Incentive Wars

[Honda Owner]

GM spent $4227 in tax dollars for every car it sold in October, buying itself a 4% sales increase. Even with this level of corporate welfare, it was still not profitable. It lost money on every car it "sold." This, ladies and germs, is being financed, with interest, with deficit  spending. One day you will see your pay packet shrink for it

Honda spent $508 per car and turned a profit. Not one cent was from taxpayers.

Eventually this government funded welfare for multi-millionaires will have to end, but the question is when?

http://www.edmunds.com/help/about/press/159666/article.html

http://www.thetruthaboutcars.com/gm-wins-the-incentive-race-in-october/comment-page-1/#comment-1559438

[TopGun]

 

Do you think that selling trucks in this downturn impacted incentives?

Do you think shutting down Pontiac, selling Hummer, Saturn had any impact on incentives?

[safristi]

...let the INVECTIVE WARS BEGIN............................ hey it's discounted popcorn from a theatre near U........ ...

[articsteve]

GM spent $4227 in tax dollars for every car it sold in October, buying itself a 4% sales increase.

That is excluding advertising which is funded by a special bailout account.

For anyone that watches the NFL or the entire MLB World Series it WAS and still IS impossible not to see at least 10 Howie Long/Malibu/Traverse commercials per game.  Honestly, I would say closer to 20 and boy are they stupid.  All of them either compare a Honda, Toyota, or a Honda lawn mower, which every house owner knows is the longest running lawn mover in existence.

And then GM uses this "sales success" as the reason to keep OPEL. 

GM has married themselves to 0%60 permanently.  There is no escape from it now.  PPL will simple walk out of the showroom if it's not offered.  Same with the Silverado; no $8000 on the hood = no sale.

[Honda Owner]

Do you think shutting down Pontiac, selling Hummer, Saturn had any impact on incentives?

I'd wager it did. It would allow the incentives that were targeted on the shut down divisions can be channeled into the surviving divisions. Either way, this type of corporate welfare is tantamount to subsidising a company that made an enormous amount of bad decisions at the expense of companies that made good decisions. So much for accountability.

[tpl]

This argument makes my brain hurt.   If a car manufacturer has to offer large amounts of money to persuade you to buy their cars then to me that suggests they have no confidence in the essential goodness of their cars and a sensible man would avoid buying one. No ?   Now I can and do understand the discounts to clear out last years models  but not huge discounts to sell in the middle of the buying season ( whenever that is nowadays)

[articsteve]

You might be able to cast accountability aside if there was a future, but for the sheer size of GM they have little to offer.  None of their vehicles are "out standing" compared to the competition.  They are OK, that's it, only with a hefty incentive.  Malibu and Impala not due for redos until 2013     How is GM gonna walk the walk for 3 years in that category.  All it's sub compacts are Daewoos.  

They have got rid of every small town dealer that ever existed.  7 have been shut in a 40 km radius of Owen Sound in the last 3 years.  Sure they were often 1 or 2 car show rooms, but they still moved product to the locals whose primary concern was LOCAL service.  Now ppl gotta drive into the OS or whatever where guess who is waiting:  Toyota, Honda, Hyundai, VW et al.  Stupidest thing they could have done.  GM actually thought ppl would drive out of their home range for a GM.

[Honda Owner]

I posted this for a reason. Really, GM is on zombie watch. The corporate culture is so fundamentally flawed that they cannot survive without huge corporate welfare. Eventually this will stop and we, the taxpayers, are going to be left holding the bag. Will Maximum Bob suffer? Not one bit. The same mob of fools are still in charge.

[drederick]

This may be the thread that takes the cake! articsteve AND artic honda owner one upping themselves - I LOVE IT!

[Careener]

Maybe their cars are just overpriced before the incentives?

[tpl]

Maybe their cars are just overpriced before the incentives?

Maybe that is it.    The market for new cars is  not a pure and efficient market by any means but even so you'd think that they would sell cars at a profit.   If some cars cannot be sold at a profit ( and I mean  a real profit after advertising expense etc.) then why not stop making those cars and make different ones that people will buy at a price that is profitable.

it would be interesting so see what would happen to all the auto/light truck manufacturers competing in NA if all cars were sold at MSRP for a couple of years( This would require all tradeins/2nd hand cars  to be bought/sold at, for instance, a standard black book price)
Theoretically the Big 3 should be profitable but more interesting would be to see which car brands/models would just no longer sell.


Another way would be to have a  "floor price" for cars  like Ontario has for beer... no car sold for less than, say, $20,000.   That would be interesting to watch... should rid the land of new Aveos within minutes.  Don't think it would work tho'

[Honda Owner]

GM's pricing structure is indeed unusual. When they release a new model, they attach a high price to it, hoping the buzz of a new intro will generate impulse sales. When these sales wane, there are drastic price cuts, usually in the form of incentives. This has the unwanted effect of reducing the value of the vehicles bought by the original purchasers.

