GM Plans 'Red Tag' Sale

Blowout Comes on Heels of October Sales Plunge

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LOS ANGELES ( -- After failed attempts to wean consumers off incentives and faced with a precipitous sales slide, General Motors Corp. is turning to an old formula: another blowout sale.

The world's biggest automaker yesterday began a promotion offering "Red Tag Event" year-end discounts on most 2005 and 2006 Buick, Chevrolet, GMC and Pontiac cars and trucks through Jan. 3.

Mark LaNeve, GM VP-North America vehicles sales, service and marketing, said the promotion combines features of last summer's "GM Employee Discount for Everyone" promotion and last December's "Red Tag" program. A national ad campaign including network TV, print in the top 50 markets, radio and interactive began Nov. 13.

As with the employee-discount promotion, GM's Red Tag prices will be the same across the country. And as with last December's sale, dealers are labeling each vehicle with a promotional price taking into account rebates. GM is listing Red Tag prices on its Web site.

GM launched the promotion after its U.S. sales in October plunged 23% from the same period the prior year; Red Tag also comes at a time when its stock is at a 13-year low.

Latest sign of trouble
The promotion is the latest sign of trouble with GM's highly touted "Total Value Promise" marketing program. As part of that program, GM slashed suggested retail prices for many 2006 models, betting that a lower sticker price would help it move consumers off rebates and put the transaction price closer to the sticker price.

But GM's 2006 launch ran into two problems: The summer employee-discount promotion generated record sales but essentially stole volume from the fall, and then high gas prices blew a hole in sales of GM' s profitable but gas-guzzling trucks. GM U.S. truck sales plunged 30% last month, vs. a 12% decline in car sales.

So GM is now packaging existing rebates and new discounts into the Red Tag promotion.

Discounts are big, especially for trucks. The company already had cut the list price of a GMC Yukon sport utility from $37,255 in 2005 to $35,680 in '06, and then it offered a $3,500 rebate expiring Jan. 3. The truck now carries a Red Tag price of $28,550.49, a discount of $7,129.51 or 20%. A Pontiac G6 V-6 sedan carries a Red Tag price of $17,561.68, more than $3,000 off its '06 list price. (The discount includes an existing $1,500-$2,000 rebate.)

GM's new promotion is simple for consumers -- but not as simple as the employee discount plan offered last summer on nearly every GM car and light truck. The Red Tag deal excludes Cadillac, Hummer, Saab and Saturn, which are staging year-end programs with different offers. Cadillac and Saab offer $500 cash rebates; Saturn is giving $500 Target gift cards; Hummer is running "Holiday Attractions," including discounts on a rear entertainment system.

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