Promotion Jump-Starts GM Sales
General Motors Corp. said Friday that its employee-discount-for-everyone promotion boosted its U.S. vehicle sales in June by 47%, its best month in 19 years and wiping out what had been a year-to-date decline.
GM’s year-over-year gains came primarily at the expense of Ford Motor Co. and DaimlerChrysler, analysts said. Chrysler Group responded with an employee-discount-for-all program of its own starting Tuesday, but Ford -- which posted its best month of 2005 -- is holding the line on prices.
Asian car manufacturers also reported robust sales in June. Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co. all posted their best June sales periods ever in the United States, and South Korea’s Hyundai Motor Co. said June was its best month on record.
But it was GM that made the biggest splash with its best month since September 1986. The company sold 558,092 cars and trucks in June, giving it a market share of 32.8% for the month. The increase brings the year-to-date total for GM, the world’s biggest automaker, to 2.4 million vehicles, a 2.5% gain from the same year-earlier period. Through May, GM’s sales were running 6.7% behind year-earlier levels.
Sales of trucks, the company’s most profitable vehicles, jumped 69% in June to a record. The Chevrolet Silverado full-size pickup led the industry as its sales more than doubled.
GM also experienced “healthy growth” in its luxury segment of Cadillac, Hummer and Saab, said Paul Ballew, GM’s market analyst. He said the company would announce next week whether it would continue the discount program, which began June 1 and is scheduled to end Tuesday.
“They have a market share of over 30% for the first time in ages,” said analyst Craig Hutson of Gimme Credit. “I wouldn’t be surprised if they run it through the summer.”
GM said the program cost the company little because dealers picked up some of the average $400 to $500 discount per car. Further savings came from a reduction in auto leasing, which has a higher cost to the company, as many motorists chose to buy instead of lease.
“It was a marvelous smoke-and-mirrors marketing accomplishment,” said analyst David Healy of Burnham Securities Inc. “You’ve got to hand it to them. But there will be payback.”
Healy was among critics who said that the run on GM cars in June probably would be offset by lower sales in the second half of the year.
Other analysts and GM dealers said the program could lead to long-term success at bringing in customers who wouldn’t have otherwise considered GM products.
“We had Land Rovers, Acuras, Toyotas, Fords, Lexuses, Mercedes and BMWs” traded in last month, said dealer GM dealer Bob Bakshi of Valencia. Sales were up more than 100% to 220 units at his Parkway Motors compared with June a year ago.
“Incentives in the past have been impressive, but this has a very simple message that got through to customers,” he said.
Doubling its sales in June was Motor City Auto Center in Bakersfield, which sold 55 GM vehicles Thursday alone, General Manager John Pitre said. He called the program “a perfect way of re-pricing the ‘05s to make the transition to ’06. We hope GM uses this type of incentive again from time to time.”
Pitre likened the program to the “Keep America Rolling” promotion of 2001, which offered interest-free financing to attract consumers after the Sept. 11 terrorist attacks and helped dealers clear inventory. It also eliminated the negotiations that many buyers find unbearable.
Ford said its domestic sales rose 0.7% in June to 288,523 cars and trucks, leaving its six-month sales 4.3% below year-earlier levels despite hits such as the retooled Mustang and growing sales of its so-called crossover vehicles such as the Ford Freestyle.
The nation’s No. 2 automaker said that June sales of the Ford, Lincoln and Mercury brand cars rose 7.7%, helped by the Mustang and Ford Five Hundred sedan, but that truck sales fell 7.3%.
Ford’s top sales analyst, George Pipas, said the company considered matching GM’s discount at the beginning of June but decided to stick with its strategy of offering $1,000 to employees who persuade friends and relatives to buy a Ford. That deal runs through Sept. 30.
Daimler Chrysler sold 238,309 vehicles in the U.S. in June, a 5.1% increase, giving a 3.8% increase year to date.
Among the Asian carmakers, Nissan’s June sales in the U.S. rose 18.8%; Toyota, 14.4%; Honda, 8.9%; and Hyundai, 4.1%.
Domestic manufacturers have improved their products enough in recent years to compete in quality with imports, said Dave Cole, director of the Center for Automotive Research, based in Ann Arbor, Mich. However, they still are saddled with “legacy” costs such as employee pension payments that add thousands of dollars to the cost of a vehicle.
With questions about future gas prices and availability roiling the industry, it’s hard to predict whether sales gains will continue. “The market is a very turbulent place right now,” Cole said, “and we don’t think that’s going to change anytime soon.”
Shares of General Motors, which will post its second-quarter results July 20, gained 65 cents Friday to $34.65, Ford rose 7 cents to $10.31 and DaimlerChrysler fell 3 cents to $40.48.
*
Times wire services were used in compiling this report.
*
(BEGIN TEXT OF INFOBOX)
Hitting the gas
General Motors’ gains in June came mainly at the expense of its American competitors. Asian brands had robust sales too.
U.S. sales increase by leading automakers in June
GM: 47%
Nissan: 18.8%
Toyota: 14.4%
Honda: 8.9%
DaimlerChrysler: 5.1%
Hyundai: 4.1%
Ford: 0.7%
*
Source: Autodata
