GM swerves, revives March discounts Despite its strategy to limit rebates, automaker adds bonuses to clear out slow-moving inventory.
Brett Clanton / The Detroit News About the deals * GM is expected to offer additional discounts on select models that have gone unsold for several months. * GM is offering between $150 and $700 in cash incentives to dealers who have agreed to take delivery of extra vehicles during the last week of February. The offer is available on select Chevrolet, Hummer, GMC and Cadillac models. Dealers can use the cash as a negotiating tool. DETROIT -- General Motors Corp. has told dealers it will launch a nationwide discount promotion next month that could spark sales but detract from its long-term goal of steering away from big incentives. The "March Madness" event, tied to the NCAA men's basketball tournament, will run from March 15 to April 4. It will be similar to a promotion GM ran last March that included temporarily lowered sticker prices on select models across GM's eight brands and cash bonuses of $500 to $1,500 on models that had been on dealer lots for more than 125 days. While details of the new program have not been announced, internal GM documents obtained by The Detroit News indicate the promotion will kick off with a mass mailing to current and former GM customers early next month, offer customers a chance to win a 2007 Chevrolet Tahoe SUV and give dealers incentives to clear out older inventory. Under a separate program, GM is offering between $150 and $700 in cash incentives to dealers who accept extra vehicles during the last week of February, according to another internal GM memo obtained by The News. In an apparent bid to boost sales before the month closes, GM is making the offer on select models by its Chevrolet, Hummer, GMC and Cadillac brands. GM and other automakers are scheduled to report February sales on Wednesday. The programs could be viewed as a step backward for GM, which in January announced a sweeping effort to move away from profit-eating incentives by cutting the price of most of its vehicles to reflect what consumers actually pay for them. GM clarifies its plan GM never intended to drop incentives altogether, company spokesman Deborah Silverman said. Rather, it is trying to use them in a "more targeted fashion" than in the past. "We'll continue to look at opportunities where they give us a competitive advantage," she said. Silverman would not discuss the March Madness program, but said the automaker was not planning to announce any new incentive programs on Wednesday. GM may not need a new discount program now as much as it has previously. Although the automaker saw sales decline 4.4 percent last year, it increased sales in January and is expected to be up again or flat in February. "Early reports show that consumers have been attracted by GM's lower prices, helping the company to gain market share from Ford and Chrysler," Merrill Lynch analyst John Murphy said in a recent report. Vehicle stockpiles shrink With just over 1 million vehicles on dealer lots at the end of January, GM's stockpiles are smaller than a year ago. And the automaker has cleared out most 2005 model-year vehicles. That means there could be less of a need to pare down inventories with steep discounts. "There are no '05s out there," said John Rogin, who owns GM dealerships in Michigan and Ohio. "It's a non-issue within GM right now." Yet a new incentive program, backed by national and local advertising, could shine a light on GM products as customers get in the mood to shop for vehicles after months of winter. And a tie-in with the NCAA tournament is in keeping with the automaker's strategy of aligning itself with premier sporting events such as the Olympics and Super Bowl. Rogin had not heard details of GM's March Madness program, but said it is common for manufacturers to roll out new incentives in the spring. GM, which lost $8.6 billion in 2005, has made a priority of returning its North American auto business to profitability. Central to the effort is the launch of 19 new cars and trucks this year, including a new lineup of full-size SUVs, the Pontiac G6 convertible and its first mass-market gas-electric hybrid, the Saturn VUE Green Line. After earlier announcing it will cut 30,000 U.S. hourly jobs by 2008, GM in January said it would lower the sticker prices of 57 models by $1,300 on average. GM said the move was mainly designed to put the focus back on its product and move away from making discounts the centerpiece of promotions. Jesse Toprak, an industry analyst with Edmunds.com in Santa Monica, Calif., said GM has managed to stay with the plan so far, tweaking rebates only in highly competitive categories such as full-size SUVs. "Last month, they really stuck to it," Toprak said. GM can't break the habit In January, GM dealers sold vehicles at an average of 15 percent off sticker price, down from 20 percent a year ago, he said. And they have reduced incentive spending in recent months. But GM is still far from breaking the habit. Last month, the automaker's incentive spending was second only to Chrysler, at $3,177 per vehicle on average, and was about three times what Toyota Motor Corp. used to lure buyers, according to Autodata Corp. The March Madness program is likely to find GM shelling out again to get the attention of consumers. And it is likely to bring a few headaches to dealers. Dealers get extra work Like GM's Red Tag clearance sale in December, the March Madness program requires dealers to append an extra sticker price onto each vehicle that is eligible for the discount. Then, there are signs that go up in the showroom and hundreds of pamphlets to mail to customers. "The administration of incentives can be a nightmare," Rogin said. "In a perfect world, we'd love not to have them." You can reach Brett Clanton at (313) 222-2612 or [EMAIL PROTECTED]
