By on January 8, 2010
But who saves the savior? (courtesy:mtforums)

When someone pays tax, they generally like to think it’s going to towards something that will benefit society. Maybe it might be a repaired road? Or funding towards a crumbling school? I doubt they would want the money to go towards shifting a supposed CamCord killer or an alleged 3 series rival, but that’s what’s going to happen. BusinessWeek reports that executives at “New” General Motors are going to cut prices and rework adverts to boost flagging sales of the Chevrolet Malibu and the Cadillac CTS; two saloons considered critical to meeting Ed Whitacre’s target of a profitable 2010. That’s right, “New” GM are going to cut prices (A.K.A “Cash on hood”) to make more sales. Sound familiar?

GM’s North American president, Mark Reuss, are hoping that these plans will reduce the excess inventory at dealerships. Inventories were at five months’ supply, more than twice the industry average. “The CTS is going to be fixed, now,” said Mark Reuss. “We’re going to be right on the back of that working on Malibu. We’ve got to have Malibu selling a lot more than we do right now. We’re looking at what we should be doing with the car versus where we’re at.”. Steve Shannon, executive director of marketing at Cadillac said that CTS prices were cut by as much as $3000.

Business Week also reports that 3 people, familiar with Ed Whitacre’s plans, say that one of his criterion is to maintain U.S market share at 20%. However, the 3 people asked not to be named because the plans are not public. The GM CEO and Chairman wasn’t commenting on his plans. So much for transparency at GM.

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27 Comments on “GM Cutting Prices, Upping Ad Spend For Once-Hot Malibu, CTS...”


  • avatar
    jmo

    I think the key is that it’s a price cut rather than “Cash on hood”.

    As I understand it, and I could be wrong, “resale value” is calculated as the difference between MSRP and used prices.*  So, for example, if I bought a new $53k 09 Mercedes E350 with $10k on the hood and sold it the next day for 43k  the numbers would show that I lost 10k.  In reality I lost nothing.

    It doesn’t make any sense for GM to claim to sell a Malibu for $25k when no Malibu ever left the lot without 3k on the hood.  Better to just sell it for $22k and not take the hit when the resale value numbers come out.

    * Can anyone confirm that the resale value number are so calculated?

    • 0 avatar
      ajla

      +1.
       
      I like this idea as long as the price cut is paired with an equal killing in incentive amounts. Hopefully this means fewer limited-time only “toe tag” sales too.

      Extending the price cut to the trucks and SUVs (which seem to always have big incentives) would be something else I’d look into.

  • avatar
    lahru

    The Malibu is a good car and does’nt need cash on the hood to be saleable if these were normal times. But when your back is against the wall and you need to move the iron, you revert to the only tactic you know and kick the can of higher profits down the road. What Whitacre said was show a profit. Oh, I am sure that they can do that,  all the while ignoring the debt load they are responsible for. They need to get to a point where they have a profit every quarter that shows investors that they can do both pay a dividend and service the debt they have. That is, many quarters, if ever, many months and years away. Hey, how is that Volt thing coming, God knows they have spent plenty on that boondoggle. Lets start a pool on that FAIL moment!

    • 0 avatar
      jpcavanaugh

      The Malibu is a good car and does’nt need cash on the hood to be saleable if these were normal times.

      The problem with your argument is that the Fusion is selling in much higher numbers with lower incentives.  The Malibu is a great car by GM standards, but it is, in fact, not selling in the numbers that it needs to.  This is proof that either the car is somehow lacking in comparison with the competition, or is priced too high for what it is, or both. 
      Personally, I don’t care that much for the looks of the car in real  life.  It is gorgeous from the side, but add a nondescript rear, a butt-ugly front and a narrow body that messes up the proportions, and you have a car that is almost there but not quite.  Gotta have quite a product to compete in this league, and the Malibu is close, but no cigar.

    • 0 avatar
      golden2husky

      The Malibu is class competitive but it is not class leading.  So, let’s say that for 2011 the new Malibu was in fact class leading.  Would that make a significant difference in sales?  I’m not so sure, at least for several years at the earliest.  The car has a lot of baggage to overcome.  Figuring all the problems of GM past, many buyers simply won’t give the car a chance.  Before beating the “perception gap is 100 percent crap” drum, this car doesn’t even get looked at by much of its intended audience, so even it it became the best, many wouldn’t even know.  For many, the only recent memory of GM was paying for failed intake gaskets and rotted brake lines.  Well then, how come the Fusion seems to be doing so much better, you might ask.  My response would be that one, Ford seems to has shaken a lot of the baggage of past transgressions, certainly much better than GM has.  Two, a lot of people are angry about the bailout bullcrap.  Three, Ford gets plenty of nice red dots in Consumers, which is the source for all those who know nothing about automobiles, or statistical analysis for that matter.  For this group, its red dot or nothing, even if the red dot of yesteryear would be hard pressed to be average today.

