Do GM's On-Off Incentives Help Or Hurt?
Speaking at the New York Auto Show today, GM CEO Dan Akerson defended his inconsistent approach to sales incentives, telling the AP [via The Washington Examiner]
I feel pretty good about that. I think we’re in pretty good shape. I don’t want to be a predictable competitor. I don’t want the other guy to know exactly what I’m doing.
For some context,
GM surprised the industry — and Wall Street — when it raised discounts by $400 per vehicle in January and February. Most automakers didn’t raise them because demand for new vehicles has been rising in line with supply…
GM pulled back on its incentives in March, spending $600 to $800 per vehicle less on the deals. But it was too late for some investors, who shied away from the company’s stock because higher rebates lower car companies’ profits.
But does Akerson’s upside, the element of surprise, outweigh the downsides of his hot-cold incentive strategy?
Automotive News [sub] provided evidence that GM’s incentive strategy might not be ideal earlier this month, when it reported
After a blowout February, Buick-GMC dealer Tim Dunne came down to earth last month. Sales at his New Jersey store cooled from 73 new vehicles in February to 59 in March.
The main reason: General Motors ended a loyalty cash incentive and lease pull-ahead deal that had been wildly popular with customers.
“It was kind of sobering to come off that quickly from those incentives,” said Dunne, dealer principal at T&T Coast Buick-GMC in Sea Girt, N.J.
GM’s response, via sales VP Don Johnson:
We’re very sensitive to making sure that the dealers aren’t on and off the gas too much. You’d like it to be a smooth acceleration and/or deceleration. I think we’ve done a pretty good job of that.
With sales up overall, GM’s dealers (90% of whom are profitable) could have it worse, but the complaint echoes through GM’s history. TTAC has deep archives of dealer complaints about GM’s confusing, inconvenient incentives systems. Akerson’s ability to make virtue of a vice is new, but otherwise it seem that GM still has work to do to make its incentives more effective.
More by Edward Niedermeyer
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same goes for employees, retirees, dealers, salespeople, and suppliers. but like good old Marek Fuchs says “at GM, they just don’t get it”.
I keep telling you, wait until the quarterly profits keep rolling in through out the year. There really is a different cost structure and, if you recall from Ed Niedermeyer's recent post, GM's incentives do not look nearly so high when compared to average transaction prices. They just command higher prices to start with. That is a great position to be in from a business perspective. Akerson credits 100,000 additional GM cars sold in the first quarter to the incentives . That is 50% more volume than VW-Audi group's entire sales and about the same as Kia, the fifth largest import brand. I have to agree with concerns about customer impressions, but the relatively small bump in incentives certainly paid off with profitable business.