Thursday, July 14, 2005

GM discount is brilliant (but Chrysler, not so much!)

Here's why:

As has been widely reported, the top-line impact of GM's "employee discount for everyone" ad campaign has been a 41% increase in sales for June. Some people have theorized that, like other recent campaigns to boost sales, this would come at the expense of profits.

An employee discount is typically 3% to 4% below invoice. However, in offering the employee discount to everyone, GM rescinded its previous $3,000 to $4,000 cash-back incentives, so the end price may be the same or even higher.

In other words, they are making as much or more money per car, and selling many more cars. Brilliant!

Chrysler has gone GM one better by offering the employee discount to everyone, in addition to $3,000 to $4,000 cash-back incentives. The figures aren't in on how this is affecting sales volume (although Chrysler, as well as most other automakers, lost sales in June when only GM was offering the employee discount), but this double discounting can't be good for the bottom line.

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