When Pete Gerosa started out in the auto business working for Oldsmobile in 1964, thedivision (now defunct) sold 510,931 vehicles, dealers for Plymouth (R.I.P., too) began selling the sporty new Barracuda and new-car prices started at $1,806.
Those were the days.
"It was a lot different back then," says Gerosa, who this year retires from GM. "The entire focus was selling the car, not the deal. Back then, customers had emotional attachments to cars."
That feeling is not entirely gone today, but there are plenty of other elements to modern automotive retailing – many of them spearheaded by GM, such as hefty incentives, deep discounting and 0% financing to move the metal.
"The advent of 0% financing was a big development," increasing sales and GMAC financing, says Gerosa. "We were called crazy, even by some of our own people."
But it had negative consequences in the showroom, acknowledges Gerosa, who until February was GM's vice president-field sales, service and parts. He now is assigned to sales and service programs and distribution strategies as a prelude to retirement.
"The impact of 0% financing is that we forgot how to sell the vehicle," he says. "The focus became the deal. We need to get back to the vehicle."
GM's new pricing strategy is to set the manufacturer's suggested retail price closer to the actual transaction price. Some dealers like it, some don't. "We have 7,450 customers – our dealers – and it's hard to get everyone to agree," says Gerosa.
So-called value pricing is a big change from MSRPs set absurdly higher than actual transaction prices.
"We priced up so we could price down with rebates," says Gerosa, recalling the recent past. "It's stupid when you think about it." Incentives are here to stay, but "absolutely not will the big rebates return," he vows.
He assesses another one of GM's creative pricing schemes – last year's employee discounts for consumers.
"We sold 1 million cars in two months," he says. "Did we pay for it in some subsequent months with pulled ahead sales? Yeah. But I'd do it again in a flash. We reduced a high inventory. We ran out of cars."
What he calls inventory clear-outs, critics call fire sales and acts of desperation. Whatever such pricing ploys are called, they should not drive sales in today's changing market, Gerosa says. "We need to get sales people focused again on selling the value of the product."
Doing that means auto makers must build vehicles that people want to buy, "not buy because they're great deals," Gerosa tells an F&I Management and Technology conference.
But an attendee, whose dealership job involves financing deals, poses a pointed question.
David Latshaw, finance director at Shaver Pontiac in Thousand Oaks, CA, asks why GM, after coming up with the hit Pontiac Solstice, fails to build enough of the 2-seat roadsters to meet customer demand.
GM plans to make about 20,000 Solstices a year, touting it as a low-volume "halo" car that will cast a glow on the entire brand. But such lofty reasoning isn't cutting it on the sales floor.
"Why is it so hard to get the Solstice?" Latshaw asks Gerosa. "Our dealership had 600 initial orders and only got 13 cars."
Gerosa responds: "What is the right number? Too many, and you discount. Too few, and there are waits. But 13 is too low."
Latshaw later tells me what happens at his dealership when vehicle demand is red-hot, but supply ice-cold.
"It's crazy," he says. "Pontiac finally has a hot product, and they are not making enough of them. We put a sold Solstice in the showroom just to display it, and people were saying, `I want to buy that car!' They got mad when we told them they couldn't. They were freaking out. We had to hide the car in back."
Nostalgia kicks in now and then for Gerosa. When he joined GM 42 years ago, the auto maker's U.S. market share was 49.6% vs. today's 24.6%, which is less than Chevrolet's 27.8% slice alone back in 1964 B.C. (Before Camry).
"When I started, it was easy," he says. "Recently, I was telling a field rep in L.A. that there was a time when we sold cars without incentives. She said, `How'd you do that?"