Value pricing isn't dead at General Motors. Last week's reduction in sticker prices was an obvious attempt to resuscitate a good idea that was handled poorly at the outset.
GM, incidentally, doesn't call it value pricing any more. GM spokespersons become more than a little bit annoyed when they hear the term.
Value pricing, as GM promoted it last spring, is an effort to bring sticker prices closer to transaction prices in order to reduce high rebates. That means cutting sticker prices.
GM made a half-hearted effort last fall when the 2006 models went on sale. Automotive News estimates the GM stickers went down an average of $301. It followed a summer of employee pricing in which vehicles were sold at less than dealer cost.
Value pricing didn't stand a chance; sales languished and the Red Tag sale was initiated. That was another near-cost promotion.
Automotive News voted value pricing the Flop of the Year. Maybe GM listened.
Last week's sticker price cut was more on the order of what should have been done last fall. GM said it averaged $1,300.
Customers won't reap the full advantage of the sticker price cuts because dealer discounts have been shaved by 1 to 3 percentage points. In other words, dealers are financing one-half or more of the price reduction. Transaction prices will not drop as much as sticker prices because the dealer discount is lower.
But the perception is that GM has cut prices considerably. And perception is important.
You may e-mail John K. Teahen Jr. at [email protected]