General Motors extends `employee discount' plan

Ford and Chrysler also to offer lower price

July 06, 2005|By Rick Popely and Jim Mateja | Rick Popely and Jim Mateja,CHICAGO TRIBUNE

General Motors Corp. yesterday extended its employee-discount-for-all program through Aug. 1, and Ford Motor Co. announced it would join the Chrysler Group in copying the highly successful offer.

GM's sales soared 47 percent in June after it gave consumers the same discount that employees receive. GM sold 550,829 cars and light trucks and captured nearly 33 percent of the market, its best month since October 2001, when it launched zero-percent financing.

Ford, whose June sales edged up less than 1 percent, responded yesterday with the Ford Family Plan. It starts today and will combine current rebates with an employee discount, typically 3 percent to 4 percent less than invoice price, the amount the dealer pays.

As at GM, final prices will be posted on the vehicles.

"What we were hearing from our dealers is that they wanted to be more competitive," said Ford spokesman Dave Reuter. "One thing that was clear in June is that consumers like a great deal, and they want it delivered in a very clear way."

As examples, Ford said an Escape sport-utility vehicle with a sticker price of $26,070 would sell for $21,335 under the plan, and a Lincoln Navigator SUV with a $51,145 sticker price would be discounted to $42,113.

Chrysler, whose sales rose 5 percent in June, said it will unveil Employee Purchase Plus today. The company said last week it would offer a discount plan if GM extended its offer.

In one example, a Chrysler Pacifica with a $41,920 sticker price would sell for $35,010, including a $2,000 rebate and the employee discount.

A dealer familiar with the plan said it would exclude the popular Chrysler 300, Dodge Magnum and Jeep Liberty diesel. Some pickups and sport-utility vehicles would carry a choice of a rebate or low-rate financing in addition to the employee discount, the dealer said.

All three programs apply to 2005 models and run through Aug. 1. Ford's program covers Ford, Lincoln and Mercury brand vehicles but excludes the hot Mustang, Escape Hybrid and GT sports car. GM's plan excludes the Chevrolet Corvette, Pontiac GTO and medium-duty trucks.

With Ford joining as expected, the Big Three continue the fight they have waged for years with other incentives, such as zero-percent financing and cash rebates.

Industry consultant Joseph Phillippi of AutoTrends said Ford and Chrysler were pressured to match GM because of the latter's stunning success and because the Big Three compete mainly with each other.

"Customers are smart and know that if they hold their breath long enough, the car companies blink when it comes to incentives," Phillippi said. "It will be interesting to see if the automakers can go back to normal pricing after this or if employee pricing or something close to it becomes the normal pricing."

This incentive battle has not drawn in major Japanese brands. Toyota, Nissan and Honda, which all posted record sales for June, had no response yesterday.

"We had a good June, things are where we expected them to be and we are moving along," said Honda spokesman Chuck Schifsky.

Though the Japanese brands followed GM in offering zero percent, most did so on fewer models and for shorter loan terms than the domestics.

"The imports probably will continue the incentives they have but opt not to join in any super sale like this one," Phillippi said. "Their view is that a super sale has a negative impact on the brand image."

Even if Ford and Chrysler dampen GM's sales in July, GM has accomplished a key goal of reducing 2005 inventory early, encouraging dealers to order 2006 models.

GM essentially started its year-end closeout a month sooner than usual, lowering its supply of cars and light trucks to 1 million at the end of June, 350,000 less than it had a year ago and 100,000 less than its year-end goal.

Rich Ankotovitch , sales manager at Bredemann Chevrolet in Park Ridge, Ill., where new-vehicle sales rose to 85 units last month from 50 in May, greeted GM's extension as good news, though with a caveat: His inventory is thin for the Malibu and Impala sedans and the Equinox SUV.

"It's a Catch-22. You want to clear out the '05s, but if you don't have cars in front of the people, they will go elsewhere," he said.

Ankotovitch said he expects to receive a few more 2005 Impalas this month but otherwise will be selling down current stock.

"We're ready for '06s now," he said.

GM, which lost $1.1 billion in the first quarter, cut its first-half production 10 percent to counter shrinking sales and announced plans to build 9 percent fewer vehicles in the third quarter.

Merrill Lynch analyst John Casesa said yesterday in a research report that "the inventory correction is over" and GM could boost production in the fourth quarter.

GM also has said it will reduce prices on most 2006 models and market their features, quality and value in an effort to make sticker prices closer to transaction prices, reducing the need for incentives.

Casesa, however, warned that such a strategy would be easy to copy. "When they do, we fear that Detroit will have once again simply set a lower price level for all its products going forward, lowering the structural profitability of the industry," Casesa wrote in his report.

The Chicago Tribune is a Tribune Publishing newspaper.

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