This Weekend, Detroit Three Trying To Launch New Season
By Michelle Krebs May 23, 2008By Dale Buss
As the arrival of Memorial Day weekend unofficially kicks off summer in America, huge and discouraging obstacles stand in the way of motorists: all the signs on street corners reading "Gasoline, $4.00 a gallon."
But gamely, the industry is trying to get U.S. consumers to look past the truly shocking ascension of gas prices, or at least to get maximum leverage out of fuel economy concerns when they do draw potential buyers to dealer showrooms.
There is vast pressure on General Motors, Ford and Chrysler to pull out of what could become a tailspin because their sales have fallen off so much in 2008 -- while the Japanese Three have managed to stay closer to flat performances compared with a year ago. Moreover, each of the Detroit Three is greatly more dependent on sales from trucks and SUVs, the formerly high-profit segments that have been hit hardest by rising gasoline prices.
In 2007, both GM and Ford came up with special incentive programs for the holiday, extending their treatment of this weekend as a special "selling window" akin to Presidents' Day in February and to the week between Christmas and New Year's Day each year. But the zeitgeist is much more problematic this Memorial Day weekend than it was a year ago.
"We don't even compare things today to a year ago," said John McDonald, a spokesman for GM sales. "The market is so different. The only similarity is where it falls on the calendar."
Just to stay competitive, Nissan jumped into the Memorial Day incentive derby today right before the weekend. From just May 23 through May 26, Nissan is offering new cash incentives of $500 to $1,500, depending on model, in addition to its preexisting incentives. But Nissan's sales dipped only by 4 percent in the first quarter, and overall it remains in relatively better position with fuel-efficient options than the Detroit Three.
Here's how each of the Detroit Three is approaching a Memorial Day weekend that could be much more fateful than any in several years:
General Motors: Boosting Rebates Selectively
In a last-week-of-the-month attempt to make May look better than its first quarter, when sales dropped by 10 percent compared with 2007's first quarter, GM has just launched a Memorial Day Sale. It began today and extends through June 2, offering new cash incentives of up to $2,500 on certain 2007 and 2008 model-year vehicles -- excluding all of its hot-selling hybrids and other fast movers such as the Chevrolet Malibu. The Memorial Day lures are in addition to "baseline" cash incentives and low-interest-rate offers that GM already had in the market.
At first glance, the new campaign looks similar to what GM did at this point last year, with a Memorial Day Sale that included zero-percent-financing deals for 36 months and a $1,000 bonus on several vehicles. But GM's new offer sheets are skewed to address at least a couple of important differences between last year's selling environment and the current one.
Fuel-price shocks are the biggest one, of course. The biggest of GM's new incentives, up to $1,500, are on relative gas guzzlers including the Chevrolet Silverado pickup and Tahoe SUV and GMC's sibling models. Meanwhile, GM is ponying up new rebates of only up to $1,000 on fuel-sippers including its Chevrolet Aveo subcompact, Chevrolet Cobalt compact, Pontiac Vibe crossover and the popular GMC Acadia crossover.
And the Memorial Day offers exclude all of GM's briskly selling hybrids as well as the quick-selling Chevrolet Malibu, whose supplies were hampered by a local GM strike for awhile, and the Buick Enclave, a popular crossover whose smooth distribution also was briefly hampered by a GM plant strike.
The second big difference compared with 2007 is that GM's "overage" situation is more dire, McDonald said. Referring to leftover 2007 models, he said, "Dealers are finding vehicles sitting on lots longer," he explained, so the new incentives are especially generous on leftover 2007 models.
Ford: A Regional Focus
Unlike this time a year ago, the No. 2 U.S.-based automaker is refraining from a new national incentive campaign. Last Memorial Day, Ford began offering a $1,000 rebate on certain Ford F-Series trucks through the end of May.
This week, Ford executives decided, they are standing pat, without any new nationwide efforts, as they attempt to recover from a 9-percent sales swoon during the first quarter. But the company does plan to leverage its recent regional marketing focus in various Memorial Day sales events. And its omnibus new Drive One marketing campaign for the Ford brand is picking up more steam with consumers, according to new analysis by Edmunds.com.
"There will be Memorial Day events that vary by region that have been developed regionally, which is consistent with our overall strategic approach to incentives," explained Ford spokesman Said Deep. This is an extension of the company's recent strategy to pour relatively more marketing resources into regional programs under the theory that regional sales executives -- and Ford dealers in each area -- know best what will appeal to their customers.
Meanwhile, Ford's Drive One campaign -- launched in early April -- continues to build significant momentum in consumer interest in at least three important Ford vehicles, as measured by visits to New Vehicle Detail Pages on the Edmunds.com site.
The Ford Focus subcompact has seen an overall 38 percent increase in visits to NVDPs, according to David Tompkins, executive director of industry solutions for Santa Monica, Calif.-based Edmunds.com. But Dr. Tompkins isn't sure exactly how much credit the Drive One advertising campaign deserves for Focus' ascension.
Two other clear advantages for Focus are that it's a proven, fuel-efficient performer in the compact segment, when more and more consumers are looking for exactly that kind of vehicle, and a significant campaign to promote the Sync consumer-electronics device has centered on Focus.
"So Focus ads overall are very different from other Ford ads," Tompkins said. "That leaves me unsure whether Focus' increase [in NVDP visits] should just be attributed to 'Drive One' even though the Focus ads contain the tag line."
