Big Discount on GM Cars

legion · 06-02-2005, 06:29 AM

http://news.yahoo.com/s/ap/gm_discount;_ylt=AjiDo3tmPmfZVr0bpfpcoqus0NUE;_ylu =X3oDMTA2bm5xNHVjBHNlYwNtcA--

I wonder if this kind of behaviour will condition car buyers to wait for big sales. I recall Marshall Fields killing its profitability a decade ago when it started having several big sales a year--consumers started waiting for the sales and stopped buying during non-sales periods.

lendaddy · 06-02-2005, 07:09 AM

GM is in the throws of death. They are now a finance company (and a good one at that BTW!) but the car making side....the body is dead the head just doesn't know it.

They will likely absorb ownership in foreign Korean/Chinese auto mfgs. and market them here as GM products in the future. They simply will NOT be able to sell their current junk at the prices they need much longer.

The are simply too big and stupid to survive.

Talk to some GM employees once. I mean the guys that work the floor. They have an angst toward their own product and company now, there is little/no pride anymore. They cut a fat hog in the ass for decades and they realize the ship is sinking now. Most actually mock their own product!

Talk to old management, the guys that have been there for decades, they say it too. The are fleeing to retirement like roaches in the the daylight.

It's over grover, it just may take 10-20 years to be official. I wouldn't surprised if we lost GM sooner, but it would be by choice then as they do have azzloads of cash (from the finance side).

The model just doesn't work anymore due to competition. It makes about as much sense as expecting American made PC's to be competative soon

, see what I mean.

Besides, what is GMs selling point? Quality? Style? Performance? Please.

legion · 06-02-2005, 07:15 AM

Quote:

Originally posted by lendaddy
Besides, what is GMs selling point? Quality? Style? Performance? Please.

Price. It was before this.

I bought a new Grand Am in 2000. Why? Because it was $5,000 less than a comparable Honda Accord...this was at a time when GM was not giving any discounts, special financing, or any other incentives.

lendaddy · 06-02-2005, 07:22 AM

Quote:

Originally posted by legion
Price. It was before this.

I bought a new Grand Am in 2000. Why? Because it was $5,000 less than a comparable Honda Accord...this was at a time when GM was not giving any discounts, special financing, or any other incentives.

Ahhh, fair enough. But at those prices they lose money making them. They are trying to make it up on the finance side. It's a shell game, it will fold.
Also, hold on to your azz when the next generation of Korean cars hit the shores. They are going to be GOOD! High quality and CHEAP! Look at the new Scion stuff for a preview.

legion · 06-02-2005, 07:28 AM

I am still holding out hope that GM's current state will force some real reforms at the company. I have a lot of respect for them. After all, they haven't tried to dump their pensions, but have consistently acted to make them more sound. They should leave the low-margin, high-volume cars to the Koreans as they have a cost advantage there.

I'm not a fan of nationalized health care, but most of the companies that GM competes with are based in countries that have this. This gives those companies a subsidy in effect. I remember reading that GM's health care costs (for current employees and its army of retirees) amounts to something like $1,500 per vehicle they produce.

lendaddy · 06-02-2005, 07:37 AM

Quote:

Originally posted by legion
I am still holding out hope that GM's current state will force some real reforms at the company. I have a lot of respect for them. After all, they haven't tried to dump their pensions, but have consistently acted to make them more sound. They should leave the low-margin, high-volume cars to the Koreans as they have a cost advantage there.

I'm not a fan of nationalized health care, but most of the companies that GM competes with are based in countries that have this. This gives those companies a subsidy in effect. I remember reading that GM's health care costs (for current employees and its army of retirees) amounts to something like $1,500 per vehicle they produce.

Yep, good points especially on the health-care. This is why I know it's a losing battle. Once the Dems AND the Corps want the same thing it's over. But I assure you it will not change the dynamic, it's just a band aid. I am in the business and would like nothing better than a robust car making America again. It just isn't going to happen, we screwed it up too much already.

