Gm To Cut 75% Of Sticker Prices By Avg Of $1300 - BUT WILL LOWER SPREAD

[Perian]

Link: wsj.com

DETROIT -- General Motors Corp. on Tuesday announced plans to slash prices on most of its models as part of an effort to better gauge what consumers are willing to pay and move away from the heavy incentives that confuse buyers and take a bite out of the auto maker's profits.

GM is trimming sticker prices across the board on its top-selling Chevrolet brand, as well as on vehicles produced under the GMC and Buick names. Prices will also be slashed on certain vehicles produced by the company's Pontiac and Cadillac divisions. In total, 57 of GM's 76 models will be eligible for discounts.

The average price reduction on eligible vehicles will be $1,300, with cuts as high as $3,000 on some vehicles, Mark LaNeve, head sales and marketing for GM, said at a press conference. He said that incentives will still be offered, but that they are expected to be lower than what is currently available.

Mr. LaNeve said customers have become frustrated with trying to keep up with incentives. ''They say, 'Incentives are confusing and we don't want to figure it out,'" he said, adding that repricing is ''what our customers are asking us to do.''

The world's largest auto maker by volume has seen its share of the U.S. market fall steadily in recent years as nimble foreign competitors such as Toyota Motor Corp. and Honda Motor Co. make inroads in GM's core market. GM's eight brands accounted for about 26% of sales of cars and light trucks in the U.S. last year, down more than a point from the previous year. At its pinnacle, GM controlled well in excess of 50% of the U.S. market.

GM, like its main rival Ford Motor Co., is in the midst an extended restructuring of its North American automotive operations. GM announced in October that it would close 12 plants as part of plans to save $7 billion per year in structural costs.

High Hopes for New Models

The company is pinning its marketplace hopes this year on the launch of a new line of large SUVs. Mr. LaNeve said that the next generation Chevrolet GMT 900 SUV will be priced lower than the outgoing model.

It is unclear whether the actual transaction price of a vehicle for consumers -- when the new reductions and remaining incentives are factored in -- will be lower than current prices. Incentives on 2006-model GMs extend as high as $5,500 currently.

Mr. LaNeve said the new strategy meets consumer demand for more "transparency" in pricing. He said the success of the employee-discount-for-everyone deals last summer was a sign that consumers wanted to know exactly what they were paying for their vehicle. The program boosted GM's dramatically, though sales in the waning months of the year ebbed.

"This is basically the equivalent of a flat tax for dealers and customers,'' said Jim Sanfilippo, auto analyst with AMCI Marketing in Bloomfield Hills, Mich. He said that the Japanese auto makers succeed in a transparent pricing model and GM's challenge will be convincing buyers that its cars are comparable in quality to the competition, but actually cost less.

GM first launched its "value pricing" strategy last summer in coordination with the employee discount deals. Mr. LaNeve said the strategy has been effective but ultimately fell short due to high oil prices and fallout from hurricanes.

Mr. LaNeve said the company has had some success with value pricing in the past. Saab, Saturn and certain new models, including the Chevy HHR, have proven the model will work, he said. The company has sold in excess of 40,000 HHRs since last year's launch without incentives.

Mr. LaNeve admitted this isn't a sure-fire way to kill incentive plans altogether. "Incentive programs will not go away... Part of the strategy [is] to get smarter and more efficient with our incentive programs.''

GM's biggest push will come with its Chevrolet brand, which overtook Ford as the top-selling brand in the U.S for the first time in nearly two decades. The Chevrolet division plans to emphasize its newfound leadership and its fuel-economy attributes in marketing efforts that kick off Wednesday.

''This isn't just a price story. It's a price and value story,'' Mr. LaNeve said. ''This is a pricing move to clarify our position in the marketplace.''

Article continues at link.

[Perian]

Good news for all - except your local sales tax collectors!

Imagine this: About one million GM vehicles in dealer lots and in transit to those dealers will need new price stickers!

More info from Automotive News:

GM WILL CUT DEALER DISCOUNTS:

To compensate for the price changes, GM will be changing the dealer discount on some product lines, LaNeve said, without giving specific examples. A change in the dealer discount means there will be a smaller gap between the invoice price and the sticker price on a vehicle.

Some examples of prices changes on Chevrolet vehicles:

# The new base price of the 2006 Cobalt LS coupe will be $12,990 including shipping charges. That is $1,500 less than the current base price of $14,490.

# The new base price of the Impala LS will be $20,990, $1,000 less than the current base price.

# The Silverado regular cab WT will be repriced to $16,990, down $2,275 from the current base price. The Crew cab version of that truck will be repriced to $25,490, $2,500 less than the current base price.

More info here: http://gmtv.feedroom.com/iframeset.jsp?ord=556137

[cjrciadt]

Value Pricing PART2, will they stick to it this time.
Also are the new GMT900's include or excluded?

[Rayzilla]

Originally Posted by Perian

Good news for all - except your local sales tax collectors!

Imagine this: About one million GM vehicles in dealer lots and in transit to those dealers will need new price stickers!

