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GM extends employee discounts for everyone

August 25, 2005

DETROIT (Reuters) – General Motors Corp. on Thursday said
it was extending through September 30 the discount program
under which it is selling anybody a new car or truck at the
same low price a GM employee would pay.

The wildly successful program, which the ailing automaker
introduced on June 1, had been set to expire on September 6.
But GM spokeswoman Brenda Rios said it would continue through
the end of next month.

Rios also said the program would now include some large
pickups and sport utility vehicle from the 2006 model year. It
had previously been limited to 2005 model-year vehicles.

Some Wall Street analysts have said the employee discounts
are squeezing already low or non-existent profit margins on the
vehicles sold by GM in North America.

But officials at the world’s largest automaker have said
the cost of the employee discounts is essentially unchanged
from other rebates and cash-back deals offered before June 1.

In the first two months that GM offered the employee
discounts, its U.S. sales jumped by 42 percent and 20 percent
respectively. But Merrill Lynch analyst John Casesa said in a
research note this week that GM’s sales were believed to have
declined by as much as 10 percent in August, because of
depleted inventories of new vehicles from the outgoing 2005
model year.

The employee discounts for everyone were matched in July by
Ford Motor Co. and DaimlerChrysler’s DCXGn.DE> Chrysler arm,
delivering blockbuster results for GM’s smaller cross-town
rivals.

Ford and Chrysler, following GM’s lead, are now expected to
continue their programs through September 30 as well.

GM has led Detroit’s incentives war ever since it
introduced interest-free car loans to boost showroom traffic in
the aftermath of the September 11, 2001, attacks on the World
Trade Center and the Pentagon.

Thursday’s announcement by GM came a day after Moody’s
Investor Service became the last of three major ratings
agencies to cut GM’s debt to high-yield or “junk” status. It
was the latest blow to the automaker as it battles ever
intensifying global competition and rising costs.

GM’s shares were down 19 cents, or 0.55 percent, at $34.08
in early-morning trading on the New York Stock Exchange.




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