Automotive News [sub] reports that GM’s Zen Master/Product Guru Mark LaNeve is turning his back on ye olde (2006) “market pricing.” You know, where the sticker price reflects the actual selling price. Or thereabouts. “In terms of a pure strategy where we price right to market and have no incentive spending — we have very few vehicles where we’d do that. We’ll have some level of incentive spending almost across the board.” After that… I’m confused. Why has GM increased ’09 product prices by 2.7 percent (roughly $790)? And what’s this mean? “LaNeve said GM prefers to spend incentive money for competitive reasons — not to reduce inventory, as it has been doing, because the latter is ‘wasted money.’ “We continue to want to price our vehicles to the market. We’d like to see incentive spending wane once we get our inventories adjusted. I think it smoothes out after the first quarter. We’re hardly building anything in the first quarter.” So, Uncle Sugar’s paying GM not to build cars, so they can eventually offer incentives to steal market share from carmakers who aren’t being paid not to build cars? Sweet.
Category: Dealer News
GM Provides Global Business Update at Auto Analyst Event
Mark LaNeve, Vice President, GM North American Vehicle Sales, Service and Marketing
01/15/2009
To All General Motors Dealers:
General Motors provided an update to financial analysts today on the company’s restructuring efforts included in the viability plan that was submitted to the federal government last month. Rick Wagoner and Fritz Henderson told the group that GM is on track and making progress toward meeting its goals. Given the ongoing weakness in the automotive markets, they also explained that GM has adopted a more conservative U.S. industry volume assumption of 10.5 million units for 2009. The original baseline projections for 2009 were for a 12 million unit U.S. market. Rick and Fritz also said that we would continue to refine the plan in response to changing market conditions.
Regarding General Motors’ brands and dealers, the plans have not changed from the original submission. Hummer and Saab are under external review, while Saturn is being reviewed internally by a team that includes dealer representatives via the Franchise Operating Team. Product discussion in the plan focuses primarily on GM’s core brands: Chevrolet, Cadillac, Buick and GMC, with Pontiac as a specialty, focused brand. Also unchanged from the original submission is the projection that GM will have 4,700 dealers in the year 2012. As we have in the past, we will continue to work together with you personally as we move through this difficult, yet necessary dealer network re-sizing. Today’s update also provided the analysts information on the progress being made by GMAC and its ability to return to sub-vented financing.
GM Card Q1 2009 Top Off Incentive Offer
PROGRAM EXPLANATION
TO: All RDMMs, ARDMMs, ZMs, ASMs and GM Dealers
FROM: GM Cardmember Services – Detroit, MI
SUBJECT: 2009 Q1 GMCS Top-Off Earnings Retail Program
PROGRAM OVERVIEW:
GM Cardmember Services (GMCS) is sending select GM Card and GM Flexible Earnings Card Cardmembers a direct mail piece that includes a special Bonus Earnings “Top-Off” offer toward the purchase/ lease of an eligible, new GM vehicle between 1/6/09 and 2/2/09.
OFFER OVERVIEW:
GMCS will add Bonus Earnings to select Cardmembers’ Accounts so that they total either $2,000 or $3,000 in Topped off Earnings.
“Yes, you can use the word free in your advertising,” writes Jim Boldebook in Dealer Magazine. “No, you probably can’t use it with reference to the sale of a car, as in free options or extras as most states have now ruled there is no such thing as free anything in a car deal, but you can use the word free in a number of ways to capture the attention of your intended audience.” Oh, do tell. “The word free can be used in copy such as ‘Set yourself free from high payments with our lower lease rates.’ Or, ‘Free yourself from maintenance worries with our all inclusive maintenance program included on most of our new models.’ You can even use the word free in disassociating it’s use in your ad copy, such as: ‘While we are not allowed to say this GPS system is free, we can you say won’t pay one penny extra for it with the purchase of any new X or Y model.'” And that’s why Jim’s agency, Creative Broadcast Concepts, gets the big bucks. If you’ve already taken your blood pressure meds, Boldebook provides his dealer readers– and you!– with a specific example after the jump.
