Confused About Incentives

“We are going to see more of the same thing in the coming half” (see Incentives cover story, WAW — Aug. '03, pp. 36-42).

For the last three years, this is the response the press receives from GM's marketing executives regarding either the size of the industry or the amount of incentives. After reading last month's amazing article on vehicle incentives it is clear that we will continue to see that quote used for several more years. The U.S. auto executives' quotes throughout the article show a total absence of solutions and no sign that they understand the problem.

Can they really be this confused? Do they really want to cite excessive capacity as the excuse for having to produce excess inventory? Do they really want to attribute a richer mix to incentives rather than weak product entries? Are they really prepared to state that they can't see how industry-wide incentives will go away? Do they really want to say that they continue a high production/low margin strategy so they can pay for retirees' pensions and health benefits? Maybe the confusion will become insight when they re-read the article. I suggest they concentrate on these pieces of data from your package.

  • 2003 Incentives per vehicle for Big Three: $3,389
  • 2003 Incentives per vehicle for Japanese $1,062, Korean $1,371, European OEMs $1,945
  • Highest Incentives by Vehicle — Big 3: 70%
  • Lowest Incentives by Vehicle — Big 3: 22%
  • Big 3 share of industry through May 2003: 63%, down one point from 2002

When you outspend the competition on incentives and lose share, the issue is weak product! The Big Three, particularly GM, has made huge acquisitions overseas since the 1980s and still do not have fresh products to compete with foreign entries in its home market. GM and Ford have the same situation in Europe. The question that executives should ask is, “Did we make bad investments overseas?” If the answer is no, then “Do we have the marketing wherewithal to convert those investments into share and profit winners in the U.S.?”
John R. Murtagh
Retired GM Marketing Executive
Oak Park, IL

Who Is Wiser?

I agree with Norman Hahn's view on John McElroy's assertion that raising taxes on gasoline is a poor idea on many points (see WAW — June '03, p.7). To raise taxes to curb the public's taste for larger vehicles is no more than a subversive attempt to steal personal choice from citizens.

I see that Mr. Wharam agrees with raising taxes to reduce petroleum consumption and then using the added income to help further technology to reduce consumption even more. I have but one question: what added income? If taxes are raised and usage is successfully reduced, there will be no added income because fewer dollars will be spent.

Just as we were told in grade school, this country is run by the majority rule. If most people want cheap gasoline and big vehicles that is what is going to happen. Change will come when the economic feasibilities change and supply runs thin or a reasonable alternative is offered.

I drive 100 miles (161 km) per day to and from work in a Dodge Neon. My wife drives a half-mile (0.8 km) a day to work in her Chevy Suburban. I use a lot more gasoline in a day than she does in a week, but there are few alternative vehicles when you travel with three car seats and a dog. We put our 6-person family in the Suburban and travel across town at 17 mpg (14L/100 km). In comparison my Dodge Neon gets four people across town at 28 mpg (8L/100km). If I travel seven bodies (six people and a dog) across town in two Neons I get a comparative 14 mpg (17L/100km). Now tell me who is wiser? Don't even try the unsafe SUV rollover thing. I am safer in my seatbelt upside down than you are facing the head-high tractor-trailer bumper at the stoplight.
Brett Stark
Production Engineer
Raybestos Products Co.
Crawfordsville, IN

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