GM HAS NEW PRICING STRATEGY FOR '06 MODELS!

July 28, 2005 --AUTOMOTIVE NEWS

BY JEFFREY McCRACKENFREE
PRESS BUSINESS WRITER

So, General Motors Corp's. wildly successful, much-copied employee-discount sales program is coming to an end.
What's next?
Well, after luring shoppers into dealerships for two months on the notion of a great once-in-a-lifetime deal -- the popular discount plan that allowed the general public to buy GM cars or trucks at the employee price -- GM is now trying something completely different. It wants to get people away from the concept of a big monthly deal. Instead, it's moving closer to lower what-you-see-is-what-you-get pricing.
GM says its plan is to lower the sticker prices on about half of its 2006 cars and trucks. The automaker will offer more upscale features and better warranties on many models. It will have about 76 models for 2006, most of which will hit dealerships in August and September.
The idea behind this strategy, which GM is calling "value pricing," is to get the sticker price closer to the actual final price a consumer pays. That way, people don't automatically expect a big rebate and can more easily compare the prices of GM models with those of other automakers.
The move is a change from GM's previous strategy, which had been to keep sticker prices high, then pile on incentives of $4,000 or more per vehicle to attract buyers. The strategy seemed to work well for GM in 2001-03, but less so in the last 18 months. It also caused wild swings in sales, with strong months followed by steep declines.
GM and its dealers say a lower sticker price is important to the growing number of consumers who do their auto shopping on the Internet.
The change is part of GM's strategy to turn around its North American operations, which lost $2.5 billion in the first half of 2005.
GM's Buick division, whose sales are down 8.4% this year despite two months of nationwide employee pricing, is cutting prices, adding features and extending the warranty period on 2006 models to attract new buyers.
Buick prices will drop as much as $500 per model, or about 2%, and features valued at as much as $1,300, such as improved brakes, will be added at no extra cost to buyers. The division also is lengthening its warranty to 4 years or 50,000 miles from 3 years or 36,000 miles, he said.
"The goal is to be competitive on the actual sticker price. It's a logical goal. A lot depends on whether they price their 2006 models close to where people think they should be, close to what people thought was reasonable in June and July," said Tom Libby, senior director of industry analysis at J.D. Power.
Libby and others said one advantage of the new GM strategy could be that it extends no-haggle pricing into its selling strategy.
That was one reason the employee-discount program was so popular, said Rebecca Lindland, auto-sales analyst for the auto-research firm Global Insight.
"The no-haggle pricing worked well with Saturn, but GM had to get away from it when the product at Saturn was weak. People need to feel like they are getting a good deal and don't have to worry the guy with another dealer is getting a better price," she said.
The improved content of 2006 models would include options such as better brakes or longer warranties, GM dealers said.