: GM rebates, CEO comments raise eyebrows



Lord Cadillac
03-24-11, 01:41 PM
Critics say outsider Akerson repeating automaker’s past mistakes

Last fall, the road ahead looked smooth for General Motors.
Just over a year since it sank into government-run bankruptcy, a leaner, meaner automaker relisted its shares on major world stock exchanges, bursting back onto the investment scene with the world’s largest initial public offering.

But just four months later some industry observers are expressing concern that the company's new driver, CEO Daniel Akerson, is unfamiliar with the car market terrain and could steer GM into a ditch.

Critics contend Akerson, a former telecommunications executive, is surrounding himself with agreeable subordinates from similar backgrounds, focusing too much on cost-cutting and relying heavily on incentives, such as rebates, to artificially inflate sales at the expense of profits and brand image.

Read more... (http://www.msnbc.msn.com/id/42198926/ns/business-autos/)

Stingroo
03-24-11, 01:48 PM
We all could have told them that....


In fact, I do believe we HAVE in threads here. Corporate America is f*cked. :noidea:

orconn
03-24-11, 02:11 PM
Akerson's comment that a car is just a consumer product like a can of 'Coke" reflects the type of lack of insight displayed by many of the very high priced CEOs running American corporations today. They sincerely believe in a "one size fits all" management strategy will lead to successful corporate management. One would think that the dismal results of this management "modus operandi" would have sunk in with the boards of directors of so many under performing American companies. The "cut and eliminate" as a sole objective of corporate management has lead to the demise of many viable cornerstone companies. AT&T being a prime example. When management cuts staff and research and product development to merely enhance the next quarter's earnings, undermining long term product improvement and marketing capabilities it launches the company on a downhill slippery slope that ends in failure and eventually the end of a once vital and profitable corporation.

Stingroo
03-24-11, 02:14 PM
I mean, this is the dip shit that said that right now GM had TOO MANY engines across all its global brands.

I could tell this guy was an idiot just about instantly.

The Tony Show
03-24-11, 02:20 PM
Two of the three things they mention as bad (early lease return offers and increased GM card bonuses) are the type of offers that are targeted at retaining current GM owners. Not only have they been around forever, but they entice customers to stay with GM and by doing so make GM more money than they gave by selling another car.

I'm against cash incentives on new cars, but everyone from Toyota to Mercedes-Benz has become addicted to that monster over the last decade. At the end of the day it's all about selling cars, and it's nearly impossible to get off the incentive bandwagon and maintain your market share unless all your competitors do the same simultaneously.

OffThaHorseCEO
03-24-11, 02:42 PM
The "cut and eliminate" as a sole objective of corporate management has lead to the demise of many viable cornerstone companies. AT&T being a prime example.

Umm, i dont know if you missed it, but, AT&T is alive and well. And since when does buying up one of the major telecommunications providers equate to "cutting and eliminating"

orconn
03-24-11, 02:53 PM
Umm, i dont know if you missed it, but, AT&T is alive and well. And since when does buying up one of the major telecommunications providers equate to "cutting and eliminating"

Obviously you are ignorant of what went on during the last 25 years of AT&T's existence and management. The once great company had a succession of CEOs whose only approach to corproate management was to cut staff and budget for marketing and R&D. The last of these assaults on the company's infrastructure in the late 1990's resulted in the company not being able to compeat successfully in the post 9/11 communications boom and the demise of the real AT&T. The company that has that name today is a mere ghost of what was once AT&T, really just a rebranded "Baby Bell."

Jesda
03-24-11, 06:06 PM
John Scully of Pepsico said almost the exact same thing when he took the reigns of Apple and almost ran the company into the ground.

Lord Cadillac
03-24-11, 06:34 PM
It sounds like what I've been saying for awhile now is happening. They're loading on the sales to increase the numbers and look good to investors - but this isn't doing anything for the viability of the brand in the future. This is ridiculous.

dkozloski
03-24-11, 06:57 PM
It's hard for the automotive enthusiast to realize that to the average driver a car is just a commodity, one is as good as another, and is chosen on the most superficial grounds.

