It’s 2009, and Chrysler Group is still hugely dependent on Ram sales to keep dealer volume flowing. Not that there’s anything wrong with pickups per se, but dependence on a shrinking market (down 34 percent year-to-date, compared to 27 percent reduction for all light-duty vehicles) is never a good thing. Cutting into profits to keep your share of said declining market is even less of a good thing. And yet Chrysler is planning on doing just that, cutting starting prices on 2500 and 3500 Heavy Duty Rams by $1,970. According to Automotive News [sub] Ram 2500 regular cab 4×2 with a 5.7-liter Hemi V-8 will start at $28,165, including shipping for the 2010 model year, despite offering more equipment than the outgoing model. Why? In a word, desperation. “There’s not a lot of strength in Chrysler’s portfolio right now, so they’re trying to give it its own identity,” says Edmunds Editor Karl Brauer. Except that “won’t sell unless they’re discounted to the hilt” was already part of the Chrysler portfolio’s identity. The only difference with the Ram is that it might just sell. As Cash-for-Clunker-era sales results prove, even huge rebates (on top of record manufacturer incentives) don’t do much to move Chrysler’s moribund car lineup. So why not try massive discounts on massive Rams? How much worse could (will) it get?
That’s right. Buy a $110,000 Tesla Roadster, and according to the Denver Post, the state of Colorado will give you $42,000 in tax breaks. That’s 85 percent of the premium over a Lotus Elise. Colorado’s alt-fuel and zero-emissions tax credit system gives between 50 percent and 85 percent of the premium over a comparable gas-burning car, but as a zero-emissions vehicle only the Tesla can claim the full 85 percent discount. “Most of them are (Toyota) Priuses and hybrid vehicles,” say CO revenue department spokesfolks. Still, the colossal incentive on the two-seat Roadster was enough for the state legislature to limit discounts to no more than $6,000. But that limit doesn’t go into effect until January. Between now and then though, there’s practically no reason to buy an Elise in Colorado… unless you want to be able to fill up at a gas station. [Hat Tip: Freedmike]
A TTAC source asks us to perform the following mental exercise:
“Just imagine that you’re a car salesman and you come into work this morning. Your boss says we have a bunch of new incentive programs you need to learn. And here they are . . .”
The big blockbuster, peanut-butter-approach programs like zero-percent financing and employee discounts for everyone have all been done before
GM spokesman John McDonald in a Bloomberg story on the industry-wide drop in incentives and rising transaction prices. What about Truck Month? Surely we can all agree that has been “done before.” And though the Detroit automakers have eased incentives by about 25 percent from their March peak, at $3,278 this August, they’re still higher than the industry-average of $2,474. And the brief respite from incentive-redlining could be ending soon. With inventories depleted by Cash For Clunkers, GM is adding shifts in hopes of increasing production by 20 percent in the fourth quarter. Throwing more cars into a clunker-hangover sales environment could be just the thing to bring incentives and “peanut-butter-approach programs” (can anyone explain that pejorative?) back in a big way. But don’t call it a comeback: they never really left.
This is good — the money on the trucks. The money on the 2010 models is a nonevent because there aren’t any of them in stock . . . The incentives are good advertising to get people in the door, then we can sell them whatever we have in stock.
Tommy Brasher, owner of Brasher Motor Co. of Weimar, Texas, on GM’s decision to hold a “Truck Month” sale after all. Maybe we didn’t get the memo, but GM’s Bob Lutz said last week that GM would forgo the celebration of lost profits for fear it would hamstring the “May The Best Car Win” campaign. After all, the whole point of “May The Best Car Win” is to convince consumers that GM products are worth shopping even when they don’t have cash on the hood. But with trucks cramming the lots and in-demand models nowhere to be found, GM went ahead and sacrificed perception for what spokesfolks call a “competitive response” to Ford’s Truck Month. Old habits die hard.
