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benyl
03-26-2005, 10:12 AM
DETROIT After Sept. 11, 2001, General Motors turned the nation into incentive-addicted, deal-obsessed shoppers.

But in mid-March, GM CEO Rick Wagoner said he is taking the big money off the table.

GM executives finally admitted that $5,000 cash bonuses when coupled with high sticker prices no longer have the impact on consumers that they once did.

Dogged by the cutthroat North American pricing environment it helped create, GM has sliced its 2005 profit forecast by 80 percent. In response to its slow sales, GM said it will move to value-based pricing.

GM's new strategy means the automaker will give new products prices that are closer to anticipated transaction prices, increase advertising on launch models to rebuild brand strength, and target incentives regionally and by specific vehicle.

"It's a change in how we go to market," CFO John Devine said. "The problem with incentives is that everyone follows very quickly, so there's not a way of creating a difference in the consumer's mind."

Devine calls GM's strategy a "modification." But it's a major departure that could influence the entire market, which largely has followed GM into the incentive wars.

After the terrorist attacks, GM's incentive strategy worked for two years. GM gained market share and inflicted financial pain on ailing domestic rivals Ford Motor Co. and the Chrysler group.

And Wagoner wasn't shy about reminding rivals of GM's success.

"It's time to stop whining and play the game," he said in February 2003, in response to competitors who bemoaned the industry's dependence on rebates.

Citing GM's higher profits and market share in 2002, Wagoner said: "What I know is that GM's strategy is working very well for us. So guess what? This year we're going to keep pushing." But with U.S. sales down 10 percent in the first two months of 2005 excluding Saab GM will start pushing in a new direction. "We found out that, on an incremental basis, we weren't getting the bang," Wagoner says now.

Now, Wagoner says, as new products come to market they will be priced closer to transaction. "That's how the strategy will play out," he said.

When the Hummer H3 mid-sized SUV is introduced in the second quarter, it will be priced near $29,000, one Hummer dealer close to the program says. Early reports indicated a starting price of around $32,500.

Devine says GM is not planning to cut prices on current models. "If we do more on the positioning, it'll be on the new models," he said.

But there has been some price-cutting on existing models. In February GM lowered prices on 22 mid-sized SUVs cutting $1,430 off the price of a Chevrolet TrailBlazer, for instance to make them more competitive, especially for internet shoppers.

GM was missing customers who weren't considering its vehicles because GM's list prices were higher than the competition.

GM will target incentives regionally instead of nationally and back away from broad-based incentives by adding more standard equipment without raising prices.

Devine says GM's recent announcement that it will include OnStar and stability control on every vehicle is one example.

GM's advertising approach will also change. GM will stick with launch vehicles longer, increasing its overall advertising budget in an effort to rebuild brands.

"We tend to hit something hard for three or four months and ease off, but our competitors stay longer," Wagoner said.

Some members of GM's dealer council say they are unaware of the change in strategy. But most are interested.

"A lot has to do with internet searches," says Chevrolet dealer Tommy Brasher, owner of Brasher Motor Co. in Weimar, Texas. "When you look at prices, they're out of line with other automakers."

Some dealers admit value pricing could cut into the dealer discount the difference between invoice and sticker price. But Brasher says dealers already are hurting themselves. "Look at the transaction prices on a Suburban or Tahoe. We don't sell them for sticker. We only sell them for $500 over invoice," he said. "We cut our own discount all the time. We are the enemy."

There could be other land mines with value pricing. Some analysts are concerned that consumers have become too hooked on incentives to let go. If GM is forced to offer incentives in addition to lower prices, the results could be painful.

"List-price cuts are a less tantalizing carrot to dangle in front of consumers than incentive offerings," wrote Himanshu Patel, an analyst with New York-based J.P. Morgan Securities, in a research report.

If GM sticks to the strategy of lower prices and lower rebates, it could hurt sales of new vehicles, such as the full-sized trucks that start coming out next year, Patel adds: "A 'value-based' pricing approach on the T-900 (full-sized trucks) could lead to lower-than-expected volumes, at least initially."

Wagoner says the transition will be gradual.

