DETROIT -- Big 3 auto dealership sales have dropped off a cliff this month after the end of employee pricing programs.
Ford Motor Co. and General Motors switched to promoting value pricing strategy, meant to replace incentives with lower sticker prices. The Chrysler group has been following a similar strategy for several years.
Dealers say the first two weeks of October have been the slowest they've experienced in years with little to no traffic or sales.
"I didn't think it could get much slower than September, but it's definitely slower," says Gordon Stewart, president of Stewart Management Group in Harper Woods, Mich., which has several GM stores.
GM has incentives on selected vehicles. But Stewart questions whether GM can avoid a high-profile national incentive program: "The word is that they're supposed to let the value pricing ride for 90 days, but the question is, do they have that kind of staying power?"
Jon Myers, owner of Naples Dodge in Naples, Fla., and chairman of the Dodge National Dealer Council, said, "It is pretty slow. It is a number of factors: the hurricane, the gas prices, coming off employee pricing, the continuation of the raising of interest rates.
"That is what everybody is saying. It is slow out there," Myers says.
Ford dealer Maureen Joyce, owner of Joyce Ford Inc. in Chicago, says, "I think we're in for a rough ride.
She asked with a laugh: "What sales? "It's not starting out well. It's not horrific yet."
"We kind of anticipated that it would start getting scary."
Joyce said that in the next incentive program, "The cars will be free. You'll just have to pay sales tax -- I mean what else can you do?"
Jim Satterthwaite, owner of Knopf Chrysler Jeep in Ambler, Penn., says sales are the worst in a generation: "My family has been in this business since 1974, and this is about as scared as I have been."
"We had a great July and good August by pulling ahead. We are in a little bit of a payback mode," he says. "The price of fuel and the uncertainty of where the economy is headed is really putting a lid on it."
Dealer Howard Drake says traffic and sales at his Hummer store are good, "OK" at his Saab store and slow at his Cadillac dealership. Drake is co-owner of Casa Automotive Group in Sherman Oaks, Calif.
"The value promise is a good deal and it makes sense, but we didn't get anything repriced in Cadillac," Drake says. "For us, many Cadillac dealers are having a tough time in understanding what value pricing is."
Richard Klaben, a principal in the Klaben Auto Stores of Kent, Ohio, says customers are delaying major purchases.
People think, "Now is not a good time," says Klaben, who sells Chrysler, Jeep, Dodge, Ford and Lincoln Mercury.
Employee discount pricing pulled sales ahead, he says. "At the end of the year, we will be no further ahead or behind than if we had never had the family plan," Klaben says.
"In the long run, it probably hurt us because we spent too much time talking about family plan pricing rather than the positives of the brands," Klaben says.
"Manufacturers put all of their eggs and dollars on one message instead of spending money to sell the brand and increase consideration level for the brand," he says. "Now we see what the payback is.
"It is not that people can't afford to get into the market," Klaben says. "It is that they don't want to. They don't feel good about it. It is more a product of watching the evening news than what is really happening in their personal life. Every layoff gets magnified 10 times."
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