All vehicles invoiced previous to 1/11/2006 get dealer cash of anywhere from $0 to $2,300 rather than having to be restickered. I am not sure which is worse. We could have a lot attendant re-sticker everything, but with the dealer cash we have to go looking through the invoice book and then still have to make sure that the thing is dated correctly!

GM also cut rebates. Net result is that if you were going to lease or finance through GMAC you are better off, but if you pay cash or get your own financing you may be worse off on some models. Leasing stayed almost the same and the incentivized rates are the same as they were.

Dealer margins are also cut to be more in line with other manufacturers. Since our info hasn't been updated yet I have no idea what we're talking about. Using the base Cobalt example in the article dealer profit was cut from $903 to $614 (about 1/3(?)) - exclusive of the 1-2% GM charges the dealer for group advertising costs.

Vehicles not effected:
All Cadillacs except for CTS (all), STS-V and SRX (all)
Corvette
Solstice
Some Aveo Packages
Base and GT Vibe
GMT-900's but you could already assume they're being priced accordingly

[Rayzilla]

Originally Posted by Perian

# The new base price of the 2006 Cobalt LS coupe will be $12,990 including shipping charges. That is $1,500 less than the current base price of $14,490.

Corolla: $14,005
Civic: $14,360
Focus: $13,450

Originally Posted by Perian

# The new base price of the Impala LS will be $20,990, $1,000 less than the current base price.

Camry: $18,845
Avalon: $26,625 (kind of a overlap - sorta...in a way...)
500: $22,230
Fusion: $17,145

Originally Posted by Perian

# The Silverado regular cab WT will be repriced to $16,990, down $2,275 from the current base price. The Crew cab version of that truck will be repriced to $25,490, $2,500 less than the current base price.

F-150: $18,930
Ram 1500: $20,900
Titan: $23,250 (Frontier $15,800)
Tundra: $16,155

Hitting these price points should at least make people stop and look at the GM products!

[FCoronado999]

IMHO,

This is not enough. It is like going to a jewelry store and they tell you there is a 10% off sale... but you know there is still plenty of margin. Effect = zero. I was hoping they would get serious and turn this thing around. The latest jawboning is just that, talk. This price cut was their chance for action, to get my money. The dealers were in the way of real price cuts. Magic 8 balls says "too little".

[toronado10]

Whatever works.GM should have done this after employee pricing instead of Total Value Promise. Maybe the sales would be better now.

[DuSpinnst]

I think GM has wised up and will continue to adjust MSRP based on market conditions instead of offering massive rebates.

[Rayzilla]

Originally Posted by FCoronado999

IMHO,

This is not enough. It is like going to a jewelry store and they tell you there is a 10% off sale... but you know there is still plenty of margin. Effect = zero. I was hoping they would get serious and turn this thing around. The latest jawboning is just that, talk. This price cut was their chance for action, to get my money. The dealers were in the way of real price cuts. Magic 8 balls says "too little".

Mine says "beware of cheap mooches".

The GM vehicles are now priced well below the competition and more often than not offer more standard equipment and are put together just as well if not better.

[New_Mexico_Sunset_on_Rt66]

With strong "must have" products, the pricing will take care of itself.

[steve333]

GM needs to increase the warranty at the same time.
Why are they being so ****************ed stubborn about it!
GM-Increase your warranties!

[mbukukanyau]

Gm Needs To Take Prices Where They Are And Just Hold Their Horses. No Rebates. For Two To Five Years. Let People Pay Full Price. Offer Only Low Finance Through Gmac. Not 0%
That Is The Only Way To Hold Residuals On Their Vehicles

[Cassie]

This is probably a good thing, but the impact on the bottom line of GM will be marginal at best I think.

[Geotpf]

Originally Posted by Perian

Good news for all - except your local sales tax collectors!

Imagine this: About one million GM vehicles in dealer lots and in transit to those dealers will need new price stickers!

Sales tax is charged on the price the consumer pays, not what is on the sticker. The sales tax on a vehicle with a sticker price of forty grand that sells for five grand less is the same as the sales tax on a car that has a sticker of thirty five grand and that sells for full MSRP, because the customer pays $35,000 in each case.

If GM can make this stick, it is a good thing. Right now, when you go on the internet and compare prices, GM vehicles frequently seem overpriced.

[Perian]

Originally Posted by Geotpf

Sales tax is charged on the price the consumer pays, not what is on the sticker. The sales tax on a vehicle with a sticker price of forty grand that sells for five grand less is the same as the sales tax on a car that has a sticker of thirty five grand and that sells for full MSRP, because the customer pays $35,000 in each case.

You missed my point.

In my home state (New York), all - and I mean all - incentives are taxable.

Example - My father just took home a new CTS last week. He received $5800 in cash back from GM and $3300 in GM Card points.

Thus, New York taxed him $ 785 on the $9100 he saved! Quite a rip-off IMO.

Thus - Lower incentives mean lower sales tax paid by the customer.