The Daily Reckoning on GM
Wal-Mart reports negligible sales growth while
General Motors reports harrowing sales decline. The
automaker's sales plummeted more than 12% in June, despite
a dazzling array "incentive" programs... could it be that
the consumer is simply tapped out?
- "Fortunately for GM, July is a new month," Automotive
News hopefully observes. Unfortunately, GM's incentives
have become so lavish that sales won't necessarily mean
profits. "This is getting good," a successful hedge fund
manager told your New York editor yesterday. "GM will
rebate you $250 if you DON'T buy one of their cars (but
'test-drive' it)! You can't make this stuff up! Oh yeah,
also, you get $5,000 back if you're a returning customer.
Sort of makes you wonder about the value of GM's 'brand.'"
- We also wonder why most of GM's creativity seems to
reside in its marketing department. Why not redeploy this
talent into the automotive design department?
- "In the past few months, the fertile minds at GM have
presented three never-before-used types of rebates to the
buying public," Automotive News reports. "All three have
been noteworthy; all three have been expensive. For
example, if you test drive a GM vehicle but buy a
competitor's vehicle, GM pays you $250. It makes you wonder
whether GM will run out of money before its marketing
experts run out of ideas."
- Technically, the automotive behemoth is already out of
money, at least if one includes its mega-billion dollar
pension liability. But those are problems for another day.
In the here and now, GM has enough cash sloshing around to
fritter away billions at a time. But fear not, based on
GM's current rate of profit, the automaker will satisfy its
pension liabilities a few years before the global oil
supply runs out.
- Time will tell if GM's groundbreaking incentive programs
are also bank-breaking.
- "The first of GM's current innovations was the payment of
$250 to anyone who test drives a GM car or truck and then
purchases a non-GM brand," Automotive News reports. "That
sounds like an open invitation to steal from GM. Drive a GM
model that you have no intention of buying and pick up $250
to help with the down payment on the Ford or Toyota or
Chrysler of your choice. Paying rebates on the other guy's
merchandise is definitely a first in automotive marketing.
- "Next came a round of huge bonuses to owners of GM
vehicles who buy another GM model," Automotive News
continues. "OK, loyalty payments aren't new, but $5,000
loyalty bonuses certainly are. That is the amount GM paid
in June to buyers of 29 car and truck nameplates.
- Coming soon: Cash rebates on tech stock purchases? |
