General Motors Chief: Value Pricing's Early Signs Positive

Early indications are that buyers are responding to General Motors Corp.'s “Total Value Promise” pricing plan that emphasizes lower sticker prices and fewer incentives, CEO Rick Wagoner says.

“People are interested in more value pricing,” he says, speaking with reporters on the sidelines of the Frankfurt, Germany auto show. “We know it's going to work.”

But he cautions that it doesn't mean incentives will disappear entirely.

What was scheduled to go away on Sept. 30 is GM's marketing effort of offering customers the equivalent of employee discounts on vehicles.

Ford Motor Co. is ending its counterpart discount, but upping cash rebates on '05s by $1,000.

The GM promotion, one of the most successful in industry history, was launched June 1.

Aimed at lowering high inventories of outgoing '05 models, the employee-pricing plan provided back-to-back months of stratospheric sales increases.

GM deliveries jumped 41.3% in June and 19.7% in July. But the program's effectiveness waned in August, when GM sales declined 16.5%. The auto maker blamed the decrease on its skimpy inventory levels, which limited consumers' choices.

Besides clearing out previously bloated vehicle stocks, GM used “Employee Pricing for Everyone” to usher in the new “value-pricing” strategy.

GM announced Aug. 2 it was lowering sticker prices, redesigning vehicles, improving warranties or adding standard equipment to more than 50 '06 models in its North American lineup.

The employee-discount plan had critics, including many dealers who said profit margins were too slim. Other detractors said the scheme was a desperate move by a desperate auto maker facing sales and market-share erosion.