Auto makers continue employee-discount incentives

CNY Business Journal (1996+), Aug 05, 2005 by Duffett, Claire

FULTON - General Motors Corp. (GM) has extended its "Employee Discount for Everyone" promotion into a third month despite some dealers lacking inventory.

The promotion was extended for the second time on Aug. 1, the day it was due to expire, and is now scheduled to conclude Sept. 6.

GM launched the discount plan on June 1, and extended it first on July 5. On the same day, Ford Motor Co. and DaimlerChrysler AG announced they would match their rival by launching similar campaigns allowing consumers to buy vehicles at employee prices.

This time, it was GM following its rivals. On Aug. 1, GM announced the extension of the employee-discount promotion after Ford announced its "Ford Family Plan" would continue until Sept. 6 and Chrysler said its "Employee Pricing Plus" would continue indefinitely. The GM announcement was a reversal of its earlier decision to end the promotion and replace it with a combination of lower prices and added features on various models.

"It made the most sense to finish the 2005 model year with the same program, rather than having to reeducate the consumer on new pricing," says Wesley Morrison, general sales manager for Laqua's 481 Pontiac, Buick, and GMC Truck Center, LLC, in Fulton.

Morrison has about 55 vehicles left to sell, he says. In July, Laqua's sold about 51 automobiles, down from 60 in June, he says. But 2005 was still his best year of sales for the month of July, up from about 35 in 2004, he adds.

Waning inventory is making it more difficult to continue the sales surge, Morrison says.

The employee-discount promotion would have been most effective if GM had limited it to the month of June, says Randy Palmer, general sales manager for Nye Automotive in Oneida.

"Right now, I have 14 [GM automobiles] on the grounds," Palmer said in a July 28 interview, before GM decided to extend the incentive into a third month. "The push in June cleared out a lot of inventory."

GM sales in July were up 19 percent over July 2004 levels, a drop from the dramatic 41-percent increase from June 2004 to June 2005, according to wireservice reports.

Sales of GM automobiles at Nye Pontiac-GMC increased 40 percent in June from May, but diminished in July, Palmer says. Although July sales started out strong, they slowed at the end of the month, due to diminishing inventory of 2005 models, Palmer says.

When the promotion concludes, GM will probably have to lower pricing on 2006 models; it just will no longer be under the employeepricing paradigm, dealers say.

"With all these deals, consumers are in the mode to buy when there is a sale of some sort," Palmer says.

The Big Three automakers are taking a gamble by extending the promotions, which cut thousands of dollars off sticker prices, in order to gain market share. The cost to buyers is often less than the dealer invoice, and the manufacturers subsidize the difference for dealerships, which varies on a percentage basis depending on the model and cost of the automobile, Morrison says.

Morrison is not worried about selling Laqua's remaining 2005 models, but he is eager to move about 100 late-model trade-ins he acquired as a result of the promotion.

"Selection and quality for someone in the market for a late-model vehicle is the best it's ever been," Morrison says. "[The GM promotion] lured people to trade in a few years earlier than usual."