GM's Employee-Discount Is Paying Off
6/30/05, 12:36 PM
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http://news.yahoo.com/s/usatoday/20050630/...newautospaysoff
General Motors (GM) has hit upon a possible escape from the big sales incentives that have ruined its bottom line without boosting its market share.
The strategy is akin to one-price selling, minimizing distasteful negotiation. GM doesn't call it one-price, but that is at the core of GM's current promotion - selling anybody a vehicle for the price an employee would pay. (Related: Chrysler may match GM deals)
Preliminary June data from analysts show that the program, which grew out of employee suggestions, is wildly successful. It appears to have boosted GM sales 20% to 30% compared with recent months and pushed June market share to 30%, from 25.4% the first five months. And it isn't costing GM much more than its previously ineffective rebates.
"Our share the first five months has been abysmal. June, it'll be good," says Mark LaNeve, GM vice president of sales and marketing. He did not give numbers. Automakers report sales Friday.
"The No. 1 reason this promotion is succeeding is not that people are getting great deals, but that they don't have to negotiate. They know they paid the same price their neighbor did," says Jesse Toprak, analyst at Edmunds.com, an online car-shopping service. "People tell us they'd rather have root-canal work than negotiate for a car."
"The price is the price, and our customers seem to like that," says Jim Brasher, a Chevrolet dealer in Weimar, Texas.
Paul Ballew, GM's head of market and industry analysis, says the promotion is part of GM's move toward "simple pricing and incentives" to stand out in "a very difficult, and at times muddled, environment for consumers."
GM's employee price is what a dealer actually pays for a vehicle, about 4% less than the dealer's invoice price. The invoice includes a profit, called holdback.
To compensate dealers for selling vehicles at no profit, GM gives them 5% of the window-sticker price, an average of about $1,500 a vehicle.
Dealers can use the 5% to give additional discounts. And some models have rebates that push prices even lower than employee discounts.
GM is paying for that 5% dealer compensation by cutting incentives. Toprak says GM's average per-vehicle June incentive cost is $3,714, slightly less than May's $3,729.
"Alert visitors to GM showrooms are discovering that prices in June are actually little different from prices in May," says David Healy, Burnham Securities analyst, in a note to investors.
Though not "the deal of a lifetime," the appeal is strong, he says.
True one-price selling involves cutting dealer profit margins slim enough that they have to sell at or near window-sticker price. GM won't discuss whether it intends to do that.
Chrysler is considering a similar promotion if GM extends its program past the Tuesday deadline.
The strategy is akin to one-price selling, minimizing distasteful negotiation. GM doesn't call it one-price, but that is at the core of GM's current promotion - selling anybody a vehicle for the price an employee would pay. (Related: Chrysler may match GM deals)
Preliminary June data from analysts show that the program, which grew out of employee suggestions, is wildly successful. It appears to have boosted GM sales 20% to 30% compared with recent months and pushed June market share to 30%, from 25.4% the first five months. And it isn't costing GM much more than its previously ineffective rebates.
"Our share the first five months has been abysmal. June, it'll be good," says Mark LaNeve, GM vice president of sales and marketing. He did not give numbers. Automakers report sales Friday.
"The No. 1 reason this promotion is succeeding is not that people are getting great deals, but that they don't have to negotiate. They know they paid the same price their neighbor did," says Jesse Toprak, analyst at Edmunds.com, an online car-shopping service. "People tell us they'd rather have root-canal work than negotiate for a car."
"The price is the price, and our customers seem to like that," says Jim Brasher, a Chevrolet dealer in Weimar, Texas.
Paul Ballew, GM's head of market and industry analysis, says the promotion is part of GM's move toward "simple pricing and incentives" to stand out in "a very difficult, and at times muddled, environment for consumers."
GM's employee price is what a dealer actually pays for a vehicle, about 4% less than the dealer's invoice price. The invoice includes a profit, called holdback.
To compensate dealers for selling vehicles at no profit, GM gives them 5% of the window-sticker price, an average of about $1,500 a vehicle.
Dealers can use the 5% to give additional discounts. And some models have rebates that push prices even lower than employee discounts.
GM is paying for that 5% dealer compensation by cutting incentives. Toprak says GM's average per-vehicle June incentive cost is $3,714, slightly less than May's $3,729.
"Alert visitors to GM showrooms are discovering that prices in June are actually little different from prices in May," says David Healy, Burnham Securities analyst, in a note to investors.
Though not "the deal of a lifetime," the appeal is strong, he says.
True one-price selling involves cutting dealer profit margins slim enough that they have to sell at or near window-sticker price. GM won't discuss whether it intends to do that.
Chrysler is considering a similar promotion if GM extends its program past the Tuesday deadline.
6/30/05, 12:42 PM
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Even after discounts prices of their vehicles are still expensive. For example, I stopped by Chevy dealer this morning and I asked how much extended version of Silverado would cost after all discounts --- over $25,000. That's a little too much for a $27,000 vehicle before discount.
6/30/05, 12:49 PM
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Originally posted by Karpro@June 30, 2005, 1:47 PM
Gee, who would have ever thought people would like easy, no hassle pricing when it comes to car buying?
Gee, who would have ever thought people would like easy, no hassle pricing when it comes to car buying?