Problem is that customers have become savvy to this and won't buy a GM car unless it is drastically discounted, meaning GM loses even more per unit than it originally intended. Keep in mind that GM loses money on each and every car they move. Only corporate welfare keeps them afloat.

[rrocket]

I had commented about the profitability of GM cars in a couple of threads last week.  One was about cost per unit (GMs selling for more than competitors).  The other was about GM increasing their sales vs. last years/quarter.  In both case I said "so what" because neither of those numbers matter if GM isn't making any money on those sales.  Well here's the proof. If you are losing money on every car sale, it doesn't matter how many or how much you sell them for.

I won't take the high road and instead I'll be a smug a$$hole and say "I told you so."    

[Patate]

GM spent $4227 in tax dollars for every car it sold in October, buying itself a 4% sales increase. Even with this level of corporate welfare, it was still not profitable. It lost money on every car it "sold." This, ladies and germs, is being financed, with interest, with deficit  spending. One day you will see your pay packet shrink for it

Eventually this government funded welfare for multi-millionaires will have to end, but the question is when?

ITT: Trolls Feeding Trolls. 

[rrocket]

GM spent $4227 in tax dollars for every car it sold in October, buying itself a 4% sales increase. Even with this level of corporate welfare, it was still not profitable. It lost money on every car it "sold." This, ladies and germs, is being financed, with interest, with deficit  spending. One day you will see your pay packet shrink for it

Eventually this government funded welfare for multi-millionaires will have to end, but the question is when?

ITT: Trolls Feeding Trolls. 

I'm curious...where do you think all of this bail-out money came from if you don't think tax-payers will be footing the bill eventually?

[toolatecrew]

Its department store advertising. Like the Bay with Jewelry. They have a 40% off "Sale" that seems to run 50 weeks a year.

Its not all their fault. The media continues to publish SALES numbers as if they are the be all and end all. In doing so it supports GMs idiotic methodology. Volume is not the goal here. Profit is. If the Media starts publishing a figure like average profit per vehicle in additon to volume it would rapidly become apparent who is doing the right thing and who is doing the wrong thing.

Its been GMs MO forever. Build them and they will come. Even if it means giving them away to fleets. Everything is about volume and its just sad.

[Honda Owner]

Its been GMs MO forever. Build them and they will come.

True. GM works on a "push" system. The company decides how many cars it needs to build and then pushes them on the dealers. It is then up to the dealers to sell them. If the metal does not move, then the dealer gets a visit from the zone rep who then reads the riot act. Salesmen are fired to scare  the remaining ones. Then a "bonus" programme is announced to encourage the others to sell. When left over inventory is on the lot, it is then fleeted at below cost, GM will eat the losses. Unfortunately, as we have seen over the last few years, this model does not work anymore and neither is GM changing it. In GM's 1960s business model, product does not matter, it is all about how well you market it. See their ad campaigns these days? A perfect example of this.

The Japanese makers work on a pull system. The dealers see the annual offerings and order cars. If said dealer is short of cars, he or she is SOL and can try dealer trades.

Its not all their fault. The media continues to publish SALES numbers as if they are the be all and end all

It is not just the media. GM also sees sales as the be all and end all and it has since the 1930s. Problem is they have been losing money on every single car they have built for years but they continue to grasp at the notion that more volume and better marketing will save the day. It has not and I doubt it will again. The only profitable car marker in the world right now is Honda and its volumes are fractions of the big boys like Toyota and VW.

The recession is over in the USA now. Mid term elections are coming in the USA a year from now. Obama would be committing political suicide to shovel more corporate welfare at GM. They are on their own very soon. Will they survive? Depends whether their slappies can get out and buy cars, especially the expensive ones.

[articsteve]

 

I will add that the US consumer is still SOL and the boys at GM are obviously listening only to their own eXonomists when they say that domestic vehicle demand will start to rebound in 2010.

Nearly half of the nation's 52 million mortgage borrowers will have negative equity by the end of the first quarter of 2011, up from the 14 million at the end of this year's first quarter, according to estimates in an Aug. 5 report by Deutsche Bank. With so many borrowers "underwater" -- or owing more on their mortgages than their homes are worth -- the risk is high that they'll default and their homes will go into foreclosure, says Mark Zandi, the chief economist at Moody's Economy.com. (Moody's Economy.com estimates that 17.5 million mortgage borrowers will be underwater by early 2010.)

[safristi]

....Artic..ya got room in yer basement.....not underwater eh!!!............. ...i'm quiet,don't smell and the "visiting" girls are NON SCREAMERS.................i pay with AIR SMILES.......or  PRESIDENT OBAMA"S POINTS..............

[TopGun]

....
None of their vehicles are "out standing" compared to the competition.
....

The king of rubbish statements...you've reached a new low...congrats.

I'll make the statement that no Toyota vehicles are "outstanding" compared to the competition.  Of course, you'll label that a bunch of crap and want ME to back-up my statement with proof from 8 sources...none of which you provide of course.