DETROIT (AdAge.com) -- General Motors Corp. today announced a "permanent repricing" strategy here at the North American International Auto Show, and, as expected, is lowering suggested retail prices on all 2006-model Chevrolet, Buick, GMC and most Pontiac models.
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| The price of Chevrolet's Cobalt -- which competes with Toyota's Corolla -- will drop $2,000 to $12,990 on Wednesday. Related Stories: Toyota 2005 Sales Up 10%; General Motors' Down 4% Cars Return to Popularity With Consumers as SUV Sales Slump Continues Toyota Poised to Surpass GM Japanese Automaker to Raise Production by 10% Automotive Ad Spend to Go Flat in 2006 Merrill Lynch Report Cites 'Intensifying Turmoil' Among Domestic Automakers Ford, GM See Drop in Sales Toyota, Honda See Best Novembers Ever Summer Discounts Hurt Winter Auto Sales Analysts See 15% November Sales Drop for GM, Ford Luxury Car Sales Slump Gas Prices, Iraq War Jitters, Lukewarm Stock Market Cited GM to Cut 30,000 Jobs, Close 9 Plants Troubled Automaker Reported $4.1 Billion Nine-Month Loss |
The lower sticker prices will show up tomorrow on 57 of GM's 76 models, as the auto giant tries to persuade buyers of Asian makes to compare and consider GM.
Ad blitz
In fact, Chevrolet begins a national TV blitz Jan. 11 touting it as "America's No. 1 brand. America's No. 1 value." The effort urges viewers to visit independent auto site Edmunds.com and compare Cobalt's value against Toyota's Corolla. The blitz, from Interpublic Group of Cos.' Campbell-Ewald, Warren, Mich., "will reinforce our piece value leadership," said Ed Peper, general manager of Chevrolet Division.
Edmunds.com, which hasn't advertised since 2000, saw 84 million visitors last year. GM is one of Edmunds' largest advertisers, but the site isn't changing editorial reports due to Chevrolet's ads, a spokeswoman there said.
$2,000 price drop
The suggested price of the LS coupe version of Chevrolet's small Cobalt car will drop $2,000 to $12,990, and the sticker price on Chevrolet's redone 2007-model Tahoe LS model sport utility will be $33,990, roughly $2,000 less than its predecessor.
"We are serious about getting our value and price story to the marketplace," said Mark LaNeve VP-vehicle sales, service and marketing in North America. "We'd like to raise awareness pretty quickly and we'll spend on some pretty good ad weight to do that."
GM will do "a lot less" broad, umbrella, multibrand incentives, such as last summer's employee discounts or the just-ended Red Tag Event, Mr. LaNeve said. (Interpublic's McCann Erickson, Birmingham, Mich., developed the umbrella work as part of its handling of GM's corporate account). "If you spend hundreds of millions of dollars advertising incentives, it's money not spent elsewhere. I'd be foolish to say we haven't gotten a reputation for GM brands being on sale all the time."
Peaks and valleys
Those broad incentive programs, which started after Sept. 11, 2001, to jumpstart sales, cause big peaks and valleys in monthly sales as the programs come and go, he said, noting that the new strategy "is the right way to run the business."
Saab, Saturn and Hummer aren't part of GM's pricing change because "we believe they are already priced very aggressively in the marketplace," Mr. LaNeve said. Pricing for most of Cadillac's lineup won't change, although Cadillac's SRX sport wagon will drop from a sticker of $39,900 to $36,900. Pricing for the 2007-model Escalade will be announced next week.
The pricing move, along with everything else GM is doing, including cutting white-collar staff and plant workers' health-care costs, is designed to improve the bottom line at the automaker, which lost nearly $5 billion in the North American market in the first nine months of 2005.
No boost in market share expected
The automaker doesn't expect to improve its market share, which has been on a slow decline in past decades. Over time, the pricing will help GM conquest buyers from competitors, Mr. LaNeve said, and demystify pricing for consumers.
But Jim Sanfilippo, exec VP of auto consultant AMCI, called GM's price moves "historic" and "groundbreaking," and said the cuts are dramatic. He predicted the strategy will work. "This is going to give them a jolt."
