General Motors is launching a program aimed at whittling the automakers 105-day supply of cars and trucks by enticing dealers with extra bonus cash for taking more stock.
But some dealers see it as GM pushing vehicles on them that they cant sell. And they fear the program could lead to two-tier pricing. The dealers worry that if one dealer declines the request, that dealer would have a price disadvantage compared to a nearby competitor who takes additional inventory and earns more bonus cash.
The program, which runs through March 2, applies to all eight GM brands, dealers say. One dealer who is familiar with the incentive program says its fairly simple: The more we take, the more money we get back.
How it works
The program has two parts. First, GM will assign dealers a sales objective through March 2. Second, GM will recommend a consensus number to dealers -- the number of vehicles for the dealer to order.
The bonus cash payout ranges up to $1,250 per vehicle depending on the percentage of consensus that the dealer orders and the percentage of the sales objective the dealer sells, dealers familiar with the program say.
At the high end, if a dealer takes 100 percent of the consensus and sells 100 percent of the sales objective, the dealer gets $1,250 per vehicle. At the low end, if a dealer takes less than 75 percent of the consensus and sells 60 percent to 99.9 percent, the bonus is $250 per vehicle.
Dealer Ed Williamson of Williamson Cadillac Co. in Miami says he has 220 vehicles in stock. He sold 93 vehicles last month; his sales objective this month is 91 units. He says hell decide whether hell order more depending on what consensus number GM ultimately assigns him.
At this current Hummer sales rate, well run out of Hummers just when our franchise agreement expires, October 2010, Williamson says. Its going to be very difficult to talk us into ordering any Hummers at all.
GM has a problem in getting dealers to order inventory, dealers say. Thats because so many stores have high inventory and are not ordering more.
Its strictly to get rid of their inventory, one dealer says of the program. Ill have to look at my numbers, but its going to be a tough call. If somebody near you does it and you dont, then you have a serious situation -- its two-tier pricing.
At the end of January, GM had 801,000 vehicles in inventory, down 103,000 units from January 2008. Cars make up 64 percent of current inventory and trucks the rest.
A GM spokesman declined to comment on the consensus program.
But during a sales call today, GM sales chief Mark LaNeve said supply is about 105 days, and GM would like to have a little less inventory.
Wed like to run more at a 75- to 90-day rate, LaNeve said. We keep trying to get there. We are planning production schedules to get to the 75- to 90-day supply. It's Gods work. We have to keep after it.
One Saturn dealer who did not want to be identified said he has his own inventory problems. He figures he has about a 10-month supply of vehicles in stock. But he also is cash-strapped and cut nearly half of his staff to survive.
Thats the conundrum each retailer has to look at with this program, the dealer said. But really, I dont have to spend too much time doing the math. I dont need any more cars.