GM sales chief Mark LaNeve plans to stick with value pricing.
But the automaker is resisting the lure of big incentives. Instead, it's taking a tough-love stance with auto dealers.
"Good dealers generate their own traffic," Jim Bunnell, GM North Central regional general manager, told Automotive News last week at GM's Dealer Business Conference here. "Unfortunately, we've trained a lot of them to sit back and wait and see what the General is going to do to create traffic."
Some dealers say GM should share in the burden because it started the addiction. They say GM reinforced customers' expectation of discounts with its three-month employee price discounts this summer.
"Employee pricing should have been 30 to 45 days because what has happened is many salespeople have forgotten how to sell a vehicle without an incentive," said John Pitre, general manager of Motor City Buick-Pontiac-GMC in Bakersfield, Calif.
Some dealers said they believe the new GM products are good enough to sell without a big incentive program. Others expressed frustration with shrunken profit margins, which they blame on value pricing and a lack of a local marketing budget to generate showroom traffic.
'We're going to continue'
GM executives told dealers here last week that it plans to stick to its "Total Value Promise" strategy. The value-pricing plan aims to set lower sticker prices, minimizing discounts.
"The pricing we've come out with for all of our launch products -- the HHR, Solstice, Hummer H3, the new Impala -- they are selling terrific, and they have little or no incentives," Mark LaNeve, GM vice president for vehicle sales, service and marketing, told Automotive News at the meeting. "The customer sees it as a value, so we're going to continue to do those kinds of things."
Data from Edmunds.com show the gap closing between GM's average sticker price and average transaction price.
But the data also show that the average GM dealer discount for September 2005 was 16.4 percent, compared with 23.1 percent a year earlier. The discount is the percentage difference between the average sticker price and the net price, defined as the transaction price after all incentives are taken into account.
"They ate into our margins," said Ken Fichtner of Fichtner Chevrolet in Laurel, Mont. Fichtner said he makes about $500 a unit, compared with $2,000 a unit before employee pricing and value pricing's limit on incentives: "I can't look a guy in the eye and say, 'I can only give you $1,000 off.' But that's all I have to give him."
When asked whether GM plans to cut dealer discounts further, LaNeve declined to comment but said, "We're certainly not having any kind of discussion on that here in Las Vegas."
Showcasing new models
LaNeve said GM did put some programs out on Oct. 14 to help dealers garner showroom traffic. It is running an owner appreciation program and offers free gasoline credit cards.
Owner Appreciation Days run through November. Only dealers in local marketing groups can participate. About 6 million owners of GM vehicles from 1988 through 2006 will get mailers inviting them to their local dealership for a free oil change and a safety point inspection. GM also is giving away one car per division nationwide to consumers who participate.
"It's a great opportunity to showcase the new models," Steve Hill, GM's director of brand and retail marketing, told Automotive News at the meeting. "You bring them up front so they have a chance to win a car and then tell them about some great lease deals. It's also an opportunity for the used-car manager to appraise the car while it's right there."
GM is paying for the oil change and service, but LaNeve declined to say how much it is likely to cost. "It's a very efficient program," he said.
The gasoline card program runs through October. GM dealers are allotted a certain amount of gasoline debit cards worth $500 to be used to close deals on full-sized and mid-sized utility vehicles, excluding the Saab 9-7X.
You may e-mail Jamie LaReau at [email protected]