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General Motors Corp., in a move with repercussions for regional ad spending, has widely expanded the vehicle discounts it offers relatives of GM employees and retirees.

Also, for the first time, GM is offering the discounts to employees of its dealers.

The expanded discounts apply to cars already on the lot. Previously, the discounts were only available on vehicles ordered from a dealer, a GM dealer said.

The policy changes were "demanded by market conditions," said Anne Marie Sylvester, media relations manager at GM's North American Operations. GM's share of the U.S. market sank below 30% at the end of February.

The changes in discount policy -- and how such sales affect regional advertising -- have angered some GM dealers.

The new program lets GM employees, retirees and more of their relatives buy vehicles right off the lot, at dealers' cost. Dealers get 6% of manufacturer's suggested price of each vehicle sold, Ms. Sylvester said; without the discounts, dealers would get about 13%.

Although it wasn't noted in the GM memo announcing the policy change, a copy of which was obtained by Advertising Age, the auto giant also is altering how dealers' regional ad contributions are affected by the discount-employee sales, said dealers and executives close to GM.


In the past, dealers were given back the money they contributed to their ad funds on vehicles sold to GM employees, due to the limited profit margins. GM now wants the dealers to keep that money in their regional ad funds.

Detroit-area dealers are sticking to the old ad policy and trying to convince dealers in other markets with GM facilities to do the same, said an executive close to the carmaker.

"The dealers are frustrated with all GM's policy changes," the executive said. "They'd like to be able to plan their businesses."

A Pontiac-GMC dealer in metro Detroit said his group, angered by the ad change, canceled more than $1 million in local advertising.

An executive close to GM said the dealer group's ads will probably be on hiatus in April and May, but "I expect them to come back."

Ms. Sylvester said she was unaware of a policy change on ad allocations.

Dealers in markets with GM plants and other facilities are affected most by the expanded discounts. They are upset because the new program lets more buyers with GM ties "take the best merchandise from stock" and restricts their profit margins on more vehicles, said one GM dealer.

Many Detroit area dealers "are fuming" over the expanded discounts, said a Detroit GM dealer who requested anonymity. "We can't negotiate anymore [on price]. We don't like it."

In Detroit, 50% to 60% of a GM dealer's sales are typically based on employee-retiree deals, said auto expert Mary Ann Keller, managing director of research at Furman Selz.

The automaker's memo said the new program expands discounts to GM employees' brothers- and sisters-in-laws, sons- and daughters-in-law, and stepbrothers and stepsisters. Surviving spouses of deceased employees or retirees may now sponsor half- and stepsiblings of the deceased person.

Saturn and Cadillac aren't included in the discount program, according to the memo to dealers.

Regarding the expansion of discounts to dealer employees, Ms. Sylvester said they offer "a pretty good potential buying audience. Where are you going to find a more loyal base of buyers?"


GM's Saturn brand dealers ranked tops in a recent J.D. Power & Associates study of 35 car brands and dealer gross profits per vehicle. But GM's other brands all were ranked lower. Chevrolet was 11th of 35; Cadillac, 24th; Pontiac, 29th; Buick, 30th; and Oldsmobile, 33rd.

GM's expanded discount program makes sense short-term, Ms. Keller said, noting, "It's better than dumping lots of cars into rental fleets or doing the unthinkable -- putting huge incentives on your cars. Long term, the program would hurt GM's brand management efforts."

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