'Me Too' Strategy for US Car Giants

07 July 2005

Potential US car buyers now have a wealth of temptation waiting on dealers' lots.

Following the hugely successful 'employee discounts' promotion introduced by US number one automaker General Motors in June [WAMN: 05-July-5], rivals Chrysler Group and Ford Motor Company have jumped the bandwagon.

All three are now offering Joe Public 2005 models at around the same price a company employee would expect to pay.

But analysts are raising questions over the impact on other retail sectors and, particularly, on the long-term future of the auto industry.

The Detroit Big Three will be communicating a mixed message about the new deals. They want consumers to believe employee prices are the best they can expect, but at the same time they don't want investors or debt-rating agencies to get the idea they are giving away cars.

Chrysler and Ford debated long and hard about following the GM route (which has now ben extended through August 1), concerned that a one-size-fits-all discount program could undermine efforts to convince customers their products were worth the asking price.

And some dealers are unhappy at Ford's decision. They say profits will be squeezed by increased overtime for salespeople. Sales are expected to increase immediately but at the expense of future months.

And what of the main Japanese rivals in the US? So far Toyota, Honda and Nissan have shown no sign of needing to adopt similar strategies.

Data sourced from Wall Street Journal Online; additional content by WARC staff