DETROIT -- General Motors has notified its dealers that if they want dealer cash on certain models, they must order more inventory on other models.
GMs motive is to drive sales, but some dealers say the program could lead to competitive disadvantages.
On Friday, Nov. 21, GM sent a notice to dealers advising them of the November Re-Consensus Dealer Cash Program. The program, which runs through Jan. 5, requires each dealer to order a specified number of new vehicles to get either $2,000 or $3,000 dealer cash on certain vehicles.
Each dealer has a different number of new vehicles that GM asks them to take based on inventory a dealer has in stock, said a person close to GM and familiar with the plan.
The calculation that was developed is based on how many vehicles a dealer has and can take to participate in the program, said the source. Its fair to all dealers. They dont have to participate.
Some dealers love the program, while others say its nothing but trouble.
Motor City Auto Center in Bakersfield, Calif., has a lot of inventory, so it has been asked to order fewer new vehicles than other stores to earn the incentive cash, said John Pitre, general manager.
Heres how it works for Motor City Auto Center: If Pitre takes one extra 2009 Buick Enclave crossover, the dealership gets $3,000 dealer cash on each in-stock Lucerne sedan and Enclave. Pitre must take a total of seven new Pontiac G6s and G8s, but he has 25 G6s in stock. Hell now get $3,000 dealer cash each on all those, he said.
Pitre has been asked to take three additional Saturn cars and seven GMAC trucks. He signed on and said the extra dealer cash helped him close two deals this past weekend.
Its straight dealer cash. If you cant take the Enclave or refuse to take it, then you dont get the additional incentive, Pitre said. It does reward those dealers who have inventory and maybe penalizes those who didnt take inventory.
Wed all like to have lower inventory, but GM needs to keep the plants running and hit their numbers, and theyre willing to put some cash up there.
A slippery slope
And therein lies the problem for some dealers, who say the program more or less forces them to take excess inventory to be competitive.
Its a dangerous and slippery slope to entice dealers to buy more inventory than their good sense says they should buy, said Carter Myers, owner of Carter Myers Automotive in Charlottesville, Va. He sells Chevrolet, Buick, Pontiac, GMC and Cadillac brands.
Myers said the incentive program is a short-term strategy to build sales from the factory to the dealer. But it could hurt dealers in the long term if they take more inventory than they realistically are going to sell. And the added incentive cash wont move much stock in a market where consumer confidence is lacking.
John McDonald, a GM spokesman, declined to discuss the specifics of the program but said GM has tight finances and cant offer traditional incentive programs.
Its tough to sell vehicles right now, so were doing what we can to help dealers acquire and sell those vehicles, said McDonald.
He added that dealers take the vehicles they can sell; every dealer makes their own business decision on what they think they can sell.