GM enjoys best month for sales since 2001

`Employee Discount for Everyone' leads to 42 percent boost over May

DaimlerChrysler and Ford to offer incentives

July 02, 2005|By Rick Popely | Rick Popely,CHICAGO TRIBUNE

General Motors Corp. erased months of disappointing sales and declining market share by selling 550,000 vehicles in June, its best month since October 2001, when it launched zero-percent financing.

The company's Employee Discount for Everyone boosted GM's sales 42 percent from May and 47 percent above June 2004, prompting DaimlerChrysler AG's Chrysler Group to announce that it will start a similar program Wednesday.

GM's offer, which began June 3, expires Tuesday. The automaker gave no hint yesterday about whether it will extend the offer.

"Watch this space," GM market analyst Paul Ballew said in a conference call with analysts and journalists. "We're not going to provide any further guidance today."

But Chrysler's announcement seems certain to force GM to extend its offer, and Ford Motor Co. said it would announce new incentives next week. Ford's current offers end Tuesday.

Unlike previous offers that delivered blockbuster sales at the expense of profits, the employee discount cost GM little if any more than it was spending. Ballew wouldn't say how much it cost, but he described GM's June incentives as "flat to up slightly" from May.

The key attraction of the offer, Ballew said, was: "Our message was very simple and able to cut through the clutter."

Consumers saved an average $400 to $500 from May prices, Ballew said. GM took money from leasing incentives and put it on retail purchases, rolled rebates into the deals, and got dealers to cut their profit and post final prices on vehicles.

Consumer automotive Web site Edmunds.com, which tracks vehicle transactions at 3,000 dealers nationally, said GM's average incentive in June was $3,714 per vehicle, $15 less than in May and nearly $600 less than in June 2004, when its sales fell 12 percent.

"It's a stroke of genius. We're blown away by what they've done," Mike Chung, a pricing and market analyst for Edmunds, said of GM's ability to parlay a catchy marketing message into a huge sales increase.

Steve Hill, GM's director of retail marketing programs, said the idea to offer the same price employees pay started about a year ago and was an extension of a successful "red tag sale" GM used in December that posted final prices on vehicles.

"It seemed like a very simple, customer-friendly way to shop," he said. "People like that opportunity. They say, `Tell me what you have and how much it costs.'"

Advertising for the offer featured GM employees. "That put a new face on GM," Hill said. "It showed an enormous amount of pride in the company that came through loud and clear.

"If it was just the deal in the ads, people would have said, `That is just a distressed company.'"

Through May, GM's sales were running 7 percent behind last year, but June's surge pushed its first-half total to a 2 percent increase, matching the industry's performance this year.

GM had lost 1.5 points of market share through May, to 25.7 percent, but June wiped out most of the decline. The automaker's share rebounded to 27 percent for the first half and was 32.8 percent for the month.

"It's nice to end the first half on a high note," Ballew said. "The [sales] level we achieved was beyond anything we anticipated."

GM's stock also has rebounded lately. Its shares plunged in March after it said it would lose more than $1 billion in the first quarter, but it gained 15.7 percent in the second quarter, the most among the 30 issues in the Dow Jones industrial average. GM shares added 65 cents yesterday, to $34.65.

Ford's sales were up less than 1 percent in June, its first monthly increase since December, and Chrysler's were up 5 percent. Both said GM's employee discount stole customers.

Every GM division posted double-digit increases except Pontiac, whose sales were off because of substantially lower fleet sales. GM's full-size pickup sales more than doubled to 159,000. Ford's dipped 3 percent and Dodge's fell 17 percent.

Major Japanese brands had good months as well, despite spending far less on incentives than the domestic manufacturers. Nissan North America was up 19 percent; Toyota Motor Sales, 14 percent; and American Honda, 9 percent.

Edmunds said Nissan spent $1,654 per vehicle on incentives last month, Toyota $989 and Honda $491. GM was highest at $3,714, Chrysler second at $3,700 and Ford third at $3,125.

The Chicago Tribune is a Tribune Publishing newspaper.

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