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GM Brings Back Employee-Pricing Strategy

Automaker Looks to Discount Tactic to Boost Slumping Vehicle Sales, Clear Inventory

By Published on .

DETROIT (AdAge.com) -- With America's new-car market in the dumps, General Motors Corp. returned to one of its former strategies to try to goose sales.
GM's '100th Anniversary Sales Event' covers virtually all 2008 models across all eight of its vehicle brands as well as some 2009 models like the Cadillac CTS.
GM's '100th Anniversary Sales Event' covers virtually all 2008 models across all eight of its vehicle brands as well as some 2009 models like the Cadillac CTS.

The automaker is bringing back "employee discounts" this week that will continue through Sept. 2, calling the limited-time offer its "100th Anniversary Sales Event" as a prelude to its centennial celebration next month. The deals, which refer to consumers receiving a GM employee's discount on car purchases, cover virtually all 2008 models across all eight of its vehicle brands plus some 2009 models: the Chevrolet Cobalt and HHR, Pontiac Vibe and G5, and the Cadillac CTS.

GM is backing the program with an integrated ad campaign from Interpublic Group of Cos.' McCann Erickson, Birmingham, Mich.

It worked before
The automaker first tried the employee-pricing tactic in June 2005. The results were so outstanding that month that GM extended the program through the summer and dragged Ford Motor Co. and Chrysler into the fray with copycat programs. But in January 2006, GM's Mark LaNeve, VP-vehicle sales, service and marketing, announced a repricing strategy that generally lowered sticker prices. At the time, he said the massive, multibrand sales campaigns hurt GM by pulling ahead sales, while generating deep sales drops in months with no deals. Within months, the marketer called that program a success.

But U.S. gas prices, housing woes and the current economic climate have slammed the industry this year. GM said its new U.S. vehicle sales dropped by 17.7% through July to 1.822 million units compared with the same year-ago period.

Charlie Hughes, president of consultant BrandRules, said "GM is going backwards" by bringing back employee discounts for all. "It tells the world they are desperate," he said. Plus, Mr. Hughes added, it can hurt models that have been selling well, such as the redone Chevrolet Malibu sedan and second-generation Cadillac CTS. The auto giant "is going to undo all the good it did" building the Chevrolet and Cadillac brands on the strength of those two model launches.

"GM had no choice but to offer something as aggressive as this because market conditions are so severe," Jesse Toprak, exec director-industry analysis for auto site Edmunds.com, told Advertising Age.

Higher incentives
He said GM needs to clear out its entire 2008 inventory to make way for the '09 models. He expects the deals to result in higher incentives for GM, which averaged $4,063 per vehicle in July, or how much consumers could expect to get off the retail price. That number is hovering near the average of $4,152 per vehicle the marketer had when it first introduced employee pricing in June 2005.

Many consumers have been postponing their new-vehicle purchases for months, and GM's new deals might be the tipping point, Mr. Toprak said. He predicted the sale won't be as effective as it was three years ago, and said Ford's similar program this year didn't generate outstanding results.

"One of the mistakes GM learned in the past was prolonging these deals too long," he said. "If GM is smart, they will keep this one short."
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