    • 0 avatar
      rudiger

      The answer is pretty easy. For decades, GM has operated under the axiom “There’s a sucker born every minute” so all they had to do was build vehicles that were just good enough for the suckers.

      The problem GM never saw coming was the pool of suckers has diminished considerably to the point there just aren’t enough of them left (or being born) to sustain the company, anymore. Too many buyers reading Consumers and not buying soley on the standard, flashy GM ad campaigns.

      If only GM could buy those red dots.

  • avatar

    cutting prices to raise profits??? Geeze Louise!!!!

  • avatar
    mjz

    Mark Reuss is right. GM should be selling two to three times the current number of Malibus, especially when the number of Camcords sold is taken into account.

    My suggestion: cut the current prices $1-2,000. Introduce a new base “S’ model, no chrome window trim, 16″ wheels, price it at $19,999 with destination included. Add a sportier “RS” trim line too. 18″ wheels, spoiler, black-out trim, priced about $21-22,000.

  • avatar
    Geo. Levecque

    Its no wonder  sales are in the Tank, did everyone see the recent unemployment figures that came out today in both Canada and the USA, get real folks the Recession is still with us, despite what the Lord who runs General Motors thinks eh!

  • avatar
    Juniper

    Transparency?
    Cammy, do you expect GM to show the world their business plan? (Save the smart ass comments.)
    Plus, Robert already wore out the transparency thing. Originality is appreciated.

    • 0 avatar
      Cammy Corrigan

      When Carlos Ghosn turned Renault around he showed the world his 20 billion French Franc plan. When he then turned Nissan around, he announced his plans via a Tokyo conference. Sergio Marchionne has been feeding to the press what he plans to do with Chrysler. Alan Mullaly, when he first joined Ford, announced his business plan, proudly, of cutting brands and having a “one Ford” vision.
       
      So, yes, if I was an American taxpayer, I’d expect the CEO to give me some idea of where he’s going with the company.

    • 0 avatar
      Steven02

      Cammy,
      I don’t see how saying that other companies are doing it, GM should too means anything.  Besides, the plans laid out by all of these people are pretty vague.  Say, GM said it wants to have global platforms in 7 years?  Most people wouldn’t be happy with that as they think the problem should be fixed much sooner.  Well, that is actually what Alan Mullaly said 5 months after he started at Ford.  For the record, Ed has been at GM for 7 months.  GM’s position isn’t nearly as simply as Ford’s was either.  GM already had a plan going forward before Ed got there.  GM have been bankrupt and decided to cut brands (similar to what Mullaly was doing on the cutting brands side).  But, as a share holder, you are not entitled to a plan at all.
      Do you own 401k, an IRA, mutual fund, or any other type of company stock?  Do you get reports about the business plan?  The answer is that you don’t, and you are not entitled to one.  You may get an indication that a new product is going to be helpful, maybe some guidance on EPS, growth numbers, etc etc.  GM does happen to announce new products, so you do a bit of information here and there.  But you never really get a large plan.  Plus, I really don’t think that putting out a press release for Whitacre’s plan would be helpful.  It could probably be put into 3 words, make a profit.
       
      Besides, GM has been open with some information it didn’t have to be.  It reported earnings (in its case a loss) one its first quarter.  Many higher ranked members of GM have been having web chats.  Which actually, is pretty much what was promised here.
      http://www.thetruthaboutcars.com/henderson-promises-transparency-web-chat/
      I don’t think the TTAC staff would be happy with any level of transparency.

  • avatar
    carm

    I have test driven the CTS twice, the old version and the new one.  Liked them both, wanted to give the USA a chance to swing me towards buying American.   Yet, when I looked at the sticker, compared the resale values, I just couldn’t justify buying one over the BMW.  54K for a CTS is a lot of money.  Dropping prices, should help.

    • 0 avatar
      AccAzda

      WOAH 54g for a CTS?!

      This is a car that runs with a 3 series for about 34-36.. and you say a CTS is 54?

      For that money ya could pick up a M45…  or a nice G35 and really enjoy yaself.

      54g for a CTS.. SERIOUSLY?!

    • 0 avatar
      ajla

      The CTS starts at $35K and can go up to $56K. So you can do a $54K CTS, but it would take decent amount of option ticking.
       
      For comparison, the 3-series sedan starts at about $33K and can get up to $60K. That means someone can actually buy a 335i xDrive costing $5K more than an M3 sedan.

  • avatar
    rnc

    Contrast this with Ford which is cutting incentives and raising prices (saw somewhere that b/t the two Ford’s average selling price is $2k higher than last year).

