GM’s sales up by 41 percent; sales boosted by heavy discount rates |
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Sun, 03 Jul 2005 03:35
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DETROIT- General Motors, the world's largest automaker witnessed a stunning reversal of fortunes in the month of June. The carmaker posted an astounding 41 percent increase in sales last month. This is despite being challenged in the markets by Asian carmakers. Hyundai, Toyota and Nissan.
The sales for the month of June were the best for GM since September 1986. The company said that the surge had been prompted by its discount rates, which allowed customers to by vehicles at the same rate as is available for GM employees. This offer was applicable on all 2005 models.
This campaign boosted sales and reversed a stinging $1.1 billion first-quarter loss that the company had reported in the first half of the year. GM's misery had been compounded by the fact that two of the three major credit ratings agencies had resorted to downgrading GM bonds below the investment rates.
The month-old Employee Discount for Everyone program appeared to have struck the right note with customers as sales rose by 41 percent. This campaign made the same sort of inroads as the Keep America Rolling campaign, which was launched by the company post-9/11 attacks. It was the first such campaign to offer no-interest financing deals to customers. The Employee Discount for Everyone program is set to expire next week, but analysts say that the GM would be hugely tempted to leave it in place "until it stops working."
Further, analysts have noted that GM's gains have been at the cost of Ford Motor Co. and Daimler Chrysler. Both these companies are also considering a similar scheme to attract customers and boost sales. Chrysler Group is rolling out a scheme on Tuesday, while Ford said that it had considered a scheme for July, but had postponed it. Both the companies were quick to concede that GM's discount scheme had indeed propelled sales, but were skeptical as to how long the scheme could be run, George Pipas, an industry sales analyst at Ford, said that while the scheme had allowed GM to run away with the lion's share of June business, it was worth questioning, " what is the exit strategy from this particular program?"
It does appear that GM's schemes will trigger off a price war among carmakers. But it is worth noting that Asian carmakers posted relatively decent increases in their sales last month, Toyota registered a 10 percent increase, while sales at Nissan were up by 14.2 percent.
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