NDVP visits for the Ford Escape Hybrid have risen a whopping 56 percent since the launch of Drive One. But again, Dr. Tompkins believes a good portion of that increase is attributable to the rising sales ramp for "all hybrids in the current economic environment."
Perhaps most indicative overall of the growing traction of the Drive One campaign is NDVP activity for Ford Fusion, a midsize entry of 2005 vintage that has been gradually building momentum lately. Its visits are up 18 percent since Drive One began.
And, noted Tompkins, there has been an overall 5 percent increase in NVDPs for Ford on Edmunds.com at the nameplate level. This is consistent with Ford executives' belief that the Drive One campaign would gradually build awareness and confidence among American consumers and would comprise a long-term platform for Ford marketing.
Chrysler: Refueling America
Chrysler is launching a car-sales competition amongst its top 300 executives,
Bloomberg News reported Thursday night. Senior managers will be able to offer vehicles at just $200 more than the discounted price paid by Chrysler employees. Apparently, prizes are involved but the automaker didn't provide details on those.
"It's important that all of our employees understand that sales and customer service are not merely activities of a particular department,'' Chrysler CEO Robert Nardelli, in a letter announcing the program to managers, Bloomberg reported. "They're everyone's responsibility.''
Meantime, having jumped on the back of a horse it calls Let's Refuel America, Chrysler strapped itself into its Memorial Day ride a couple of weeks ago. The company insists that its rebate program -- which offers protection against gas prices over $2.99 for three years, with the purchase of certain vehicles -- is accelerating interest in those models and in Chrysler's lineup overall.
But the important proof of any significant impact from the daring new incentive plan will come when Chrysler reports its May sales in early June. The first quarter was worst for Chrysler of any major U.S. automaker, its sales spiraling by 19 percent compared with 2007.
In announcing, earlier this week, an extension of Let's Refuel America to July, from its initially planned June 2 expiration, Chrysler executives said that the program had created a lot of buzz for the company and its vehicles, including big jumps in traffic on its Web sites, a rise in Internet visits to its dealerships, and a boost in consideration.
But, conceded Stuart Schorr, Chrysler's senior manager of sales and dealer communications, "It's still too early to tell" what kind of lift in actual transactions that Chrysler dealers may enjoy. "We're getting a lot of anecdotal evidence [pointing to a sales bump], but the overall industry is down so far, it's still hard to tell."
Edmunds.com's analysis, tied to NVDP visits on its Web site, confirmed that it's too early to call Let's Refuel America a success. Overall, Dr. Tompkins said, "There has been no lift at the nameplate level" in NVDP visits.
And while there have been increases for several individual vehicles covered under Let's Refuel America, they haven't been particularly huge. The Chrysler 300 sedan -- in many ways an almost-forgotten vehicle in the Chrysler lineup since the styling of its new version wowed the market upon its introduction in 2005 -- has enjoyed an 18 percent increase, the largest. The lift in Edmunds.com NVDP visits for the Dodge Caliber compact has been 12 percent; for the Dodge Avenger midsize car, 11 percent; for the Dodge Grand Caravan minivan, 8 percent; for the Chrysler Aspen SUV, 7 percent; and for the Jeep Compass SUV, 4 percent.
"Chrysler's campaign just doesn't seem to be moving the needle much," Tompkins said. "Our consideration information [as measured by NVDP visits] is a good proxy for shopping activity. When we see modest lifts, such as with Chrysler's program, we view that as an indicator that they are not getting new shoppers to consider their vehicles."
Tompkins went on to suggest that the real value of Let's Refuel America to Chrysler and its dealers may be as a "deal-closer, increasing the percentage of considerers who actually buy the vehicle." However, Edmunds.com's data on purchase intent for Chrysler vehicles "actually shows small declines."
Schorr said that "the most immediate impact" of Let's Refuel America has been in "generating interest, questions, research, and visits to dealerships. We're not sure if it's a real 'deal-closer,'" he said, because Chrysler also offers other incentive options on each vehicle whose overall value is comparable to that of the gas-card offer.
"Some people value the security and predictability of the Let's Refuel America option a lot, so they may be new buyers," Schorr said. But in general, "the biggest thing about this is that it has gotten people talking and considering Chrysler and given them a new option."
One thing is for sure: Chrysler is committed to Let's Refuel America. And at least so far, no other major automaker has followed suit.
Schorr insisted that Chrysler's maverick status in this regard largely reflects the difficulty that any competitor would have in mounting a comparable program.
"It's not a decision you just jump into and roll it out there within 30 days," he said. "It took daily meetings for about 2 1/2 months, with a team of 40 people, for us to get this together."
Moreover, Schorr maintained, there's only one company in the United States -- an outfit that he declined to identify -- that could manage such a huge and complicated program for an automaker. And Chrysler has an exclusive deal with that company.
But GM's McDonald differed on why his company and others hadn't followed in Chrysler's wake with their own gas-price-protection incentives, citing GM's experience a couple of years ago with a much more limited, regional incentive that offered a $1.99-a-gallon gas-price ceiling. In fact, he said, GM initiated its plan exactly two years ago this week.
"It had limited appeal," McDonald recalled. "It remains to be seen whether [Chrysler's current program] translates into sales."
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