Says Wagoner: "I do think it's going to take a while to see the impact fully on the retail side."

cars.com

nhlfan
03-29-2005, 02:18 AM
GMs cars have been absolute crap in the last couple years, save the corvette

Redlyne_mr2
03-29-2005, 08:35 AM
These car companies are going to incentive themselves out of business. Maybe if they made good cars in the first place they wouldnt have to go through this.

Xtrema
03-29-2005, 11:28 AM
Union is the problem.

thich
03-29-2005, 12:24 PM
yeah GM's union is the main problem.
I think they spend more on their health care plan than the Canadian government does :thumbsdow

Xtrema
03-29-2005, 03:48 PM
Well with Bob Lutz, there are some good efforts but nothing of a home run yet (like Nissan Altima or Chrysler 300C).

G6 is nice. Corvette is highly competitive in its segment.

Solstice and Sky is probably gonna do well but roadster is very limited in sales volume to turn a business around on.

ninspeed
03-29-2005, 05:59 PM
Originally posted by thich
yeah GM's union is the main problem.
I think they spend more on their health care plan than the Canadian government does :thumbsdow
on average, 1500$/car goes to paying employee health care

nhlfan
03-30-2005, 01:29 AM
if GM put out a second gen integra, it would be better than the korean crap they currently try to hustle you with.

i drive a trans am and i hate gm lately...:werd:

403Gemini
04-01-2005, 04:19 PM
Originally posted by nhlfan
if GM put out a second gen integra, it would be better than the korean crap they currently try to hustle you with.

i drive a trans am and i hate gm lately...:werd:

you hate gm? pft man try driving a "newerish" one! the suspension is garbage.

cobalt and redline look nice, but i imagine their suspension is basically the same as a cavaliers and the sc2's.

Freebs
04-01-2005, 04:58 PM
colbalt SS is nice... 205whp, supercharged and intercooled. But i know what you guys mean they havent made the best cars... i own a sunfire.. and i mean i do like it just cuz its my first car and all... but if i could get somthing else (if insurance wasnt so bad) i would for sure get something else... i do like my dads 2002 Trans am though.. nice solid feel, no problems with it at all.

403Gemini
04-01-2005, 05:07 PM
Originally posted by Freebs
colbalt SS is nice... 205whp, supercharged and intercooled. But i know what you guys mean they havent made the best cars... i own a sunfire.. and i mean i do like it just cuz its my first car and all... but if i could get somthing else (if insurance wasnt so bad) i would for sure get something else... i do like my dads 2002 Trans am though.. nice solid feel, no problems with it at all.

honsetly ive had less problems with my saturn in the course of 2 yrs than i did with my integra in the first 6 months owning it. granted my saturn is 8 yrs newer, but its up to about 150,000 kms and when i got my integra it had 180,000 kms.

Just the handling sucks i find, and when i go above 170 i notice that i feel like my wheels are hardly making contact on the pavement so i usually slow right down. the car has no weight. i think its like 2800 lbs or something?

nhlfan
04-02-2005, 03:25 AM
Originally posted by 403Gemini


honsetly ive had less problems with my saturn in the course of 2 yrs than i did with my integra in the first 6 months owning it. granted my saturn is 8 yrs newer, but its up to about 150,000 kms and when i got my integra it had 180,000 kms.

Just the handling sucks i find, and when i go above 170 i notice that i feel like my wheels are hardly making contact on the pavement so i usually slow right down. the car has no weight. i think its like 2800 lbs or something?
theres a difference between downforce and weight.

403Gemini
04-04-2005, 02:10 AM
Originally posted by nhlfan

theres a difference between downforce and weight.

time for me to get a huge spoiler then ;) lol

nhlfan
04-05-2005, 04:33 PM
Originally posted by 403Gemini


time for me to get a huge spoiler then ;) lol
or maybe you shouldnt be taking an old saturn above 170 at all :thumbsup:

heavyearly87t
04-05-2005, 04:48 PM
Originally posted by 403Gemini

cobalt and redline look nice, but i imagine their suspension is basically the same as a cavaliers and the sc2's.

I just read that the Cobalt is a very changed car and well worth the money in it's segment. Car & Driver last month I think had a write up on it and that was there quote anyway.

Combined with the rebates it just might be a great buy.

I have not read anything on the Redline.