There’s an eerie thread of optimism weaving through a number of post-bailout, post-December bloodbath stories lately. Sure, hope dies last and all that, but as Studs Terkel put it, “hope has never trickled down, it has always sprung up.” And most of this fresh-faced optimism seems to have trickled down directly from GM PR. Take the headline “‘Happy Days’ Return For Domestic Car Dealers” over at Dealersedge.com, for example. If the use of scare quotes in the headline isn’t enough to set your PR-friendly hackery alarm ringing, well, that’s why we’re here. The entire piece is based on quotes from employees and owners of three dealerships, two in New Hampshire, one in Michigan. These ecstatic, old-timey song-referencing folks spout anecdotal evidence of a new influx of floor traffic, offering no dissent from the opinion that “happy days” are indeed here again. And why wouldn’t they say that zero percent terms on Trailblazers and Saabs have Americans flooding the showrooms?
Well, someone had to do it. Automotive News [sub] reports that the Fed will use its $200b Term Asset-Backed Securities Loan Facility to provide new-car dealers floorplan loans. It’s been understood since its November 25th spawning that TALF would “secure” auto loans, but a Fed FAQ released today reveals that “for TALF purposes, auto loans include retail loans and leases relating to cars, light trucks, or motorcycles and auto dealer floorplan loans.” In news that won’t thrill the small-town dealerships, the minimum TALF loan size is $10m with a three year maturity. Sorry, credit card debt is not eligible. Suzuki Motor Company announced that it would discontinue floorplan financing precisely (if you believe Automotive News [sub]) four minutes after the announcement. Coincidence?
An eye-watering death scent surrounds Chrysler going into this week. With a last-ditch bailout likely to focus on GM, and even the hometown cheerleaders kicking around the idea of throwing ChryCo in the volcano, Auburn Hills has all but given up on trying to staunch the flow of bad news. Of all the Chrysler-related bad news, nothing jumps out like the persistent rumors of Pentastar dealers offering two-for-one deals on Auburn Hills Iron. We first heard of this happening in the UK with overstock Avengers, but the phenomenon is spreading to the states. Automotive News [sub] reports that If you buy a 2008 Dakota for $27,590 at Bettenhausen Dodge in Tinley Park, Ill, Mr Bettenhausen will throw in a lightly-used 08 PT Cruiser for your trouble. “The automotive business is no longer about how much money you can make,” says the Bettenhausen. “It’s about minimizing losses. We need to get ourselves to a breakeven point in this challenging market.” Especially when Chrysler’s right there to twist the knife. Automotive News [sub] reveals that the Chrysler Sales Bank is back to plague dealers with yet more inventory they can’t sell and don’t want.
GM first made Saturn’s “strategic review” official in the bailout-begging, condition-floating context, although Lutz swears Ol’ Man Wagoner was on it months ago. Anyway, now that the industry has processed the news, there’s a rash of post-Saturn plans flying around. Our man in China seems fairly convinced that Chinese firm SAIC could make a bid for Saturn and its conveniently independent dealer net of over 400 stores. Another possibility that might be more palatable for GM comes from Automotive News‘ [sub] Richard Truett, who reckons the General could kill two birds with one stone, by “handing the keys to the Saturn brand to GM’s German affiliate, Opel.”
It’s should be fairly obvious by now that Saturn is a dead brand walking. Little remains of Roger Smith’s import-fighting concept anyway, as the “different kind of car company” now consists solely of rebadged and Americanized Opels, fine young CUV-annibals, and the Sky. None of which sell very well. So, dead by Thursday, and that’s all she wrote? Not according to those crazy, mixed-up kids at Automotive News [AN, sub]. “Saturn has a product program, both current and future, that is currently in our plans,” GM Marketing Honcho Mark LaNeve tells AN. “But a lot of what is in our plans is in a state of flux right now given the state of the economy and everything.” Understatement of the week day hour? GM hopes to conceive a new business model to make the brand profitable, according to LaNeve, because a sale won’t happen. Hello, China? Then again…
I’m a bit gun-shy after mistakenly accusing NBC of pulling the SNL sketch pillorying the Big 2.8’s Congressional bailout begging from YouTube for ad revenue-related reasons. So I’m not going to raise the specter of conspiracy for a 404 message on The Australian newspaper. I’m sure the story on the Pontiac G8 disappeared due to technical reasons. Or something. Thankfully, one of our B&B cut and pasted the piece into an email. “Holden Exports Facing Stop Sign” contemplates the prospect of GM axing Pontiac as part of its pursuit of bailout billions. “The Holden-built Pontiac G8 is part of the problem, as it is struggling to find buyers. Just 13,000 have been bought since shipments began at the beginning of the year, and inventory levels exceed 11,000 cars — or 283 days’ supply — the third-worst for any GM model, according to specialist US website Automotive News. Potential Pontiac G8 buyers must now factor in an uncertain future for the brand. ‘It’s a challenging business environment for carmakers around the world,’ said a spokesman for GM Holden, Jonathan Rose. ‘We’re very proud of our export program.’ He denied Holden was adding to Pontiac’s woes, and said export shipments were continuing… The company expected US demand for Pontiac G8s to boost exports, but recently announced plans to shut its factory for 25 days in the first quarter next year, in addition to its four-week Christmas holiday closure.”
