GM deal fails to lure buyers from rivals Employee discounts for all made sales soar, but most customers were already in carmaker's fold. By Ed Garsten / The Detroit News General Motors Corp. chalked up blockbuster sales in June through its employee-discount-for-all promotion, but the deal didn't help the automaker steal a greater percentage of customers from rivals and may cost future sales. GM sales soared 47 percent in June, cleaning dealer lots of excess inventory, but most of those sales came from consumers who were already GM customers, according to sales data released Tuesday by the Power Information Network. The study, which looked at the brands of vehicles swapped for new GM cars and trucks, found that 63.1 percent of the automaker's June trade-ins were GM models, compared with 64 percent in May. In auto industry parlance, GM was unable to "conquest" more customers from rivals. "I would have expected them to have a higher conquest rate," said Tom Libby, senior director of industry analysis for the Power Information Network, a unit of consultants J.D. Power and Associates. "It's a very mild degree of conquest." As some analysts have suggested, GM may have simply pulled sales from future months and will have to pay the price later in the year. GM disputes the notion. The company said internal data shows the number of "conquest" sales rose by nearly 50 percent in June, compared to less aggressive incentive programs in the past. GM spokeswoman Deborah Silverman says the automaker attracted more than 150,000 new customers in June, compared with 80,000 to 90,000 during a typical incentive campaign. "We fell just a little short of doubling our conquest sales in June, which, from our perspective, is a very good result," Silverman said. The automaker did win some new customers from domestic rivals but very few from foreign automakers. GM was all alone in the marketplace with the deal in June. Ford Motor Co. and DaimlerChrysler AG's Chrysler Group, moving to stem additional customer defections, have rolled out their own versions of employee pricing this month. "There's less reason for a Chrysler owner or Ford owners to switch to GM when they can get the same thing from their own company," Libby said. In June, 13.4 percent of the trade-ins at GM dealers were Ford cars and trucks, and 10.6 percent were Chryslers. A year earlier, 11.6 percent of the cars and trucks taken in by GM dealers as trade-ins were Ford models and 9.4 percent carried a Chrysler brand. But GM found it much more difficult to draw owners of vehicles built by Japanese automakers. Its so-called conquest rate against Toyota Motor Corp., Nissan Motor Co. and Honda Motor Co. rose at a slower pace than its ability to draw Ford and Chrysler buyers. Since the 1970s, when GM's U.S. market share was more than 40 percent, the automaker has steadily lost sales to Asian and European rivals. It now controls 26.8 percent of the U.S. market. Even with the latest promotion, GM dealers are having mixed results in winning over new customers. Some say they are seeing dozens of new shoppers that never would have considered a GM brand. Others say they are seeing typical buyers, just more of them. "At every one of my dealerships, conquest business is the majority of the business," said John Rogin, who owns GM dealerships in Michigan and Ohio. He's said he's taking Dodge, Ford, Honda and many other brands for trade-ins. He reported "well in excess of 50 percent conquest at our (GMC) store and near 50 percent at our Buick store." Mark Pawelski, the sales manager at Liberty Chevrolet in New Hudson, said "I haven't noticed this great conquest going on." There's no doubt, however, GM helped dealers clear out hundreds of thousands of 2005 model year vehicles. Before the promotion began in June, about 1.2 million GM cars and trucks sat on dealers' lots, but that dwindled to about a million vehicles at the end of the month. GM and its dealers may have to pay a steep price in exchange for the success of the employee discount sale. The promotion's success left many dealers with few vehicles to sell in July before 2006 models arrive. Many customers who acquired a new GM model in June and July simply moved their purchase plans forward to take advantage of the discounts. J.D. Power's Libby says it's too early to measure the effect of the employee discount offer on future sales. And Rogin is discounting fears that future sales will fall off in the wake of such a blockbuster sale. "Momentum is an incredible thing," Rogin said. "I don't see anything stepping in its way." But in Reno, Nev., Chevrolet dealer Jack Stanko Sr. is braced for some sluggish sales ahead. "Whenever you have a program like that, you pull sales ahead," Stanko said. "Time will tell." Stanko didn't participate in the employee deal in June out of concern of thinner profit margins. He decided to participate this month after Ford and Chrysler joined the mix. Stanko's sales staff threatened to revolt when the discounted transaction prices resulted in 50 percent lower commissions. So Stanko dug into his own pocket to make up some of the difference through a new compensation plan to prevent salespeople from quitting. "It's definitely a situation where every deal is a mini-deal," Stanko said. "I don't expect to make any money in July." GM's Silverman acknowledges some dealers have been unhappy with the promotion, but says 90 percent of GM's approximately 7,500 dealers have consistently participated since it began in June. "The majority of those I spoke with have been very enthusiastic," she said. Liberty Chevrolet's Pawelski is remaining upbeat and isn't hearing any complaints from his sales staff. "The staff is just happy we're getting sales," he said. "Let's get 'em in the door and let's sell some cars." You can reach Ed Garston at (313) 223-3217 or egarsten@detnews.com. Web Source: http://www.detnews.com/2005/autosinsider/0507/14/A02-245812.htm
