DETROIT - General Motors and Ford may be slowly backing away from a longstanding Detroit practice: inflating the price tags on cars and then offering big rebates to sweeten the deal.þþIn the latest escalation of the price war among the Big Three American automakers, G.M. and Ford said Monday that they would cut the sticker prices on a few dozen of their new cars and trucks, in some cases by thousands of dollars. That could mean smaller and fewer discounts and other incentives that consumers have grown to expect when they buy an American car. þþÿYou're going to see G.M.'s incentive spending going down quite a bit,ÿ said Brent Dewar, G.M.'s marketing and advertising chief for North America. ÿIt's a paradigm shift.ÿþþFor both G.M. and Ford, the new pricing plan is a change in marketing strategy that they hope is more direct and appealing. But it is not clear whether consumers who have become accustomed to seeing cars advertised with $4,000 ÿcash backÿ deals will respond favorably. And it is also unclear how long G.M. and Ford will stick to this strategy. þþÿThe consumer psyche has been indexed to getting those big deals,ÿ said Jesse Toprak, an analyst with Edmunds.com, an informational Web site for car buyers. ÿIf the consumers come back and ask for the big rebates they got before, there's going to be a sort of reverse sticker shock with people saying, 'Where is the big rebate?' ÿþþThis summer, G.M., Ford and the Chrysler division of DaimlerChrysler have all used a combination of rebates and so-called employee-discount promotions to sell off backlogs of 2005 vehicles. G.M., which began offering its employee discount to everyone in June, ended the promotion Monday after two months of tremendous success. Both Ford and Chrysler, which reluctantly followed G.M.'s lead, began offering the discount last month and will extend their sales. Ford said Monday that it would continue the program on 2005 vehicles through Labor Day, and a person with knowledge of Chrysler's plans said it, too, would keep offering the discount at least through August.þþThe employee-discount sales have provided a much-needed lift, especially for G.M. and Ford, which have struggled with slumping sales and eroding market share for much of the year. In June, G.M. reported a 41 percent increase in sales compared with June 2004. When the Big Three report their sales numbers for July on Tuesday, they are all expected to post sizable gains. þþWhile the employee-pricing discounts are moving more cars out of Big Three dealerships, they still hurt each company's bottom line because ultimately the automakers are making less money on each discounted car they sell. Mr. Toprak, the Edmunds analyst, said lowering sticker prices could make matters even worse for G.M. and Ford because they also may have to keep offering customers the same big incentives. Edmunds research on the effect of lowered sticker prices in the past has shown that automakers' spending on incentives tends not to change.þþÿIn almost all cases, consumers end up getting the same level of incentives, which means - do the math - they're getting less for each vehicle,ÿ Mr. Toprak said, referring to the automakers. He cited Chrysler, which has lowered the sticker prices on a number of its vehicles over the last year, as an example. According to Edmunds, the 2005 Chrysler Town & Country has a sticker price of about $2,000 less than a comparable 2003 model, but Chrysler's incentive spending on the 2005 model was only $43 less. þþG.M. plans to lower the sticker price on 30 of its 76 models, including the Chevrolet Malibu and the GMC Yukon. Ford will do the same on 13 of its 27 models, including the Focus and the F-150 pickup. In some instances, the price will come down by thousands of dollars. A two-wheel-drive version of the 2006 Chevrolet Silverado will be priced $3,055 less than the 2004 model. A top-end 2006 Lincoln Navigator will have a sticker price $1,690 less than the 2005 model.þþThe price cuts will barely affect some of Ford's most popular models, like the Mustang. On some models, like the Freestyle and the Expedition, Ford has slightly increased the price. G.M. has raised the price on only one model, the Cobalt. þþBy lowering sticker prices, General Motors and Ford are not doing away with incentives, they are just hoping to offer smaller ones.þþÿWill incentives go away? No,ÿ said Marty Collins, Ford's general manager for marketing. ÿWe think incentives will continue to play a role in stimulating the marketplace.ÿþþ
Source: NY Times