6/30/05, 12:53 PM
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My coworkers wife got a fully loaded AWD (except for the engine which is the standard I6) Buick Ranier for a hair over $30,000 after rebates. Not to bad for a vehicle that was spec'd out for more than $38,000. 
Not my cup of tea, but still a great buy!
Not my cup of tea, but still a great buy!
6/30/05, 09:51 PM
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Interesting. I'll bet that GM continues this program after the 5th. It's nice to see that this hasn't cost GM money to implement. My concern was that they were giving away the store, but that's apparently not the case. Dealers and customers like it, and what could be bad about that?
No hassle pricing--what a concept! If they continue with this, maybe it'll start a trend within the industry. Nah. Too good to last.
No hassle pricing--what a concept! If they continue with this, maybe it'll start a trend within the industry. Nah. Too good to last.
7/1/05, 10:04 AM
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Originally posted by TomServo92@June 30, 2005, 11:52 AM
Not me. I thoroughy enjoy wasting a whole day while the salesman runs back and forth between me and the sales manager trying to find a price everyone can agree on.
Not me. I thoroughy enjoy wasting a whole day while the salesman runs back and forth between me and the sales manager trying to find a price everyone can agree on.
I hope some day no haggle pricing will be universal. The last car I bought I went to two dealerships where we couldn't agree on the price. At least I found out where their bottom line wasn't. I finally got the car at a no haggle dealership. I'm sure I could have got a better "deal" if I had kept negotiating at the other places, but I don't need that stress, self-doubt, second-guessing or buyer's remorse.
7/1/05, 11:50 AM
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I think it is a good short-term fix that will clear out some GM inventory.
The downsides are many.
-GM keeps killing resale value by pumping out discounted cars.
-People will not pay MSRP on any GM product ever again
The way GM is discounting their cars, I think GM should move all its car dealerships to outlet malls.
The downsides are many.
-GM keeps killing resale value by pumping out discounted cars.
-People will not pay MSRP on any GM product ever again
The way GM is discounting their cars, I think GM should move all its car dealerships to outlet malls.
7/1/05, 01:15 PM
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Originally posted by Galaxie@July 1, 2005, 11:53 AM
I think it is a good short-term fix that will clear out some GM inventory.
The downsides are many.
-GM keeps killing resale value by pumping out discounted cars.
-People will not pay MSRP on any GM product ever again
The way GM is discounting their cars, I think GM should move all its car dealerships to outlet malls.
I think it is a good short-term fix that will clear out some GM inventory.
The downsides are many.
-GM keeps killing resale value by pumping out discounted cars.
-People will not pay MSRP on any GM product ever again
The way GM is discounting their cars, I think GM should move all its car dealerships to outlet malls.
I'm not sure about killing the resale value by pumping out discounted cars. Maybe the savings make the pain of depreciation, which all cars suffer, a little more tolerable. Only time will tell on this point.
7/2/05, 10:41 AM
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Don't know how true it is but read that Chrysler was looking at such a plan. This may be the way the car companies go if it really is not costing them more than all these incentives. Regarding the traditionl sales trot in and out of the office. I started a long time ago to tell the salespersn the first time they got up and said they had to see their manager that I wanted to deal directly with the person who could could make the decision and if he/she got up - I was up and out. Now, I fax/email to the manager
what I am looking for and wait for replies. Believe it or not, it works better or at least it has for me.
what I am looking for and wait for replies. Believe it or not, it works better or at least it has for me.
7/2/05, 03:31 PM
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Even after employee discount Chevy still cost as much as the other brands.
For example, my dad is looking to buy Pickup Truck. We went to both Chevrolet and Ford this morning. Both Silverado and F-150 were very similar, almost same size. Silverado had more powerful engine (4.8L compared to 4.6L), but Ford's towing capacity is better (about 8,000 compared to 7,000). So MSRP on both of them was around $31,000. After employee discount Silverado eneded up at $25,800. After all discounts at Ford (I got additional discount because I own another Ford vehicle), F-150 ended up at $25,900.
So we're talking about $100 difference for 2 vehicles that have almost same MSRP. I don't really see how good GM's employee discount really is.
For example, my dad is looking to buy Pickup Truck. We went to both Chevrolet and Ford this morning. Both Silverado and F-150 were very similar, almost same size. Silverado had more powerful engine (4.8L compared to 4.6L), but Ford's towing capacity is better (about 8,000 compared to 7,000). So MSRP on both of them was around $31,000. After employee discount Silverado eneded up at $25,800. After all discounts at Ford (I got additional discount because I own another Ford vehicle), F-150 ended up at $25,900.
So we're talking about $100 difference for 2 vehicles that have almost same MSRP. I don't really see how good GM's employee discount really is.
7/3/05, 09:04 AM
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Originally posted by scottie1113@July 2, 2005, 10:22 PM
I think it just makes it much easier to buy. You know the price and don't have to do the dance with the salesman and the sales manager. I applaud the process.
I think it just makes it much easier to buy. You know the price and don't have to do the dance with the salesman and the sales manager. I applaud the process.
7/3/05, 05:51 PM
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And it only took 15 minutes? Wow.That must be close to a record. I think a lot of buyers are fed up with the whole process. I realize that dealers are independent from manufacturers and can do what they want, but I suspect that they would sell more cars if they made the whole thing as quick and painless as possible.
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