Economics professors Burton Abrams and George Parsons sum up the Cash for Clunkers tragedy wonderfully in their essay Is CARS a Clunker? [PDF available here]. “Concentrated benefits create vocal advocates, while diffused costs produce silent, apathetic opponents,” they conclude after showing that the costs of crushing clunkers outweighed the benefits by about $2,000 per vehicle. But reality is even worse. As economists, Abrams and Parsons break everything into dollars and cents. That’s their job. But one look at the CARS.gov list [PDF] of vehicles “traded in” shows that, for car aficionados anyway, the true cost of Cash for Clunkers is almost impossible to boil down to mere money. Did you know some fool “traded in” an Aston DB7 Volante? An M3? A TVR? A grip of Ur-Quattros? Three Laforzas? I didn’t even know what a Laforza is. Now I don’t want to get all Hemmings on you, but this stuff is more than just heritage: these vehicles are wonderfully bad decisions waiting to happen. Literally thousands of young men are currently trolling their local Craigslist for out-of-reach vehicles at prices that would make anyone who knew better run away screaming. Thanks to Cash for Clunkers they’ll never understand the agony and the ecstasy of trying to keep an Aston running on elbow grease, generic parts and a Nietzschian will to awesome. And that’s the real tragedy.
We don’t have any numbers yet on GM’s 60 day money-back guarantee, but according to GM dealers speaking to Automotive News [sub] it’s not generating a lot of interest. “If [customers] like the car, if they test drive the car, most of the people would rather have a car to keep,” explains one dealer. Which makes a certain amount of sense, and which is why dealers insist that the number of buyers taking GM up on the offer doesn’t matter. “It’s more important to talk about the money-back guarantee. It conveys confidence in the vehicles,” says another dealer. “It’s not about the deal, but rather it’s about the world-class products.” That sounds good in principle, but the reality is that it actually is all about the deal. Again. Still.
UPI reports on recently-released documents which detail the extent to which states went to secure GM’s recent compact car manufacturing contract. Wisconsin had committed “$213.14 million in concessions from United Auto Workers Local 95, $100 million in Enterprise Zone tax credits and $24 million in discounts from health insurers and providers,” according to the report. Another $100M was added to the incentive package after Wisconsin officials learned that it was falling behind in the bidding, bringing the total package to $409M. Which wasn’t even close to enough to beat out Michigan’s winning bid, which totaled $1B.
But only because dealers will be forced to give up a half a percent of their profit margin, reportsAutomotive News [sub]. Good thing Mark LaNeve says volume will be higher. Otherwise that might suck for the dealers. As Bob Lutz puts it, “We’re putting our money down that if people buy one of our vehicles and don’t absolutely love it, we’ll take it back. Three or four years ago, this would have been a huge risk. We are now so confident of our vehicles, we can afford to take this risk.” Actually, Bob, it sounds like you’re putting the dealers’ money down. But, hey, at least that way it’s not taxpayer money! Who’s feeling positive?
General Motors has announced that it will lend dealers cash to cover their government clunker rebates for 30 days while the NHTSA figures out how to wind down the program. “We want to do all we can to provide customers with timely new vehicle deliveries and dealers the liquidity they need to run their businesses,” says Mark LaNeve in a company press release. “This will continue the sales momentum of our new fuel-efficient vehicles such as the Chevrolet Cobalt, Equinox and Buick Enclave.” Or, it could mean dealers will end up owing GM instead of the government owing them.
Would you believe that two-thirds of all car dealers are still waiting for their first clunker check? Could you imagine that only three percent of all clunker deals have been been blessed by NHTSA? Automotive News [sub] has the survey for you! The only problem is that AN admits the poll was unscientific. Plus, it was an onlinepoll. Still, the headline looks good beneath a headline in which NADA admonishes that dealers are “at risk” in making further clunker deals. And NADA’s internal surveys show that all the clunker money is already gone, reinforcing the apocalyptic tone of the AN survey.
The Alliance of Automobile Manufacturers’ Senior Director of Communications has informed TTAC via email that the CARS (AKA “Cash for Clunkers”) program has NOT been suspended. “All deals concluded before a suspension is announced (if that happens) will be honored,” promises Charles Territo. We’ve also heard that the President is urging Americans NOT to not buy a new car (i.e., go ahead and buy a car) under the program over the weekend.
Our good friends at The Department of Transportation report the latest C.A.R.S. (Cars Allowance Rebate System) or Cash-for-Clunkers clunker stats as of right . . . now.
Total Vehicles Sold: 16,351
Funded to Date: $68,923,000
Passenger Cars Due for Euthanization: 10,114
Trucks Headed for the Crusher: 6237
Meanwhile, we intercepted this communication from a dealer: “I wish you would let us opt out of the cash for clunkers deal. Three dealers on the conference call stated that they were not fucking with this bullshit. You wouldn’t believe the bullshit involved in this. I don’t see this costing us any significant sales. We will waste more time fucking with this than it will ever be worth. The rebates are in place to subsidize the deal. Collecting our money will be a full time job.”
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