    But then again when you remove $70 billion from your liabilities you free up the obligation to cover those liabilities with proceeds from sales, so therefore they probably can cut prices and make money (would imagine that those cuts will be strategically focused on a few new vehicles).

  • avatar
    bigbadbill

    Yeh, I don’t see very many Malibus around my area of the country (southwest Florida). Too bad, a nice car (except for that silly 4 cylinder Ecotec option) I almost bought one but that 20 + grand purchase price scared me so I opted for a used car instead…a mint 2003 Oldsmobile Intrigue with that sweet Shortstar V6.  Saving more than $18,000 in this economy was a smart move, IMHO.

  • avatar
    Jimal

    I’ve always thought the current Malibu was a bit over priced. The CTS not so much, but then again Chevrolet is supposed to be the volume “value” brand. I like the Malibu and am looking at the ones coming off lease our out of the fleets now (even with the automatic) but when I look at them new the asking price is just too high.

  • avatar
    rudiger

    A good example of how GM bunged-up New Malibu pricing in typical GM fashion was the Malibu Hybrid. When it first came out, it was around $1800 more than a comparable equipped, non-hybrid Malibu. With the tax-credit, it brought the hybrid premium down to around $500. Granted, the Malibu Hybrid didn’t achieve extraordinary fuel mileage gains over the non-hybrid versions, but it was definitely worth a measely extra $500. That’s about the price of a useless rear spoiler these days.

    Alas, just when it looked like GM might sell a few of them, they quickly upped the price by at least another grand or two. Suddenly, the Malibu Hybrid wasn’t such a great deal. Not many people were buying them, anyway, so, when GM upped the price to ridiculous levels, no one bought them and the Malibu Hybrid was summarily cancelled.

    Now, Ford has the universally praised Fusion Hybrid. I don’t know what the price premium/fuel mileage gains are so might I suggest a TTAC comparison of the two to see just where GM went wrong with the Malibu Hybrid? Frankly, I don’t think there was much of anything wrong with it other than GM’s greed.

  • avatar
    mtr2car1

    to me, the CTS has always been stuck in the middle on size and price btw the 3 and 5 series – you don’t get much for your 40K and your asking yourself “why bother” when you get the stuff and its 53K.

    The Malibu needs a name change – you’ve got no name credibility vs. Accord/Cam/Altima/Fusion/6.  It could be 50 times better than the rest but to me it’s name says old.

  • avatar

    I too looked at the CTS and frankly was a little sticker shocked for what you got. I was at the car show and was able to do a lot of comparing and it really fell short. Though great exterior aesthetically IMO. 

  • avatar
    acentre

    Why would I purchase a Chevy Malibu, when I purchase an Accord ex-l for $23,500 last May. The Malibu has to be priced way below a Honda or Toyota product. The Malibu may be a good car, but the brand perception and resale value are against it.

  • avatar
    tomLU86

    The Malibu is great car, but not the unquestioned leader in all areas.  With the record unemployment, cutting the prices a little won’t help sales very much, cutting them more will anger those who already bought one.   I’d rather have a Malibu than a Ford Fusion, but the Ford is benefitting from the perception that Ford is better, and from those who resent the “bail-out” and won’t buy GM.

    Here’s a thought–take the Malibu and offer something no one else does in the family sedan class in the US.  A station wagon would work;  and/or a 4-cyl, 5 speed, with sporty seats (like the optional Recaros on the 2005-06 Cobalt SS), priced under $20,000.

    Would they steal more sales from other GM cars (Malibu/LaCrosse) or Camcord/Fusion?  Can’t tell.  The econo-sporty 5-speed Malibu would cost some money for minor plant tooling, maybe a hole in the floorpan for the clutch line—a ‘lean’ GM could put this in production in 3-months, typically GM might be more like six–would that be soon enough?

    The wagon should’ve been planned for but wasn’t–that would be expensive and complicated–need to design ($$$$), modify the body shop ($$$$), and general assembly ($).   GM saved a few $ upfront, but what do you do now, when you’re trying to sell a great car in a recession?

    Or, they can have a committee, shuffle the numbers around and hope potential customers perceive they will save money, and hope the economy picks up.  Sadly, that’s probably what will happen…the key word is hope….

    • 0 avatar
      BuzzDog

      Good idea, but would it really be all that difficult to add a wagon?

      Opel already builds a wagon on the same platform, although there is the expense of additional tooling for the U.S. plants, and in meeting safety regulations and such.

      Then again, GM’s reluctance to add a wagon may arise from a perception that the Equinox fills this role.

    • 0 avatar
      Steven02

      I am thinking that it is too late to put a Malibu wagon in for the current model.  For the next model, I think it is possible.  But I believe the EPII is too close for the Malibu and that making a wagon now won’t make a difference because it would need to be redone.


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