GM Gives Dealers Cash To Move the Metal
August 28, 2007

General Motors, in an effort to stop its sales slide and give model year-end sales a boost, is giving dealers of some of its brands cash awards according to an internal GM memo obtained by Bloomberg News.

GM will pay dealers $250 for each vehicle sale made from August 23 through the end of the month, according to the memo from Jim Bunnell, general manager of GM's Buick, Pontiac and GMC divisions.

Summer sales, so far, have been lackluster industrywide, and August will show no recovery, according to Edmunds.com, which releases its forecast for August sales on Thursday.

"After some of the worst June and July sales in the recent history, it does not look like we will see much of a recovery in August for new vehicle sales," said Jesse Toprak, Edmunds.com analyst. "Despite the production cuts, domestic automakers are starting to experience inventory build-up issues on slow-selling models.

"Although not ideal," Tropak added, "high incentives spending becomes the only way to get rid of this excess inventory as we go into fall clearance time. We expect incentives to increase incrementally for the rest of the year for the current model-year vehicles."

Automakers generally prefer to pay cash to dealers because it does scream fire sale as rich rebates do to consumers. Dealers then can use the money to increase discounts offered to consumers, boost advertising or whatever they see fit to drive sales.

In this specific case, Bloomberg reports that dealers may use the $250 they earn in August to sweeten deals in September. GM will allow them to apply as many as four $250 "certificates,'' or $1,000, to the sale of 2006-to-2008 model-year cars and $500 to the sale of light trucks, Bloomberg reported.

GM recently increased incentives on large trucks to zero-interest for up to four years, added customer rebates of up to $4,000 on smaller trucks and eliminated overtime at six of its truck and SUV plants because of slowing sale.

Analysts predict vehicle sales will slide to their lowest level in nine years in 2007; they are mixed on whether sales will pick up in 2008 or not.

Posted by Michelle Krebs at 11:36 AM under Analysis , GM , News | Comments (0) | digg this | Seed Newsvine