GM Exec: "We Regret The Employee Pricing Program"

[Perian]

http://online.wsj.com/article/SB113648080470838766.html?mod=home_whats_news_us

GM Official Regrets Employee Discounting
By GINA CHON
Staff Reporter of THE WALL STREET JOURNAL
January 5, 2006 4:05 p.m.

General Motors Corp.'s top North American sales and marketing executive, Mark LaNeve, said he now regrets launching the employee-discount program that drove GM sales to record levels last summer, and doesn't plan to repeat such promotions this year.

Co., Instead, Mr. LaNeve said in a recent interview that GM will roll back prices, and try to emphasize the advantages of its new models. Mr. LaNeve declined to say how much GM would lower prices compared to Ford MotorToyota Motor Corp. and other car makers, but he said the sticker prices would be "aggressive." The first indicator of how low GM tends to go will be in the pricing for the new Chevrolet Tahoe, which will be announced next week during the Detroit auto show. The current base model has a starting price of $34,990.

"In some ways we are turning back the clock," said Mr. LaNeve, vice president for GM North American vehicle sales and marketing, in an interview just before GM's year-end holiday break. "The Japanese made their mark by making good products at a lower price. So to some extent, we are going to underprice them."

Mr. LaNeve said the employee-discount promotion, which GM began last June, was very efficient in moving vehicles. Ford and DaimlerChrysler AG's Chrysler Group soon followed with their own programs in July.

But after the program ended three months later, sales dipped and hit a low in October, when sales fell by 26%. The payback from the summer sales bonanza was compounded by high gasoline prices because of Hurricane Katrina, which drove down sales of sport-utility vehicles.

The employee-discount program also caused the Detroit auto maker to focus its advertising messages on the sales promotion, instead of highlighting product attributes and its effort to reduce base prices on certain models.

"Hindsight being 20/20, I probably wouldn't have done it," Mr. LaNeve said.

GM intends to kick off an aggressive product message in 2006 to talk about quality and value. GM plans what Mr. LaNeve describes as a "straightforward message on competitiveness, price advantages." In some cases, that will mean calling out specific competitors, like Toyota and Ford, sometimes on a model-by-model basis.

[mgescuro]

Wonderful!
Well... with 20/20 hindsight everything is clear.

Well... hopefuly 2006 will be better.

[Havasavana]

This is disgusting. Just a quick look at some GM press releases and other articles makes this latest comment silly.

May 24, 2005 from Consumer Affairs:

General Motors Corp is asking its retired executives to give away employee vehicle discounts to anyone who wants them, according to the Detroit News.

GM Press release of July 1, 2005:

“We had great results across the board in June, and our truck business was exceptionally strong,” said Mark LaNeve, GM vice president, North America Vehicle Sales, Service and Marketing. “We see this as an indication that America’s desire for trucks and SUVs is still a strong force in the marketplace. It’s really pretty simple – offer great vehicles that people want, match that with outstanding value, and you’ll get great results.”

LaNeve went on to say that the ‘GM Employee Discount for Everyone’ exceeded expectations. “We were confident that our ‘Employee Discount’ program would hit a responsive cord, but we were a little surprised by just how strong the results were, including bringing over one hundred and fifty thousand new customers into the GM family in June. This definitely moves us in the right direction as we gear up to introduce our 2006 models,” he added.

GM Press release of August 2, 2005:

"Over one million Americans drove off in a new GM car or truck in the past two months," said Mark LaNeve, GM vice president, North America Vehicle Sales, Service and Marketing. "It's proof that an excellent vehicle, offered at an easily understood, fair price is compelling to consumers. Sales results for June and July demonstrate that once they experience our products, more and more Americans come to appreciate the high quality, tremendous value and benefits of owning a GM car or truck."

GM Press release of September 1, 2005:

General Motors dealers in the United States sold 355,180 new cars and trucks in August, down 16 percent from the same month a year ago. Car sales in August declined 15 percent and truck sales were off 17 percent.

GM's August sales performance was in line with expectations following exceptionally strong sales in June and July, spurred by the highly successful GM Employee Discount for Everyone program.

"We knew August was going to be a tough month given extremely tight inventories," said Mark LaNeve, GM North America vice president, Vehicle Sales, Service and Marketing. "However, even with August sales, it's been a great summer for us, our dealers and, most importantly, our customers, who got a great deal with the GM Employee Discount Program, which hit home because of its simplicity and clarity."

That newly acquired 20/20 seems limited in how far back it goes. Have they forgotten why they did it? Have they forgotten why they continued it more than once? Did they not give any consideration to the lingering effects? I remember everybody and their brother were talking about payback. Of course the GM execs were in denial on this just as they have been on high gas prices re. SUVs.

Like a kid who can't resist pigging out on candy then complaining when it's gone and about the belly ache he has to show for it. Time for some new players on this team.

[mjd1001]

One of the major problems for GM....coming up with a long term strategy and direction for the company (by long term, I'd even take 12 months) and sticking to it.

Wasn't it in the early Fall we heard about Value pricing, then just 2 months later massive incentives hit? Now we hear they regret the big incentives that came even before those.

I get the feeling the decision makers at GM meet every monday, think they have come up with the best idea in the world...annoucing it to everyone as the 'final solution' to their problems....and then when they only give their idea 12 hours and it isn't working....try something else.

[asim]

Haha...I knew this was going to happen. I can't wait for Detriot Auto Show...I am dying to look and find out the price of a new Tahoe.

