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As Sales Slow, Automakers Could be Heading for Incentives War

Good news for consumers could be a disaster for industry’s bottom line.

by on Feb.12, 2014

GM's move to offer more than $7,000 in incentives on its 2014 Silverado has made investors nervous about a possible incentive war.

When General Motors announced it would offer more than $7,000 in discounts on some of its big Silverado pickups the news sent many shoppers rushing to showrooms – but it also sent shivers racing down the spines of automotive investors increasingly worried that slowing sales may trigger the sort of incentive wars that trashed industry profits during the years leading up to the recent recession.

All the ingredients are there for a classic price war, automotive analysts warn. January auto sales took a sharp dip that may have been impacted by more than just the cold weather gripping the nation. In turn, there are now a growing number of vehicles piling up on dealer lots across the country, a situation that may force manufacturers to sharply increase current rebates and other incentives.

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“Rising inventory levels combined with several more waves of bad weather will result in a short-term spike in incentives,” said Eric Lyman, vice president of Editorial and Consulting for ALG, formerly known as the Automotive Leasing Guide. “The danger is that this could be the beginning of an escalating arms race for market share.” (more…)

Discounting Added 100,000 Sales, Claims GM CEO

Not a “predictable competitor,” Akerson says.

by on Apr.20, 2011

GM CEO Dan Akerson: not a "predictable competitor."

General Motors sold as many as 100,000 more cars than it might have, during the first quarter, by unexpectedly increasing its incentives, CEO Dan Akerson said at an industry conference marking the start of the New York Auto Show.

The maker surprised analysts and competitors alike when it boosted rebates and other givebacks by about $400 a vehicle during the early days of the new year, a time when rising demand led some makers to curb their incentives.

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“I don’t want to be a predictable competitor,” explained Akerson.  “I don’t want the other guy to know exactly what I’m doing.”

Industry observers have questioned the move, which cuts into the maker’s cash flow and potential profitability.  But the added demand more than justifies the cost, the GM CEO asserted.


U.S. Auto Sales “Tracking Very Strongly”

Incentives help key makers, notably Toyota.

by on Mar.15, 2010

Auto sales are trending up an incentives, like those on the 2010 Toyota Corolla, get much of the credit.

Spurred by some of the heftiest incentives in some time, industry observers report seeing significant signs of growth in the U.S. auto industry during the first part of March.

At least one well-regarded analyst is forecasting that demand could reach an annualized rate of 13 million for the month overall should the pace continue.  That would be one of the best months the American market has experienced since the recession began, in late 2008, excluding the impact of last year’s Cash for Clunkers program.

“U.S. auto sales ar tracking strongly,” said Deutsche Bank analyst Rod Lache, in a new report, adding that “several factors appear to be contributing to the uptick.”

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Among the most significant forces in the market: an increase in incentives spending by makers like General Motors and Toyota.  The Japanese makers has traditionally been reluctant to put much money on the hood, but heeded dealer calls for an incentive campaign after the disastrous, double-digit decline in sales, last month.


GM President Reuss Betting on Good Product, Not Toyota’s Misfortunes

Customers "didn't think we were listening," says hands-on exec.

by on Feb.11, 2010

General Motors must succeed on its products, not its competitors' misfortunes, says GM President Mark Reuss.

There might be a rare opportunity to take advantage of its arch-rivals problems, but Mark Reuss, General Motors’ new president of North American operations , insists he’d rather do it the old fashioned way, with better product.

Nonetheless, seven months after emerging from bankruptcy, the “new” GM is in a much better position than it has been in decades, Reuss said repeatedly, during a series of conversations this week, as well as his keynote speech at the 2010 Chicago Auto Show.

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The executive pointed to GM’s “May the Best Car Win” program as a sign that customers see big improvements in the company’s cars, trucks and crossovers.  The recently-concluded marketing campaign offered potential customers the opportunity to buy a GM vehicle – and then return it if it didn’t meet their expectations.  Of 439,000 eligible buyers, only 505 returned their vehicles, Reuss revealed, adding that in some cases, buyers simply choose to swap for a different General Motors vehicle.


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.


GM Offering Big Incentives on Pontiacs and Saturns

Dealer discounts of up to $7,000 per vehicle are aimed at clearing out the lots as brands prepare to close.

by on Dec.29, 2009

GM is offering dealers up to $7,000 to clear out inventories of Pontiac and Saturn models.

Big sales are typical in the days after Christmas, especially if you’re looking for holiday cards, wrapping paper and ornaments.  But General Motors is offering some big deals of its own on two of the brands it will soon abandon, and they make the sales at the local discount malls seem paltry by comparison.

At Jim Causley Buick-Pontiac-GMC, in the Detroit suburb, shoppers are being offered $6,500 discounts on models such as the Pontiac G3 and Solstice roadster, “and they’re going fast,” says salesman Mike Smith before rushing off to deal with a line of waiting customers.


That’s a sharp turnaround from earlier in the month when Causley’s showroom was uncomfortably quiet, particularly for the Pontiac brand, one of four marques GM decided to abandon – along with Saturn, Saab and Hummer – as part of its bankruptcy reorganization.  Worried about being able to service or sell vehicles sold by those brands down the road, many potential customers were steering clear.    (more…)

Signs of Recovery at GM, Asserts New Sales Chief

Economy bottomed out, adds chief analyst, but recovery slow.

by on Oct.28, 2009

New General Motors Sales czar Susan Docherty would rather fight than have you switch to another brand.

New General Motors Sales czar Susan Docherty would rather fight than have you switch to another brand.

While the recovery is just taken hold, there are positive signs in the economy, and that’s translating into some measurable gains for the post-bankruptcy General Motors, company officials declared during a Wednesday meeting with the news media.

The struggling automaker expects to gain share, when the final sales numbers are counted for October, and those cars, trucks and crossovers are rolling out of dealer lots at a higher transaction price than a year ago, said Susan Docherty, GM’s new director of sales.  Residuals – industry speak for projected trade-in values – are rising and the automaker is hoping to “dial back” on incentives, which remain the highest in the industry.

But Docherty, who assumed her new post just nine days ago, also acknowledged that GM has some significant challenges ahead of it.  For one thing, it has to improve its standing in the annual and highly influential Consumer Reports magazine survey of vehicle dependability.  In a news conference just yesterday, CR editors said that GM’s performance is “inconsistent,” at best.

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The carmaker’s mediocre performance is “one of the things that keeps me up at night,” said Docherty, who was previously in charge of the Buick-Pontiac-GMC brand group.
“Clearly, there are signs of an economic recovery from the worst recession in 70 years,” noted Mike Di Giovanni, GM’s chief market analyst, who joined Docherty for today’s briefing.  But he warned that while the worst may be over, the economy has a long way to go, and so does the auto industry.