Silverado and Sierra eight months ago, GM has lost pickup market share to rivals Ford and Ram, which have offered steep discounts. Some dealers have clamored for stronger incentives and promotional events to lift sales.

Meanwhile, analysts have questioned GM executives about the company's slipping market share in the highly profitable large pickup segment. Combined market share for the Silverado and Sierra has been 33 percent or lower in four of the last five months, down from GM's 35 to 40 percent market share in recent years.

Profit threat?

In a note to investors Wednesday, Barclays Capital analyst Brian Johnson said GM's underperforming pickup sales pose a threat to its bottom line.

"GM has faced an intense full-court press by its competitors Ford and Ram," Johnson wrote. "The result: the [pickup] launch has been arguably the least successful large pickup launch over the last 15 years."

GM executives have said that they will defend the company's truck market share but point to the higher prices that the pickups are commanding as proof of their success. Average transaction prices in recent months have run $4,000 to $5,000 higher than year-earlier transaction prices on the prior-generation truck.

GM executives predicted that the company will gain modest U.S. market share overall during 2014. But GM stumbled out of the gate in January, as sales declined 12 percent amid bad weather in the Midwest and other GM market strongholds. The decline was led by Chevy and Cadillac, both down 13 percent.

Several analysts expect GM to post a decline in sales again in February, despite its Presidents Day sale, partly because continued bad weather hampered demand. TrueCar expects GM's sales to decline for the month while the industry overall increases sales by 0.5 percent.

Automakers will announce sales results for the month on March 3.

Despite the two-pronged sales promotion planned for March, it's unclear whether it represents a significant uptick in GM's spending on incentives compared with February. The supplier pricing offer will replace other deals that GM has run in recent months, such as cash rebates and special deals for loyalty, conquest and lease customers, a company source said.

Research firms that track automakers' incentive spending vary on how deeply GM dug for its Presidents Day sale.

J.D. Power research shows that GM's incentives rose less than 1 percent through Feb. 14, vs. the same period in January, to $3,598 per vehicle. Its incentive spending as a percentage of average transaction price was 11.3 percent, higher than the 10.2 percent industry average but lower than Ford's 12.7 percent.

Compared with February 2013, though, TrueCar forecasts that GM's total spending on incentives in February will decline by 5 percent, while the industry's spending is expected to increase by 5 percent.

You can reach Mike Colias at mcolias@crain.com.


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