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GM Aiming New Incentives at Toyota

Recall costs likely to be huge, both to cash reserves and image.

by on Jan.27, 2010

Have one of these to trade? GM is offering an extra $1,000 if you do.

All’s fair in love, war and automotive marketing, it seems, and General Motors is hoping to make some gains off Toyota’s latest round of quality problems with a new $1,000 incentive program.

The cash offer is good for any potential customer that wants to trade in a Toyota product.  GM buyers will have the option of getting $1,000 in cash, cutting $1,000 off their lease payments or taking a zero-interest, 60-month loan.  The program, which began today, runs through the end of February, said a GM spokesman.

“Our dealers were getting inundated” with calls from Toyota owners looking to trade in, said GM spokesman Tom Wilkinson, adding that “carmakers are always looking for a competitive advantage.”

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That deluge was triggered by a series of setbacks to the Japanese giant which last week announced it would recall 2.3 million vehicles due to problems with “sticky accelerators.” Then, on Tuesday, Toyota said it would halt U.S. sales of eight vehicles impacted by the recall and halt production at five North American plants will it tried to assess the cause of the safety problem and come up with a solution.

The automaker has said its plants will be down for at least one week, though it is possible the shutdown could stretch on beyond then as it struggles to get replacement parts.  Toyota appears to have isolated the source of the parts leading to the recall, but it’s unclear how long it will take to get replacements to its plants, never mind to dealers for vehicles on their lots and for repairs to products now in consumer hands.   It’s also unclear how long the sales moratorium, which impacts models including the popular Camry, Highlander and RAV4 models, will continue.

By industry estimates, Toyota will lose nearly 4,000 sales a day due to the sales ban.  Using the federal government’s estimates for the average price of an American vehicle, about $28,000, that means the company could give up business worth more than $100 million daily, or $3 billion a month.  And even when sales resume, the impact will likely be felt because there could be a shortage of products in the dealer pipeline resulting from the production shutdown.

Toyota had been hoping to reduce losses for the fiscal year ending March 31st, after recording its worst loss since the end of World War II for the prior year.  But the current crisis will compound the financial impact of another big recall, this one affecting 4.2 million vehicles, which Toyota announced last October.

Add in several other recent black eyes, including the government-ordered callback of more than 100,000 Tundra pickups prone to “excessive corrosion,” and some observers believe Toyota could be at the tipping point, no longer able to retain a coveted reputation for bullet-proof products and excellent customer care.

A new study of how American motorists perceive automotive quality suggests that Toyota has dropped from second place, a position it has held since 1997, to seventh.  That puts it behind Ford, which has jumped from as low as 14th to 6th, according to Art Spinella, who prepared the research for CNW Marketing.  Meanwhile, upstart Korean maker Hyundai has largely closed the perception gap with its arch-rival, making into the 8th spot.

Meanwhile, Toyota’s high-line Lexus brand, which routinely topped CNW’s quality perception chart, has plunged, as well, and now lags European makers such as Porsche and Mercedes-Benz, as well as domestic luxury leader Cadillac.

The new incentives are just the latest effort by GM to tackle Toyota.  The Detroit maker has been making direct comparisons between its vehicles and those of the Japanese maker in a series of new television commercials.

But the cash-back offer is directly aimed at taking advantage of Toyota’s latest problems.  “Turnabout is fair play,” said a senior GM source, asking not to be quoted by name.  “I wouldn’t quite say that,” cautioned spokesman Wilkinson, “but we certainly saw things used against us a year ago when we were in the soup,” he said, referring to GM’s journey through bankruptcy.

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2 Responses to “GM Aiming New Incentives at Toyota”

  1. RAV Fox says:

    Isn’t this the same GM whose management team has for the past couple of weeks been proudly screaming all over radio and TV that the era of incentives is over, and that they admit it was a big mistake on the part of the previous management team?

    I particularly love the line “The move is in response to “thousands” of calls and e-mails to dealers and GM employees from Toyota owners asking for help, GM spokesman Tom Henderson said today.”

    Laughable.

  2. Buickman says:

    We shouldn’t have thrown money at Toyota owners, better to have increased telling our quality and MPG story. too bad distress has become a way of life at GM.

    for all the improvements at General Motors, the incompetency continues in sales and marketing. call it the LaNeve Legacy. misguided with absolutely zero sales experience, these idividuals thwart the best efforts of our engineers, stylists, and production people. Whitacre says there will be accountability and I believe him, just hope it doesn’t take him to much longer to see where the real trouble at GM has been, and still is to this very day!