Ford and (Daimler)Chrysler matched GM’s “Employee Pricing For All” program with similar programs of their own. GM’s sales surged 41% in June, thanks to the new pricing program.
I have two main thoughts about this.
First, if you have to pay thousands in incentives to get people to buy your cars, the “Employee Pricing For All” concept has power and simplicity that might mean you have to give less money than if you used a regular cash-back program. Put this one in the positive column.
Second, if you have to offer employee discounting on every model (minus a few exceptions), you are essentially selling a price, not a car. This is the same ways GM sold cars after 9/11– focusing on 0% financing. (Mitsubishi has also offered heavy incentives, and where are they?) The main problem with this is that they got a lot of people into showrooms, but plenty of them went to buy Toyotas. The Japanese automaker also reported a big boost in sales. There’s a saying that the purpose of GM is not to make money or even cars, but simply to sustain the enterprise, and the vast ecosystem that surrounds it. Now it looks like that ecosystem extends out to their competitors. There should a be a line item in Toyota’s marketing budget that reads
GM Employee Pricing Program …………………………………….. $0.00
Supposedly, GM’s incentive spending is up around $4,000 per vehicle, and these new programs do nothing to wean customers away from a pricing focus. This perpetuates a vicious cycle, not just for first time buyers. Big incentives on new cars depress values for used cars, which in turn means new cars depreciate faster, which means buyers are willing to spend less on them.
Selling price is a great strategy if you have the sustainable cost advantage to back it up. GM (along with Ford and Daimler Chrysler) does not. So they can’t keep selling price. Interestingly, Cadillac, the division I had written off a few years ago, is the one with the best legs. Why? They completely redid the model line, giving every car a distinctive, edgy design, good features, and a certain panache. The upcoming Pontiac Solstice roadster shows that any division can build a desireable car. The pricing problem with the Solstice is that dealers are demanding huge markups over the base price, and GM is concerned this will poison buyer’s attitudes when Pontiac is on the ropes. If only the had that problem with more models.