Playdrv4me
03-24-11, 07:05 PM
Two of the three things they mention as bad (early lease return offers and increased GM card bonuses) are the type of offers that are targeted at retaining current GM owners.

Perhaps this is a novel concept, but shouldn't the vehicles themselves be responsible for retaining customers? :noidea:

Jesda
03-24-11, 07:08 PM
It's hard for the automotive enthusiast to realize that to the average driver a car is just a commodity, one is as good as another, and is chosen on the most superficial grounds.

The average driver chooses a car based on reputation, image, and several economic and psychological factors. Likewise, Coke and Pepsi are all sugar water, but psychological factors, pricing, and marketing play a major role in each brand's popularity.

GM became the #1 automaker because Henry Ford stubbornly adhered to "BLACK SEDAN FOR EVERYBODY".

People buy Toyotas for perceived reliability. People buy Cadillacs for perceived luxury. Whether that's true is another matter, but even the average driver, including Yaris owners, consider superficial factors when making purchases. A car, after all, isn't cheap. Once you lock yourself into a price bracket and category of vehicle, little things turn into major deciding factors.

Some people will choose one car over another because of cupholder capacity. Some will go for styling.

The average driver may not care for luxury, but the average driver considers all of these things to some degree. Ford has proven that technology can turn an otherwise mundane car (the last generation Focus) into a hot seller.

OffThaHorseCEO
03-24-11, 07:25 PM
Obviously you are ignorant of what went on during the last 25 years of AT&T's existence and management. The once great company had a succession of CEOs whose only approach to corproate management was to cut staff and budget for marketing and R&D. The last of these assaults on the company's infrastructure in the late 1990's resulted in the company not being able to compeat successfully in the post 9/11 communications boom and the demise of the real AT&T. The company that has that name today is a mere ghost of what was once AT&T, really just a rebranded "Baby Bell."
More like a government stifling inovation and unfairly regulating growth
Without risks there are no rewards we all know that

AT&T controlled the market on just about everything it touched. Anytime the company saw a glint of gold and wanted a share, they were forced to give up something else.
Eventually the gambles stopped paying off, and since they were forced to give up cash cows to pursue new ventures, they eventually got to the point of being bought up, split up etc etc

orconn
03-24-11, 08:22 PM
More like a government stifling inovation and unfairly regulating growth
Without risks there are no rewards we all know that

AT&T controlled the market on just about everything it touched. Anytime the company saw a glint of gold and wanted a share, they were forced to give up something else.
Eventually the gambles stopped paying off, and since they were forced to give up cash cows to pursue new ventures, they eventually got to the point of being bought up, split up etc etc

Now you are really talking ancient history! And when this was true it was also a legal monopoly!

The Tony Show
03-24-11, 10:50 PM
Perhaps this is a novel concept, but shouldn't the vehicles themselves be responsible for retaining customers? :noidea:

If the cars weren't capable of retaining customers, no amount of incentive would entice people. That said, if you force every one of your owners to stick with their leased car until the bitter end, you give them another 3 months to perhaps hear a rave review of the new Lexus or Hyundai from their neighbor and begin considering it. There's a lot of good competition out there, so offering loyal customers a very nice new car AND the ability to get out of their lease two months early sweetens the deal and reduces the likelihood of their defecting to another brand.

Once again though, for the 8 millionth time, here were are saying the sky is falling because an American car company is doing something, yet no one says likewise about the import car companies doing the exact same thing. Has everyone forgotten about Toyota's "Saaaaaved by zeeeeeeerrrroooo!" or Hyundai's "We'll pay off your loan if you lose your job" already? Offering 0% for 72 months or to buy back an entire car are both incentives which are VASTLY more expensive than GM's offer to pay two payments if you trade early.

