Bloomberg TV

Friday, October 14, 2005

Good Job on Those Employee Discounts

I've been railing for months now about the twin phenomena of dementia in the US auto industry known as "Employee Discounts" and overreliance on SUVs in an age of consumer price inflation led by gasoline. The problems with these insane giveaways are manifold. I recount them briefly here:

(1) Automakers depress resale values by offering discounts piled on top of incentives piled on top of discounts. As long-term ownership propositions, the money "saved" by buying these cars at fire-sale prices is lost because their resale values are markedly diminished.

(2) Brand equity is lost. What kind of pride of ownership is there in owning makes that are enthusiastically being hawked like fake Rolexes on Main Street? Shame is the name of the game.

(3) Sales were moved ahead by these discounts. Now that the promotions are gone, the bargain-seekers are too.

(4) By offering these discounts, consumers are conditioned to look forward to more giveaways. If US automakers treat sticker prices like a running gag, then consumers will too.

The end result is rather terrible for domestic automakers:
Retail new-vehicle sales were down 33 percent across the industry in the first nine days of October compared with the same period a year ago, the Power Information Network said.

It said results were down at nine major automakers, but GM led the pack with a 57 percent decline followed by Ford, which saw its retail sales drop 45 percent over the first nine days of the month.

The Chrysler arm of Germany's DaimlerChrysler posted a 32 percent drop over the same nine-day period compared with year-ago results.

Meanwhile, those not dumb enough to follow suit are suffering less, as expected:

The U.S. arm of Honda Motor Co. Ltd. posted the smallest drop, with retail sales down just 8 percent, followed by Toyota Motor Corp., with sales down 14 percent.

The long-predicted demise of GM, like that of its Delphi affiliate, will not be too far away if it can't come up with products more in tune with the times, like really usable hybrid vehicles. Ford is in somewhat better shape, but isn't turning the ship around by any means. Why they stick to a strategy of lowballing massive SUVs few really want is beyond all reason.

Posted by Emmanuel |

« Home | Crusader Advertising, Anyone? » //-->


Post a Comment

 © Bloomberg TV 2005 - Powered by Blogger Templates for Blogger