Beginging of the end?

[Boozer]

General Motors' employee discount pricing incentive program (which ends Aug. 1, 2005) has not only dramatically jump-started sluggish sales at the world's number one automaker -- up 41 percent last month, according to company spokesmen -- it has prompted both Ford and DaimlerChrysler to offer similar deals to consumers.
All three major U.S. automakers have been selling vehicles at "in house" prices formerly available only to company employees. The discount varies from model to model, but is worth approximately 3-4 percent off the dealer invoice price of a new car, truck or SUV.
That can amount to a savings of several thousand dollars per vehicle off MSRP "sticker" -- and has helped GM, Ford and Chrysler to clear out the glut of inventory that had been accumulating on their dealers' lots.
But while these incentives programs have been great news for consumers, in the long run, they could spell disaster for the Big Three. Fire sale prices on new vehicles may move product, but don't necessarily enhance the bottom line -- especially when the import competition hasn't had to resort to radical price cuts to attract buyers into their showrooms.
GM reported record losses of $846 million earlier this year -- the largest single quarterly loss since 1992. And GM's overall market share has dropped to about 25.4 percent, a dramatic downturn. The value of GM shares has fallen through the floor to junk bond status -- vitiating nearly $13 billion in shareholder equity.
Ford has also taken a beating -- with overall sales falling for the past 13 consecutive months. Even the once big-selling Explorer SUV is slipping, with sales down substantially this year.
Chrysler has fared slightly better -- in part because of the success of new models like the well-received 300 sedan -- but there's no question times are tough in the Motor City.
It's an open question whether an incentives-based bump in sales in the short term -- even a very big bump -- translates into long-term red or black ink for America's Big Three.
Indeed, the most recent data shows GM still hemorrhaging badly -- posting second quarter losses of $318 million, or 56 cents per share. Total revenue at the company fell to $48.5 billion from $49.3 billion.
None of this is good news.
Consumers now have an idea about the true mark-up on GM, Ford and Chrysler vehicles -- and are not likely to be interested in paying anything close to MSRP once the employee discount programs end. In order to maintain sales momentum, GM has already announced it will lower the MSRPs of its vehicles -- a de facto extension of the current lowball pricing structure. But that necessarily means lower profits per vehicle for GM -- and Ford and Chrysler, if they follow suit.
This is a terrible catch-22 situation for the domestic Big Three. If the only way they can lure buyers into showrooms is by selling vehicles at a loss or at profits point so low that it doesn't cover the cost of their automotive operations it's really only a question of how long they can string things out before a crash becomes inevitable.
Like the red giant stage of a dying sun, the spectacular summer sales fireworks may just be the prelude to an ugly implosion.

[BarryMac]

Interesting, I'm wondering this now, with the flood of new cars hitting the streets due to the "Employee Pricing", are there going to be unbeatable deals on used Cars and Trucks? I was in my local GMC Dealership a couple of weeks back and they had used 2500HD's with 80K miles on them selling for nearly as much as you could drive out of the dealership with a brand new one. Are these Dealerships going to get stuck with an assload of used vehicles that they can't get rid of if they want too???

[Ziggy]

Interesting, I'm wondering this now, with the flood of new cars hitting the streets due to the "Employee Pricing", are there going to be unbeatable deals on used Cars and Trucks? I was in my local GMC Dealership a couple of weeks back and they had used 2500HD's with 80K miles on them selling for nearly as much as you could drive out of the dealership with a brand new one. Are these Dealerships going to get stuck with an assload of used vehicles that they can't get rid of if they want too???
It deminished trade values signifcantly, has an effect on used car sales privately and can hurt residual values for leases.

[ADDICTED]

So this employee discount ends today? Then would why would anyone want to purchase a new car until next time around when they can get this pricing again? It seems that they might have a bigger drop in sales?

[BarryMac]

It deminished trade values signifcantly, has an effect on used car sales privately and can hurt residual values for leases.
Hell, I may find that used Duramax at a decent price then, the prices that they were asking a few weeks ago for used was ridiculous... :notam:

[riverracerx]

I think GM is going to run the space program and the govenment is going to take over the auto business.

[SummitKarl]

and just how often do you replace those cars and trucks.
thats right you will need another new one someday, especially those GM products (sorry couldn't resist)
I would rather sell 100 units at a $1 profit then 1 unit at a $100 profit.
it costs less to make volume, and employes many more. that means more work for the employees =overtime and more money in the economy (that the employees spend) "hopefully at victoria secret" rather than big fat salary and bonus to a corp exec (that might buy 1 big house or yacht) maybe if corp greed was not so rampent in the Major players, they wouldn't require a 40% mark up in the first place.
just my thoughts on it.

[Ziggy]

A majority of the sales were for overstock of inventory that was already built Karl, not new orders. It was more of a clearing house deal.

[SummitKarl]

A majority of the sales were for overstock of inventory that was already built Karl, not new orders. It was more of a clearing house deal.
REALLY!!!!!!!!!check stock market for the last month for GM and Ford(I just did)HUMMMM!!!!! aren't quarlty earnings due out soon :idea:
but yes I certiantly can belive the overstock deal as well, slow sales for a while. and a briliant marketing ploy as well.
so maybe I should try Employee pricing on homes, wish I could but there isn't a 40% markup to start with

[Cole Trickle]

The used car values will suffer for a couple months and then balance out again.
Toyota,Honda and Nissan sell to an entire different brand of buyers.My guess is that your average Toyota/Nissan/Honda buyer purchases a new veicle every 5-10 years while GM,Ford and Dodge owners choose to upgrade every 2-5 years.
Why?
Most of the people I know that buy Japanese based cars are very conservative and are looking for reliable/safe and a car that will get them from point A to point B.They are probablly more worried about gas mileage then they are about quarter mile times or towing capacity.(Toyota and Honda know this and thats why they hold strong to there pricing guidelines and sway from offering incentives)
GM,Ford and DC know they are going to have a real hard time swaying these people away from there Accords and Camry's.I would bet that these two cars easily have the largest return customer base.
The only way for the big 3 (Getting smaller 3) to sell a product is to generate these special deals and compete against eachother in the same market place.
Brand loyalty is a thing of the past for american based companies.