GM's incentives-fueled sales gain raises concern about return to ‘push'
Mike Colias
Automotive News | February 1, 2011 - 4:27 pm EST
DETROIT -- General Motors Co. officials today fended off questions about whether the automaker's 22 percent January sales increase was fueled by a surge in incentive spending.
GM's incentive spending in January rose 29 percent from a year earlier, to $3,762 per vehicle, according to Edmunds.com. That's the highest per-vehicle figure among the six largest automakers.
The increase “raises some eyebrows,” Jessica Caldwell, Edmunds director of industry analysis, said in a statement. She noted that GM's increase came despite selling more redesigned and refreshed models relative to competitors.
“This suggests that their new model year vehicles are more heavily discounted than one might expect,” she said.
During a conference call with analysts and reporters, GM U.S. sales chief Don Johnson acknowledged a “modest” increase in incentive spending in January. He said he was surprised that some competitors cut incentives rather than following GM's lead.
“We wanted to get a head start with sales by focusing our efforts to our customers,” Johnson said. “I think we did catch our competitors a little bit flat-footed in the month.”
Incentive spending has been closely watched by dealers and others in the industry who are worried about automakers returning to the so-called “push” strategy of pushing too many cars onto dealer lots and moving them through profit-eroding discounts. GM and other automakers have vowed not to fall back into old habits.
“We are not going to return to the days of driving production with incentives,” Johnson said today. “We know that that's not going to be a recipe for success for us.”
Car sales strong
In January, strong car sales helped deliver a 19 percent sales gain for Chevrolet, GM's largest brand, which accounted for 70 percent of the automaker's overall sales last month. Sales of the Chevy Impala sedan grew 39 percent to 15,188 units.
GM sold 13,631 units of the Chevrolet Cruze, the compact launched in September to replace the Chevy Cobalt. Cruze sales are on target for GM's expectations and more than doubled Cobalt sales from January 2010, Johnson said.
Strong sales of the Equinox (up 35 percent in January) and Traverse (up 50 percent) crossovers also lifted Chevy. GM alleviated tight supply for the Equinox late last year, although Johnson acknowledged that inventory for the Equinox and the GMC Terrain crossover remain “on the tighter side.”
“Dealers are doing an excellent job of turning those vehicles,” Johnson said.
Buick sales rose 32 percent to 13,269. GMC sales also grew 32 percent, to 27,658. Cadillac sales jumped 49 percent to 12,581.
Overall, GM said its retail sales rose 36 percent, while fleet sales declined 7 percent, mostly from a drop in sales to rental fleets.
Johnson said the sharp increase in retail sales reflects improving credit availability and consumer confidence.
“Consumers are driving much of the gain that we're seeing in the industry,” he said.
Big gains for older cars
Johnson wouldn't specify which vehicles were juiced by incentives in January. But some older models saw big sales gains.
Sales of the Buick Lucerne sedan rose 62 percent to 2,816. Sales of the Cadillac DTS sedan more than doubled to 1,365. Both cars are being phased out after this year.
Kurt McNeil, Cadillac's vice president of sales and service, said the brand reduced incentive spending last year while competitors were “blowing their brains out” in a race for the top sales spot in the luxury category.
“They backed off a little bit in January, but they're going to be right back at these competitive games,” he said. “We're committed to a long-term approach.”
Johnson said incentive spending tends to be volatile from month to month. He said from now on, GM will disclose its incentive and average-transaction-price figures “directionally” over 12 months, rather than sharing monthly figures.
Johnson complained that competitors and market-research firms sometimes give a distorted view of GM's incentive spending.
“We're going to continue to very judicious with our incentives, but at the same time we're not going to tip our hand to what we're doing in the market to our competitors,” Johnson said. “I'm getting the feeling this month they're all out there talking about us and not talking about themselves.”
Photo credit: BLOOMBERG
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