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End of staff pricing hurts GM, Ford results

From the Detroit Free Press:

Sales slowdown hits automakers

End of staff pricing hurts GM, Ford results

October 4, 2005

BY SARAH A. WEBSTER
FREE PRESS BUSINESS WRITER

Despite a summer sales rage caused by employee pricing promotions, General Motors Corp. and Ford Motor Co. on Monday reported a double-digit sales plummet in September that reversed their sales gains for the year.

Consumers flocked to GM and Ford showrooms this summer to take advantage of GM's Employee Discount for Everyone program and Ford's Family Plan. Sales results surged for local automakers. Dealerships ran short of cars and trucks. The pictures of empty dealer parking lots seemed to foretell a revival for domestic automakers.

In September, though, sales of GM vehicles fell 24.2% compared to the same month a year ago. Sales of Ford brands fell 19.5% during the same period.

Those big declines offset the blockbuster gains the two automakers made over the summer with their employee pricing promotions, which ended Monday. Year to date, sales are now off 1.3% year to date at GM and 1.4% at Ford.

Consequently, market share so far this year has declined to 26.8% at GM, down from 27.9% a year ago, and it fell to 18.9% at Ford, down from 19.7% a year ago.

SUVs, especially the biggest models made popular by domestic automakers, were rejected by consumers, who opted for more fuel-efficient vehicles. Sales of SUVs declined 30.4% during the month, and they are off 7.9% for the year so far. Sales plummeted for the Ford Expedition, Chevrolet Suburban and Hummer H2.

"Many of the superlatives that were used to talk about sales this past summer turned to expletives in September," George Pipas, the top sales analyst for Ford, said during a conference call with journalists.

The real local success story heading into the fourth quarter seemed to be the Auburn Hills-based Chrysler Group. The local automaker mixed its Employee Pricing Plus program with hot new products such as the Jeep Commander SUV to keep ahead of the pack.

Sales for the division of DaimlerChrysler AG were up 4.0% in September and 7.1% for the year, compared to the same period a year ago. Sales for all of DaimlerChrysler rose 3.7%.

That was far better than the overall auto industry.

Nationwide, U.S. consumers bought 1.3 million cars and trucks in September, a decline of 7.6% compared to the same month a year ago.

Chrysler's strong performance helped offset a sales decline in the Mercedes-Benz division, resulting in a DaimlerChrysler sales increase of 6.4% through September. Market share for DaimlerChrysler is now 14.8% through September, up from 14.3% a year ago.

Asian automakers also made gains despite the rougher month. Sales for Asian automakers, meanwhile, increased 7.8% for the first nine months of the year, capturing 36% of the U.S. market, up from 34.3% a year ago.

Experts had expected industrywide auto sales to slow down this month.

Employee pricing programs, they said, had pulled buyers into the market early and the promotion had been steadily losing steam since GM first implemented it in June.

More unexpected factors, though, included storms in the Gulf Coast, which caused wide-scale destruction and volatility in gas prices, and declines in consumer confidence.

"It's not a time when people are thinking of major investments," said Leo Jerome, president and owner of the Lansing-based Story Automotive Group, which owns a variety of domestic and import new vehicle franchises in Michigan.

For now, gas prices are rising again, and industry experts said that consumers seemed to be generally shifting toward smaller vehicles, such as cars and crossovers, as a result.

Crossover-utility vehicles, or CUVs as they are sometimes called, look like SUVs but are more fuel-efficient, ride more smoothly.

Car sales were up 6.3%, while light-truck sales plunged 17.8%.

Crossover sales, meanwhile, increased 19% during the month and are up 16.6% for the year, according an analysis by Autodata Corp. of Woodcliff Lake, N.J.

The credit rating agency Standard & Poor's echoed those sentiments in a note on Monday: "We believe soaring gasoline prices after hurricanes Katrina and Rita are leading to an accelerating decline in demand for SUVs."

Even though GM and Ford's results are now down year to date, they're still a bit better than they were before the summer sales craze started. For the first five months of the year, GM sales were down a sharper 6.7% and Ford's were off 5.7%.

For now, it looks like automakers are returning to a traditional marketing strategy.

GM said it would move to a Total Value Promise program, while the Chrysler Group will begin an Advantage program. Both efforts will sell consumers more on the attributes of the vehicles than the price.

Ford, meanwhile, is expected to announce a True Blue Pricing program today that will offer consumers a mix of cash and low-interest rate deals.
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