You really need to tour a plant sometime, you will almost want to cry at how incredibly inefficient and wasteful they are. And the red tape, it's insane! The line leaders take great happiness in shutting down a line on a technicality (this rewards them with overtime later). Then they play cards till the white collars whitewash the situation. I'm not making this stuff up, talk to these guys.

Now how can that crap possibly compete, with or without pensions. Oh, and how bad do you think employee moral will get when they lose pensions and or have to use health-care programs designed for the masses rather than the gold plated versions they are use to? It's gonna be bad my friend, real bad.

KNS · 06-02-2005, 07:54 AM

GM is in trouble. Read 'The End of Detroit'. The Big Three and even the Japanese are worried about the Koreans. When Hyundai first came here I remember laughing at the workmanship. Now I am pretty impressed by what I have seen so far of the new Sonata. The latest Accord and Camry are so ...blahh. The new Sonata is a pretty nice looking and well equipped car and should be a real threat to the Japanese.

BlueSkyJaunte · 06-02-2005, 08:17 AM

One thing and one thing only is killing the US auto industry.

The UAW.

stevepaa · 06-02-2005, 08:17 AM

socall911sc hit the nail on the head. My father and his brother buy Caddies, once about every five years, but they are both in their 80's. Not too many sales left.

The last American car we bought was a 1987 Buick Century wagon which really did not stand up as we expected. In 1992 we were ready for a new one, except they had not made any improvements except to downgrade the engine. We bought a Volvo for maybe $6k more. We just gave it to a neighbor for his kid's college car. Thirteen years old, 288K miles and still looks no more than a year old and runs like new still.

GM is in trouble and I hope it does not spill over to GMAC.

stevepaa · 06-02-2005, 08:19 AM

Blaming the UAW is just too simplistic.

GM priced their product low and delivered poor quality and poor product.

BlueSkyJaunte · 06-02-2005, 08:29 AM

When you've seen how the whole corporation works from the inside (I have many friends and relatives who work(ed) at GM on the floor, in engineering, and in management) and you see how the union philosophy permeates everything from manufacturing inefficiency, to poor product testing, to enormous healthcare and pension obligations, you come to understand how the UAW really is at fault.

They are in the process of strangling the hand that feeds them.

As for your statement "GM priced their product low and delivered poor quality and poor product", that isn't "simplistic"??? WTF?

stevepaa · 08:37 AM

connection troubles

stevepaa · 06-02-2005, 08:36 AM

Well your second post explains it better. But what union philsophy are you talking about.

My first post explained my dealings with GM which substantiate low price with poor product.

skipdup · 06-02-2005, 08:36 AM

Quote:

Originally posted by legion
... GM's health care costs (for current employees and its army of retirees) amounts to something like $1,500 per vehicle they produce.

I thought I saw it was over $2,000 per car.

What good is their fantastic health care going to do when they're all out of jobs?

- Skip

stevepaa · 08:46 AM

Is the demise of old corps not to be expected in a capitalist society? How is this different than United, etc, or any older commercial corp with an aged local workforce. Competition from a company with younger/cheaper/foreign workforce will kill any older company.

lendaddy · 06-02-2005, 08:54 AM

Yep, the union mentality spreads like a cancer in the behemoths. Workers, then shifts, then lines, then plants.......begin to only care about themselves and focus on "what can we get or get-away-with", instead of building a better company. The union workers don't see themselves as part of a team making great cars, the union teaches them to milk the cow. Well, Bessie's empty.

It's painfully obvious to those that work with it daily. It's basically done for, it's rotting from the inside out and you can't fix that. The fact that the workers have no pride in their product anymore is the surest sign. I spoke with a high up a few weeks ago and he was mocking the new light trucks, mocking them!

lendaddy · 06-02-2005, 08:58 AM

Quote:

Originally posted by stevepaa
Is the demise of old corps not to be expected in a capitalist society? How is this different than United, etc, or any older commercial corp with an aged local workforce. Competition from a company with younger/cheaper/foreign workforce will kill any older company.

At lunch I was thinking this (scary I know) A totally new American car company. No unions, not top heavy, excited, bold and proud. It would kick ass!

