2006 Detroit Auto Show Index by TCC Team (1/7/2006)
GM Slashing Prices, Hoping to Cut Incentives
General Motors will slash prices on about 80 percent of the cars, trucks and crossovers it sells in the
The new program will involve every model sold by the Chevrolet, Buick and GMC divisions, along with some from Pontiac and Cadillac. Prices were previously realigned at the Hummer, Saab and Saturn brands, LaNeve pointed out, so when those marques are included, GM has slashed prices on 90 percent of its
The program reflects reality, GM officials emphasized. There is a sizable gap between the sticker price and the so-called transaction price, the figure customers actually have to come up with. Part of the difference comes in dealer discounts, but in recent years, GM has had to cover the bulk through some of the largest incentives in industry history. “Incentive programs won’t go away,” LaNeve acknowledged, but the automaker wants to do away with the fire sale image it has developed lately. Instead, it wants to be perceived as offering extremely good value on its product. “A lot of people will still go to the competition,” he said, “but if they do, we want them to know they’re paying too much.” Value Pricing, he noted, has been a foundation of the Asian import strategy. It has another critical advantage: more accurate retail prices typically lead to higher residuals. That means lower subsidies on leases and higher trade-in values for owners.
“This can’t hurt their image,” said auto analyst Jim Hall, of AutoPacific, Inc., adding “This has potential to work,” as long as GM remains consistent with the Value Pricing strategy, and doesn’t start to sneak prices up again. David Cole, director of the Center for Automotive Research, agreed, but cautioned that the market will have to decide. “The $64 billion question,” he suggested, is whether GM really will be able to cut incentives. If it has to continue to offer big rebates on top of lower prices, he warns, the impact on the automaker’s bottom line could be devastating.—TCC Team
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Geely CEOEnlarge Photo