[Ming]

They may regret it now, today, but they'd do it again in a heartbeat if they thought it would help them beat their next quarterly results. Too much focus on short term gain is a problem throughout American industry -- a focus on quarterly results at GM, that is, with shareholders impatient for things like brand image and quality perception to sink in over several years, and upper management unable to point to enough successes that give them the backbone to stand up against the shareholders and do what is right for GM long term. When you're losing money and market share, you'll do anything for that short term fix. THEN they'll get around to doing things the right way. Sadly, the American buying public is not patient for GM change its schizophrenic ways of "value pricing" one day, and "red tag" sales the next. They become like me, jaded and unwilling to buy unless they feel they are getting a truly good deal for the money, like with the HHR and Solstice. 40 thousand dollar MSRPs with 10 thousand dollar rebates? Ridiculous.

[lytmup]

GM needs to stop "talking" about quality and value and "produce" it.

Unfortunately, one year isnt going to turn that around, and not having those insane promotions is really going to hurt them sales volume wise in 2006.

I am doing my part in getting a new Vette, BUT if this thing stinks quality wise like my past Camaro's did, then I am done with GM.

[Mr. Burns]

Originally Posted by Ming

They may regret it now, today, but they'd do it again in a heartbeat if they thought it would help them beat their next quarterly results. Too much focus on short term gain is a problem throughout American industry -- a focus on quarterly results at GM, that is, with shareholders impatient for things like brand image and quality perception to sink in over several years, and upper management unable to point to enough successes that give them the backbone to stand up against the shareholders and do what is right for GM long term. When you're losing money and market share, you'll do anything for that short term fix. THEN they'll get around to doing things the right way. Sadly, the American buying public is not patient for GM change its schizophrenic ways of "value pricing" one day, and "red tag" sales the next. They become like me, jaded and unwilling to buy unless they feel they are getting a truly good deal for the money, like with the HHR and Solstice. 40 thousand dollar MSRPs with 10 thousand dollar rebates? Ridiculous.

exactly. Its always been the short term. analysing toyota, we see that most of their success is due to their long term achievements, wether its their trusted name plates (corolla, camry etc...) or their reputation. All have been achieved through a long period of time. GM is exactly the opposite. They basically have no reputation and no trusted name plates due to constant name changing. The japanese had to ride out the difficulties while they obtained their long term goals. the camry hadnt sold so well in the first year of intro for example, they didnt change its name.

same goes for incentives, now people expect GM to offer discounts, but GM has to ride it out and not give in. Sales will slow, but eventually consumers will come to realize that the deal they've been looking for wont be found in GM dealerships. The upsides are grand, better resale values, and more profits.

GM now has the vehicles that can sell at full sticker, people might not expect to pay that much now, but eventually they will, right after they drive that lucerne.

[SobeSVT]

It was pretty obvious that this would be how this whole irresponsible program was going to end. I remember though how I was crushed in this very forum when I said that this was a horrible idea and that was going to end bad.

I feel vindicated. Still sucks, though.

[steve333]

In all fairness to them they have to give huge rebates to clear out the 2006 Tahoe Models. Everyone wants the new model.

[hudson32]

Originally Posted by mgescuro

Wonderful!
Well... with 20/20 hindsight everything is clear.

Well... hopefuly 2006 will be better.

Hey the good thing is that a top GM executive is straightforward in admitting a mistake. That attitude is what I hope pervades GM. Not everyone is as talented as LaNeve(just look at Cadillac) and Lutz, but if GM can face reality about this incentive stuff and all other misses, then can GM turn around some of its fortunes.

[Globalist]

Originally Posted by hudson32

Hey the good thing is that a top GM executive is straightforward in admitting a mistake. That attitude is what I hope pervades GM. Not everyone is as talented as LaNeve(just look at Cadillac) and Lutz, but if GM can face reality about this incentive stuff and all other misses, then can GM turn around some of its fortunes.

One week tactical and one week strategic. It's a tactic to confuse customers, competitiors and themselves :-)

Seriously, it looks like GM is trying to be more strategic (long-term) but like in any de-intoxication, it's okay to fail sometimes.

[LAMRONH]

Originally Posted by mjd1001

One of the major problems for GM....coming up with a long term strategy and direction for the company (by long term, I'd even take 12 months) and sticking to it.

Wasn't it in the early Fall we heard about Value pricing, then just 2 months later massive incentives hit? Now we hear they regret the big incentives that came even before those.

I get the feeling the decision makers at GM meet every monday, think they have come up with the best idea in the world...annoucing it to everyone as the 'final solution' to their problems....and then when they only give their idea 12 hours and it isn't working....try something else.

Yeah, long term in GMspeak is one quarter. In Tototaland and Hondaworld it's five to ten years. One other major problem at General Van Winkle's house is these execs don't know when the hell to shut their high octane motorized yapps.
"Better to remain silent and be thought a fool than open your mouth and remove all doubt." --Abraham Lincoln

[Elk]

Same stuff they said before Red Tag.

[Mikkoo]

Originally Posted by LAMRONH

Yeah, long term in GMspeak is one quarter. In Tototaland and Hondaworld it's five to ten years. One other major problem at General Van Winkle's house is these execs don't know when the hell to shut their high octane motorized yapps.
"Better to remain silent and be thought a fool than open your mouth and remove all doubt." --Abraham Lincoln

Precisely, domestic mfg's are quite short-sighted and don't think long term. Perhaps one aspect is that there worried about stockholders. And looking at how low the stock has sunk recently makes the exec's panic even more.
That said, lets hope LeNeve's remarks are a change in GM's stance and they'll stick with this plan.