Problem is the unions would spaz. They would shut down shipping, parts, equipment, etc... Basically do their part to make America great again, you know

kaisen · 09:09 AM

Quote:

Besides, what is GMs selling point? Quality? Style? Performance? Please.

Well, GM and Ford have OWNED the large SUV and full-size truck markets. They still do, and will for the short term. The Tundra and Titan (and SUV's based on them) will make only a small dent.

However, those segments are sinking like boulders, while small cars are super hot. GM has no hot small cars, and they haven't for a long time. GM has been too busy focusing on their bread and butter: trucks.

GMs quality has been getting better and better, but their reputation still suffers. Style is subjective, but there are some GM designs I rather like. Performance may be relative, but I don't think they are at a disadvantage in the marketplace.

I personally believe that the SUV craze is coming to an end. Cars, and wagons, are cool again. The smaller crossover utes fill what most people need out of an SUV. Most SUV's were bought by people who really didn't NEED one that big. They're readjusting now. Fuel prices may have been the catalyst, but the natural cycle was coming anyway.

As for GM's new 'Employee Pricing' campaign.... it's not going to be that big a deal. Almost no one pays sticker anyway, most pay near invoice. The difference from invoice to GMS (employee pricing) is about 4.5%.

Example: 2005 Suburban LT (loaded)
$50760 MSRP
$45143 Invoice
$42972 GMS

If you were good, and paid invoice before and took the $4500 rebate that was out there in May, you would have paid $40643.

Now, you don't have to negotiate, pay GMS $42972 less $3000 rebate and net $39972.

It's a better deal by $671 and you don't have to negotiate. Big deal? On a $50K Sub, maybe.

Now take a 2005 Chev Malibu LS:
$22005 MSRP
$20505 Invoice
$19618 GMS

There was a $2500 rebate, now it's $2000. So you're $387 ahead.

I think the only traction the program will get is because you don't have to negotiate to see the real transaction price. Compare to a Honda/Toyota where the real transaction price may be MSRP, it will look very attractive.

Dealers will be pissed because they are the ones settling on a set margin (GM pays the dealer x% of invoice for profit). Dealers will also be pissed that GM just took all their leverage away to get rid of distressed inventory. That ugly pink one is the exact same $$ as the hot gray one. The hotter inventory may fly off, but the pooch inventory will still sit.

GM will suffer for a few years. GMAC looks robust, but if Mr. K spins it off, it will die without the porfolio strength and depth of all those captive new-car sales. It was just accounting.... do you credit the front end (sales) or the back end (finance). GM felt it was better to give it to GMAC. The subvention for all that 0% was just charged like a cash incentive would have. GMAC still 'saw' market rates on their books. GM's car division paid for the difference.

Sorry for the ramble....

E

lendaddy · 06-02-2005, 09:15 AM

Good perspective kaisen,

GM does have the new Cobalt line of small vehicles. They are quite excited about that.

Style wise, I see VERY little from GM. But that's subjective. And you are very correct that the accounting can perk whichever division they like, but the fact remains it costs GM far more than the others to make an actual vehicle, even if not upside down.

Now trucks! The last great safe haven! Say goodnight Chet. I was a GM truck guy huge until this year. I bought a Tundra, and it is a FAR better vehicle, and they are still learning full size trucks! Again it's my subjective opinion, but I think it's only going to get worse.

Now American car quality may be on the rise, but the truck quality is sinking (common denominator anyone). Again this is my opinion, but we've had several. They are no where near as "robust" as they once were.

Purrybonker · 06-02-2005, 09:17 AM

Quote:

Originally posted by lendaddy
GM is in the throws of death. They are now a finance company (and a good one at that BTW!) but the car making side....the body is dead the head just doesn't know it.

Many retail sectors have or are migrating to that business model these days. The actual product is just a vehicle (no pun intended) to facilitate a financing scheme. Sears is a great example; they target to run their retail business at a break-even and to take profit on the card business. Been doing it for years.

The money changers may never make it into heaven (so says the bible somewhere), but consumers are so hooked on instant gratification that those meek finance boys will almost certainly inherit the earth...