General Motors on Monday dropped its popular employee-discount plan in a signal that the era of big incentives could be ending while Ford said it would continue employee pricing for another month but also will try to cut back on incentives for 2006 models, the Associated Press (AP) reported.
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AP noted that GM was the first to allow customers to buy 2005 vehicles at the employee rate in June and said the automaker’s sales jumped 41% that month, while Ford and Chrysler followed with their own employee pricing plans in July. All of the plans were set to expire on Monday.
Ford, however, reportedly said it’s extending employee pricing until September 6 for Ford, Lincoln and Mercury vehicles and is also adding some 2006 models to the discount plan, including the Ford Escape and Expedition SUVs, the Ford Econoline van and the Lincoln Navigator SUV, all of which saw sales fall in the first six months of this year.
GM dropped employee pricing but told the Associated Press it would try to lure buyers with lower prices on its 2006 models. GM is hoping to wean customers off incentives and establish its brands as a good value. Such moves to back off incentives in the past couple of years have been largely unsuccessful.
“Regardless of what any of our competitors are doing, we think this is the right play for us,” Brent Dewar, GM North America’s vice president of marketing and advertising, told AP.
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By GlobalDataThe news agency said GM is lowering the prices on 30 of its 76 models and adding features to other models to make them more competitive – under the new pricing strategy, the base price of the Chevrolet Malibu, for example, is $US17,990, or $1,835 below the 2005 model, while the base price of the Saturn Ion sedan is $12,490, or $2,455 lower than the 2005 model.
Buick and Hummer vehicles will get a four-year, 50,000-mile warranty previously reserved for GM’s luxury Cadillac and Saab brands, AP added.
Ford told the Associated Press it would also lower prices on most of its 2006 Ford, Lincoln and Mercury models. The Ford Explorer has new content and better fuel economy but will be $1,750 less than the 2005 model, the company said. For the first time, the Ford Focus will be under $14,000; the 2006 Focus starts at $13,995, $610 less than the 2005 Focus.
Officials from both companies told the news agency that, in most cases, 2006 prices for Ford and GM vehicles will be slightly higher than the prices for the past model year under the employee-discount plan.
According to the Associated Press, GM and Ford both said on Monday that customers have had a hard time finding actual vehicle prices on the internet because base prices shown don’t include available incentives – Ford said 70% of new vehicle buyers now use the Iinternet to research vehicles, but just 15% click far enough to see what incentives are available.
Dewar reportedly said GM wants to use incentives more sparingly, targeting them at specific vehicles rather than showering them on every vehicle.
“Incentives will still play a big role, but we want to make sure we’re closer to the transaction price,” he told AP.
Citing research firm Autodata Corp., the Associated Press said GM spent an average of $4,458 per vehicle on incentives in June, higher than any other automaker – Toyota spent $1,090, the lowest.
AP noted that some analysts have questioned whether GM’s strategy will be successful, saying the company has conditioned customers to expect incentives since introducing zero-percent financing plans in the wake of the September 2001 terrorist attacks.
“Because they have been taught to expect these incentives and rebates, domestic buyers often sit on their cheque books until the incentives arrive and then they flock to the showrooms.” Jack Nerad, editorial director and market analyst for vehicle research site Kelley Blue Book, told the news agency.
But Rebecca Lindland, a senior analyst for the consulting firm Global Insight, reportedly predicted consumers will like the new pricing strategy because they don’t like wading through incentives and trying to find a good deal.
“It would become a much cleaner process for the consumer if they make the sticker prices closer to what the consumer’s going to pay,” Lindland told the Associated Press. “Nowadays, people are so busy and aggressive. They don’t want to take the time it takes to really haggle.”
Lindland added that consumers liked the employee-pricing programmes because they didn’t have to haggle over the price.
AP noted that the programmes also let consumers in on one of the perks of working for an automaker – although GM’s plan is ending for most consumers, it will continue for the roughly 215,000 employees of GM North America and its financial arm, GMAC, as well as thousands of employees at Delphi Corp., GM’s former parts division.
