View Full Version : Car Sales Up



Patrick
07-05-2005, 05:13 PM
Now is the time to buy a car, while the car makers are offering everyone employee discounts. Seems like it's boosted car sales.

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"Ford matches GM discounts, ups price war By Tom Brown
6 minutes ago



DETROIT (Reuters) - Ford Motor Co. (NYSE:F - news), bowing to pressure from General Motors Corp. (NYSE:GM - news) and hoping to end a long losing streak, said on Tuesday it was matching the big consumer incentives program that delivered blockbuster sales for GM last month.

Ford announced its new marketing campaign just hours after GM said it was extending its "Employee Discount for Everyone" deals through Aug. 1.

The Chrysler arm of DaimlerChrysler (NYSE:DCX - news) (DCXGn.DE) is expected on Wednesday to also match the GM program, as it too responds to marketplace pressures brought on by the world's largest automaker.

The GM move was widely expected and set the stage for another intensification of Detroit's long-running price war. Under the program, which was launched last month and due to expire July 5, GM is selling anybody a 2005 model car or truck at the same low price that GM employees pay.

Ford spokesman David Reuter said the "Ford Family Plan" -- which takes effect on Wednesday and will also run through Aug. 1 -- would be similar to GM's and shave thousands of dollars off the sticker prices of most 2005 models.

The GM program, which resonated with consumers, drove the automaker's June sales up 41 percent and delivered the company its best sales month in almost 19 years.

Ford's sales fell for the 13th straight month, meanwhile, and it can ill afford not to remain competitive with its larger, cross-town rival.

"We are going to advertise this widely in a huge, significant way throughout the month," said Reuter, the Ford spokesman. "It's pretty clear from what GM has done that customers like a great deal delivered in a very simple, clear way."

Ford's only hot-selling car, the all-new Mustang, will not be included in the "Family Plan" program, Reuter said. Gas-electric hybrid versions of its Escape sport utility vehicle are also excluded.

GM's program resonated with consumers because of its simplicity and because it eliminated the haggling over prices that many consumers dread.

"Customers like the one-price, no-haggle aspect of the program and continue to respond to it," said Jane Liu, vice president of data analysis at industry tracking firm Edmunds.com.

But selling cars by slashing thousands of dollars off their invoice prices is not without costs, and it can damage any brand's residual values.

SHRINKING PROFITS

Paul Ballew, GM's head of global market and industry analysis, told reporters and analysts on a conference call last Friday that GM's cost of incentives was flat or up only slightly in June compared to May.

But Autodata Corp. of Woodcliff Lake, New Jersey, said GM's June incentives increased about 11 percent over the previous month to an industry-leading average of $4,458 per vehicle.

According to Autodata's incentive numbers, it cost GM more than $250 million to sell the 558,092 vehicles it sold in June than it would have at May's incentive levels.

"This is just going to lead to lower sticker prices in general," Autodata's Dave Lucas said of GM's program and the mounting pressure on other automakers to match it.

"This will have ramifications across even the Japanese," Lucas added. "They certainly will feel the pressure."

Edmunds.com, disputing Autodata's calculations, said GM's June incentives had only increased 3.6 percent over May.

Merrill Lynch analyst John Casesa said on Tuesday that GM's employee discounts may well have been a "financial home run" for the automaker after its first-quarter loss of $1.1 billion.

He cautioned, however, that the full impact of the GM program would have to take into account the impact on sales and margins in the future.

"The everyday low price strategy should be an easy one for competitors to copy," Casesa wrote in a research note.

"And when they do, we fear that Detroit will have once again simply set a lower price level for all its products going forward, lowering the structural profitability of the industry," he said.

GM shares closed up 18 cents at $34.83 in Tuesday's trading on the New York Stock Exchange. Ford, also trading on the NYSE, closed up 9 cents at $10.40. "