Huge discounts pay off for Ford, Chrysler, GM

July sales rise 35% at Ford, 30% at DaimlerChrysler, 20% at GM. No wonder all three say they'll keep the employee-price discounts another month.

With employee-discount plans pulling buyers into Big 3 showrooms in numbers not seen in years, General Motors (GM, news, msgs), Ford (F, news, msgs) and DaimlerChrysler (DCX, news, msgs) on Tuesday extended the blockbuster promotion.

Sales numbers for July announced Tuesday showed the reason: Ford reported its sales rose 35% over July 2004, and it set a modern record for the highest monthly sales of a single nameplate by moving 127,000 of its F-150 pickups, up 64%. It was the first sales increase in 13 months for Ford.

DaimlerChrysler reported a 30% surge, and its stock hit a 52-week high on the New York Stock Exchange.

GM saw a 20% increase in July sales. In June, when it had the employee-discount boon all to itself, its sales rose 41%.

The employee discount programs essentially eliminate haggling at the dealership by offering the public the discounted price – below invoice – that company employees receive.

GM on Monday had said it would not renew the employee-discount promotion it pioneered, instead lowering sticker prices. Tuesday, the company reversed course to match its rivals in extending the programs. All of the plans had been set to expire Monday.

Import brands soared in July as well. Nissan (NSANF, news, msgs) saw sales rise nearly 20% year over year; Toyota (TM, news, msgs) reported a 12% increase. Neither offered an employee-discount plan.

All figures are adjusted for an extra selling day in 2004.

For 2005, discounts; for 2006, cheaper stickers
The official strategy at both GM and Ford remains weaning buyers off mega-incentives. According to research firm Autodata Corp., GM spent an average of $4,458 per vehicle on incentives in June, higher than any other automaker.

GM is lowering the prices on 30 of its 76 models and adding features to other models to make them more competitive. Under the new pricing strategy, the base price of the Chevrolet Malibu, for example, is $17,990, or $1,835 below the 2005 model, while the base price of the Saturn Ion sedan is $12,490, or $2,455 lower than the 2005 model.

 

Sure, the Big 3 are making money off of this employee dscount thing, but the value of our trucks are decreasing faster than ever. If I can go buy a new F250 Powerstroke brand new for $30,000, why would I buy your used one for $25,000? This is what's happeneing to the used car market and its why the Hondas and Toyotas hold their value so well!

How about this idea...design and build solid, reliable vehicles and stop offering so many discounts. That way, we can buy these cars and be sure that they will hold their value better. The Big 3 have stepped up their reliability a lot. A little tweaking and attention to detail in design and the Japanese won't flush the Big 3 out!!!

 

How bout this idea instead, start getting real - no justifyable reason that any pickup truck made should sticker for half the cost of a smaller site built home. In 10 years time the house will have appreciated about 40% over it's original value based on current nationwide real estate trends. In that same 10 years time, your 50,000.00 truck is just a piece of junk that no one wants.

I'd say it's a much better idea to bring prices down, you won't worry so much about retained value if your buying for cheap to begin with. These things are NOT investments. Maybe this way some of the higher end trucks will become more affordable to the masses, and will be purchased for something other than being a status symbol.

 

I bought my Z71 for the same price my dad spent on his huge home on a 1/4 acre. Home values appreciate and car values depreciate. It is a buyers market in both homes and cars - always buy NEW in a buyers market!

Start a small business so you can depreciate the losses on your business taxes.

 

Thats good they are selling better. About the whole retain the value mess , i really could care less I buy a vehicle because I like it not because it retains its value. A Honda or Toyota would make want to kill myself if i had to drive them anyways lol. You dont start a business or do anything just to take it off your taxes, thats why we really really need a flat income tax rate anyways!

 

You my friend need to read about the section 179 as applied to full size trucks.

 

I wasn't implying by any means that cars are investments by any stretch of the imagination. I just remain appalled that my Explorer depreciates faster than I can pay it off...and I bought it used for under Blue Book value!!!

 

Toyota's cars hold their value longer because they have better quality vehicles than any domestic car. This is for cars, trucks and SUVs are completely different story.
I think if price of gas go down (which probably won't happen anytime soon), Ford, GM and Chrysler's trucks and SUVs will be awesome sellers again, no doubt about that. The main reason why sales of trucks and SUVs went down (before family plan) was because of gas prices, not because of Japanese competition (Titan, Tundra, Ridgeline and similar vehicles are not competition at all).

 

Well if gas prices are affecting truck sales you sure wouldnt know it. Between the Big 3 they have sold like 500,000 trucks in the last two months. Whew thats a lot of trucks. That means a ton of used. Might be the time to look at a used one.

 

That's because they had (and still have) huge discounts. How many trucks did they sold in 2 months before they started giving discounts?

 

My friend who's a sales manager at a Ford dealer is worried, big time. They've quit selling to folks that don't have a quality trade or don't finance with them, not making a lot of money off them. Their inventory is way down, area dealerships aren't too keen on making trades, and the incoming inventory is small.

Basically, he's really worried that:

1. This is a bubble because of the employee pricing. Once that's done, there will be a stretch of 2-6 months where sales are WAY off.

2. Even if sales don't plummet, inventories are so low they don't have enough in the area to keep up with demand for a time.....possibly pushing some people to imports

Both he and my neighbor (who has sold cars for a local GMC dealership for 20 years) really didn't like this across the board discount. Both say their dealerships were doing fine before this, and this discount pricing has and will hurt them in the future.

kh