By on September 29, 2009

Anyone ready for another Zombie Watch?

The big blockbuster, peanut-butter-approach programs like zero-percent financing and employee discounts for everyone have all been done before

GM spokesman John McDonald in a Bloomberg story on the industry-wide drop in incentives and rising transaction prices. What about Truck Month? Surely we can all agree that has been “done before.”  And though the Detroit automakers have eased incentives by about 25 percent from their March peak, at $3,278 this August, they’re still higher than the industry-average of $2,474. And the brief respite from incentive-redlining could be ending soon. With inventories depleted by Cash For Clunkers, GM is adding shifts in hopes of increasing production by 20 percent in the fourth quarter. Throwing more cars into a clunker-hangover sales environment could be just the thing to bring incentives and “peanut-butter-approach programs” (can anyone explain that pejorative?) back in a big way. But don’t call it a comeback: they never really left.

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12 Comments on “Quote Of The Day: There Are Incentives And Then There Are Incentives Edition...”


  • avatar
    panzerfaust

    “I got nothin” pt II

  • avatar
    segfault

    They’re adding shifts in hopes of a second C4C program to sell the inventory.

    Time for New GM Bankruptcy Watch…

  • avatar
    gslippy

    I’m tellin’ ya, no-haggle pricing is the way to go. One price, no gimmicks, rebates, incentives, or funny money, and then deal only on trade-in values.

  • avatar
    CyCarConsulting

    If production reaches a glut level again, look for the rebates, and all the give away programs. With the dealers lean on inventory, GM could ease back into it very methodically, without devaluing the product once again.

  • avatar
    porschespeed

    The more things change, the more they stay the same…

  • avatar
    Dimwit

    The biggest problem that both Chryco and GM have is that they’ve been reduced to the dogs. These things won’t sell unless you practically give them away. Most will be dumped into fleets. Weird option pkgs and less than popular colours on slow selling models.

    What they will produce are the most popular models with the best option group. I’m sure that the plan is to have these move quick and provide cashflow.

  • avatar
    mikey

    Third shifts added,2400 people get recalled. Sounds like good news to me.

    In the car production world you don’t add a shift to fill a short term gap,when OT will do the trick.

  • avatar
    FreedMike

    We seem to be assuming that incentives are a bad thing here. Are they?

    Frankly, I can’t think of an industry that doesn’t give deals when sales are slow.

    Would a switch to one-price, no sales gimmick pricing work for a brand? Saturn tried it, and it worked until its cars got so stale that no one wanted them anymore.

    Maybe there’s an opening here for someone, though I’d guess it’d have to be a niche brand like Subaru or VW. The GMs, Toyotas and Fords of the world won’t stop the rebate gravy train any time soon.

  • avatar
    ronin

    The need to offer incentives is a tacit understanding that their prices are too high for the market.

    If their prices were not too high they wouldn’t need taxpayer bailouts, whether in the form of direct payments (oh, sorry, “loans”), seizing capital from bondholders, or not-cash for clunkers bailouts.

    Their too-high prices are being propped up by one gimmick or another, so that the taxpayer overpays not only when buying the product, but in paying taxes and taking on debt for his kids and grandkids.

    And I should feel bad when they have to offer their meager incentives, little changed in actual value over the last decade, while their MSRP prices are rising, several times over the last year, and again as I type?

  • avatar
    Happy_Endings

    We seem to be assuming that incentives are a bad thing here. Are they?

    Incentives aren’t bad, if they’re manageable. GM’s average incentives are $3,278. The average new car price is $26,300. Add that three grand back in and GM’s incentives are over 11% of the price of the car. That isn’t manageable.

  • avatar
    KixStart

    Maybe there’s another dimension to incentives… they can be used as a “down payment” in many cases. The finance company doesn’t write a loan for more than the “price” of the car and everybody’s satisfied and the books look OK but, in reality, it’s a low-quality loan and the buyer is fully upside down.

    Too many low-quality loans will wreck a company.

    Incentives may be the only way that certain consumers can afford a new car and perhaps help create an unsustainable market.

  • avatar
    KixStart

    CyCarConsulting: “With the dealers lean on inventory, GM could ease back into it very methodically, without devaluing the product once again.”

    Are the dealers “lean on inventory?” The Camry outsells the Malibu by at least 2 to 1 (3 to 1 during August C4C Madness), yet Malibus, for example, in local inventories seem to outnumber Camrys by 1.5 to 1.


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