Will Today be Black Monday for GM as It Dumps Discounts?

01 August 2005

Today, Monday August 1, could presage a further downturn in US domestic sales of General Motors' non-discounted models.

The globe's largest automaker today ends its highly successful 'employee-discount' program, hoping that the sex-appeal of its new 2006 model lineup will prove an even greater customer bait than lower prices.

This could be wishful thinking. Although domestic rivals Ford Motor Company and DaimlerChrysler both followed GM with their own 'employee discount' promotions, it is by no means certain they will ditch the price-cuts just yet - especially if they can steal share from the market leader.

GM spokeswoman Deborah Silverman says the company's sales rose 41% in June and have kept a similar pace through July. But the auto giant hopes to halt the rot that has eroded its bottom-line for much of 2005.

Emulating the supermarketeers' cornball claim of 'every-day low prices', GM plans to start its 2006 sales year with permanently reduced prices on many models instead of relying so heavily on incentives, Silverman said.

According to car industry researcher Autodata, GM spent an average of $4,458 (€3,675; £2,534) per vehicle on incentives in June, higher than any other US car marketer. Toyota, the world's second largest automaker, spent less than a quarter of that sum ($1,090), yet hiked US vehicle sales by 11.6%.

"When you become less reliant on incentives, it allows consumers to more effectively compare vehicles," noted GM's Silverman.

Data sourced from Washington Post Online; additional content by WARC staff