We thought things were bad when General Motors announced it was delaying incentive payments to dealers by two weeks (ten more days, hang tight guys). As usual, it gets worse. We now hear from Automotive News [sub] that GM is using its November Re-Consensus Dealer Cash Program to dump more inventory on its hapless dealers. An undisclosed formula determines eligibility for GM’s dealer incentive program, the gist of which is the less inventory you have, the more you have to order to receive incentive cash. Seems fair, right? Don’t worry, it’s not. Forbes reports that Detroit dealers are actually carrying historically low inventories, but that “days on hand” is what’s killing them. And now those (relatively) low inventory numbers are what GM is using to foist their cars on the dealers. A Montana dealer with a 365-day supply was asked to take only one Malibu sedan and one Silverado to get $3,000 dealer cash on his 2008 and 2009 models of the Traverse crossover, Tahoe and Suburban SUVs, and Impala sedan and $2,000 on Cobalt compact cars. But if you have less than 365 days worth of inventory (and in this market, who knows how long it will take to actually work through that much) you are going to be ordering more cars to get the cash… or watch your sales go to another dealer who does.
With things, erm, being as they are right now (economy in the toilet, SUVs being hugely unpopular, nobody buying cars, GM on the verge of evaporating and floating to China), Hummers are about as desirable as herpes. Although the Red Tag sale price of the H3 5-cylinder is floating around $26,000, there’s still a sub-basement. Some highlights from around the sales (or no sales) on FleaBay, Swapalease, and AutoTrader:
—2009 Hummer H3 – $22,985.00 – 13 miles – Optimistically want a 100% cash payment. eBay Motors
–2008 Hummer H3 Alpha – V8 engine – $34,900 – 1854 miles – Oh come on. eBay Motors
–2008 Hummer H3 – $322/month – 4000 miles so far, 30 months remaining, 28500 miles remaining. Swapalease
–2008 Hummer H3 – $18,717 – 15,048 miles – Listed as new – might never have been titled. Autotrader
–2008 Hummer H3 – $22,291 – 4143 miles – stick shift is actually marginally cool. Autotrader
–2009 Hummer H3 – $21,995 – Brand new – classic “one at this price.” Team Chevrolet Hummer, Pasadena
Ford recently announced Employee Pricing PLU$, with the PLU$ for any rebate. As Ford employees get any rebates the general public gets, these aren’t really extra. Every 2008 and 2009 is included except for the hybrid SUVs and the new F-150. Of course, with Jet-gate and all, is anyone paying attention? In case someone is actually buying a Ford, Mercury (yes, they’re still around), or Lincoln this month or next, TrueDelta has supplied thetruthaboutcars.com with a close (within $25) approximation of the employee prices. The catch is the usual one: lower rebates. For example, the Ford Fusion rebate has been reduced from $3,500 to $2,500. One oddity: the rebate is $1,000 higher on the V6 Escape than on the four-cylinder Escape. Since Ford actually charges under a grand for the V6 at employee prices, Ford essentially will pay you $108 for the 69 extra horspower. Now, that’s a plus.
J.D. Power has released its latest Sales Satisfaction Index Study results. And once again, some people are confused by what this survey measures. Edmunds: “In an unusual twist, many Asian brands — including Honda, Toyota, Scion, Subaru, Suzuki, Hyundai and Mazda — ranked below the industry-average customer satisfaction score in the study, despite gaining market share over domestic vehicles.” Shock! Horror! How can customer satisfaction with the triumphant Japanese be below average? Because this survey has nothing to do with the car, and everything to do with the dealer. As in past years, the differences between the scores is small. Nearly every mainstream brand falls within 20 points of the average on a 1,000-point scale; the difference between the top and the bottom is less than 1,000 points. The most surprising result– also not news– the average car dealer scores 857 out of 1,000. Think of it this way: if car dealers are so good, and the average level of satisfaction is so high, then why do most people prefer root canal surgery to visiting a car dealer? [ED: By the same token, why doesn’t Anita Lienert read TTAC?]
[Michael Karesh runs TrueDelta, a TTAC data provider]
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