DETROIT Christmas came a few days early for General Motors dealers.
GM made two moves today to bolster dealer profits. The automaker increased dealer margins on most of its vehicles by an average of half a percentage point and is boosting the number of days that it will pay the interest expense on new vehicles to 91 days, from the current 69.
GM will pay the interest for those 91 days even if the dealer sells a car an hour after it is delivered. Also, GM will pay the interest even if the dealer finances through a company other than GMAC Financial Services.
GMs action came just days after it raised prices on most 2008 models.
Here is what it means in raw numbers: The dealer margin on most GM cars will go from 10 percent to 10.5 percent. For light trucks, the margin increases from an average of 12 percent to 12.5 percent, said Mark LaNeve, GMs vice president of vehicle sales, service and marketing.
One high-volume dealer who spoke on the condition he not be identified said GMs margin increase means that if he sells 50 cars a month at an average price of $35,000 each, hell pocket an extra $140 a car, or $7,000.
We believe that this move is critical for helping dealers put deals together in the market, LaNeve said. They are faced with rising costs just like we are.
The health and profitability of our dealers is absolutely critical to GMs continued success and the continued momentum in the turnaround.
By increasing the number of days GM pays interest expense, LaNeve said GM is trying to ensure that dealers have more money to spend on local advertising or on customer spiffs to help close sales.
LaNeve said the decision to boost the dealer margin was made at the top levels of GM. He didnt rule out raising it again.
Said LaNeve: We will continue to monitor pricing and total dealer margin structure. If we feel there are appropriate moves to be made in the future, we will continue to do that.
LaNeve, who met last week with GM dealers on a West Coast trip, has been moving aggressively to help GM dealers boost profits.
GM has formed a dealer profitability subcommittee as part of its National Dealer Council. GM also recently moved to give dealers more control over local advertising.