Incentives are part of the landscape now. GM's incentive spending is WAY down from where it was 2 years ago, mostly because the product is better. That said, that genie is never going back in the bottle. EVER.

EChas3
03-24-11, 11:56 PM
Now you are really talking ancient history! And when this was true it was also a legal monopoly!

And at that time, we had the best communications system in the world. While technology has advanced and costs have dropped, industries that depend on the technolgy now spend as much money determining which vendor is responsible for issues as the sum of all the services provided. Back then, we just called AT&T and they fixed the problem.

Times change and the explosion of innovation from deregulation continues to be one of America's few economic assets. But it is funny that the magic of Bell Labs is only living in a world where the 'Baby Bells' run the show. Ameritech owns AT&T. The wicked step-sister (GTE) is now Verizon and nearly rules the air.

billc83
03-25-11, 01:53 AM
If the cars weren't capable of retaining customers, no amount of incentive would entice people. That said, if you force every one of your owners to stick with their leased car until the bitter end, you give them another 3 months to perhaps hear a rave review of the new Lexus or Hyundai from their neighbor and begin considering it. There's a lot of good competition out there, so offering loyal customers a very nice new car AND the ability to get out of their lease two months early sweetens the deal and reduces the likelihood of their defecting to another brand.

Once again though, for the 8 millionth time, here were are saying the sky is falling because an American car company is doing something, yet no one says likewise about the import car companies doing the exact same thing. Has everyone forgotten about Toyota's "Saaaaaved by zeeeeeeerrrroooo!" or Hyundai's "We'll pay off your loan if you lose your job" already? Offering 0% for 72 months or to buy back an entire car are both incentives which are VASTLY more expensive than GM's offer to pay two payments if you trade early.

Incentives are part of the landscape now. GM's incentive spending is WAY down from where it was 2 years ago, mostly because the product is better. That said, that genie is never going back in the bottle. EVER.

Cadillac, for a while, tried to get by without incentives in an attempt to seem more upscale. It didn't work; incentives were back by the end of the year.

The way to handle increased incentives is to either 1) increase price or 2) lower production cost to compensate. Either way will potentially drive customers away.

Jesda
03-25-11, 02:13 AM
AT&T died years ago. Today's AT&T is SBC with the brand that it acquired when it swallowed the old ATT.

The soul of today's AT&T is, without question, all SBC -- soulless, in other words. The "reach out and touch someone" company with its legacy of innovation and customer service is long, long gone.

The Tony Show
03-25-11, 12:14 PM
Cadillac, for a while, tried to get by without incentives in an attempt to seem more upscale. It didn't work; incentives were back by the end of the year.


It was 2007, and they called it the "Total Value Promise". They lowered MSRP prices by an average of $4,000 across the board and eliminated incentives, the end result being the same transaction price as before. It tanked.

Why? People pay less attention to how much they're paying than they do to how much they're getting off. The concept of paying close to MSRP just didn't process in people's brains, especially when Mercedes was offering $3,000 rebates- it just seemed like a better deal, regardless of the fact the price of the Mercedes was $3,000 higher, making the final transaction price equal. It's just a mental state of "I'm getting a deal", and the same reason retail stores will mark up something like a book 40%, then put a "40% OFF!" sticker on it and sell them like hotcakes.

The car companies created the monster, and now consumers are hooked on it. Rebates aren't considered something special anymore- they're just expected.

dkozloski
03-25-11, 12:54 PM
What amazes me is the number of cars on the road that are just limping along with CELs, misfires, smoke, and stink. If you mention to somebody that a new set of sparkplugs would do wonders for their car they give you a totally blank stare. There is a very large segment of the population that is just barely getting by paycheck to paycheck and they don't have the money to spend on their vehicle as long as it still moves. It got a whole lot worse here lately when the price of heating oil went to $3.77/gal. I got a delivery the other day that was over $1200. If you think times are tough now just wait a few months and see what it looks like.