DISCOUNT PUMPS UP GM SALES: Other carmakers plan to jump in on employee pricing July 2, 2005 BY SARAH A. WEBSTER FREE PRESS BUSINESS WRITER General Motors Corp.'s wildly successful campaign to offer employee pricing to everyone catapulted the automaker out of a months-long slump in June, sparking a nearly 50% jump in its vehicle sales. The program was so popular that the Auburn Hills-based Chrysler Group announced plans to join in the latest discounting war next week, and the Free Press has learned that Ford Motor Co. is preparing to do the same. Ford told managers earlier this week that it, too, would match the GM program if GM announces it will extend it past the Tuesday expiration date, according to a manager who asked not to be named. He said the company has been preparing its program throughout the week. GM reported Friday that its sales for the month were up an astounding 46.9% in June compared to the same month a year ago -- an amount that surpassed even high expectations and drove industrywide sales close to 1.7 million cars and trucks. GM sold 550,829 vehicles in June, capturing 32.8% of the U.S. market during the month, largely on the strength of its pickups, SUVs and minivans. The automaker had to search back to September 1986 to find a better month. The performance brought some relief to GM and its dealers, who were suffering under swelling inventories of 1.2 million unsold cars and trucks, despite cutbacks at plants. "GM production lines will be rolling again," predicted dealer Jerry Seiner, who had the best sales month ever at his big GM store in Salt Lake City and is now short of some models. "The month was absolutely phenomenal. We had our best overall sales month in the history of the organization." The cozy and catchy invitation to join the GM family -- complete with proud ads featuring a cute worker badge logo and everyday workers boasting about quality -- easily eclipsed the success of GM's historic Keep America Rolling incentive program. That effort offered consumers zero-percent financing after the Sept. 11, 2001, terrorist attacks that stunned the marketplace and prodded sales up 24.4% the next month, an amount that seemed enormous. While initially successful, GM's Keep America Rolling seemed to quickly train customers to expect heavy discounts and eventually began eroding the value of GM's brands, experts have said. But the employee discount program has struck such a confident and positive tone that industry experts have been lauding it for not having the feeling of a routine fire sale of unwanted merchandise. "It was an act of desperation, and it worked," said Art Spinella, president of CNW Marketing Research in Bandon, Ore. Pressure to match But like the successful 2001 discount program, GM's latest effort is creating pressures -- for GM to continue offering it and for competitors to match it. GM's employee discount program runs through Tuesday, and while GM won't comment on its plans, it is widely expected the automaker will continue the promotion through the end of July after the current program expires. Competitors hurt by GM's gains, especially on the sale of profitable pickup trucks and SUVs, aren't waiting to hear what GM has in store for the rest of the month. Sales of the Chevrolet Silverado pickup were up 110% compared to June a year ago, hurting the Dodge Ram, which was down 17.1%, and the Ford F-Series, which was down a smaller 3.3%. Gary Dilts, senior vice president of sales for the Chrysler Group, said the company will do a similar employee discount match program beginning Wednesday, after its sales failed to keep pace with the industry last month. DaimlerChrysler AG, which sells Mercedes, Chrysler, Dodge and Jeep vehicles, reported sales were up 5.1% compared to the same month a year ago. Dilts noted that because the Chrysler division, whose sales were up 5.2%, did not keep pace with the industry sales gain of 15.9% in June, it would respond. "So look for us July 6 to be in the market with what we think may be a better program than what they've got out there now," Dilts said. Meanwhile, Ford seemed to benefit from the increase in showroom traffic generated by GM's program: June was the first month this year that Ford posted a sales gain. However, it was a small 0.7% and did not keep pace with the overall industry, so that automaker is also under pressure to match GM's program. Ford spokesman David Reuter, though, said the company has no plans to announce any decision until its current incentive program expires Tuesday. Nissan Motor Corp. was the only major automaker other than GM to outperform the industry gains for the month, with a sales increase of 18.8% for the month. Toyota's sales rose 14.4% in June. Honda posted an 8.9% gain. Cautions for the future Despite the record month, GM's sales for the first half of the year were up a more modest 2.1% compared with the first half of 2004 -- a bit more than the industry gain of 1.9%. By comparison, sales were up 4.6% at Chrysler Group and down 4.6% at Ford for the first half of the year. GM's lighter 6-month achievement is largely due to the fact that GM sales preceding the innovative employee discount program were so dismal. For the first five months of the year, GM's sales were down 6.7%. Paul Ballew, GM's executive director of global market and industry analysis, said the automaker was pleased that the jump in sales helped reduce inventories to about 1 million units nationwide. But he cautioned that the boost would likely reduce demand for new cars and trucks in upcoming months. "We do have to inject a bit of caution; given the results in June, that's important for us to do," he said. "But I think that it is fair to say that we are pleased with the recovery in sales." Spinella said the company will have difficulty breaking away from the employee discount tactic. "If, in fact, GM stops the program, then there will be an instant stop to the floor traffic," and market share will plummet, Spinella predicted. And if other major automakers match GM's program, Spinella said, the market will equalize the game and "GM is in trouble again." George Pipas, Ford's U.S. sales analysis manager, credited GM for getting the lion's share of the business in June. But he also questioned what the automaker's exit strategy would be, noting that GM is still offering zero-percent financing after its 2001 incentive program. Contact SARAH A. WEBSTER at 313-222-5394 or swebster@freepress.com. Business writer Jeffrey McCracken contributed to this report. Web source: http://www.freep.com/money/autonews/sales2e_20050702.htm
