Employee-priced car incentives lose appeal

Big Three Automakers Launch Employee Discount Programs For Consumers
Sale signs lie on vehicles at a Chevrolet dealership in Ferndale, Michigan last month. GM's monthly sales fell despite its ongoing incentive offers giving consumers the chance to buy vehicles for the same price as its employees.Bill Pugliano / Getty Images
/ Source: The Associated Press

Automakers saw mixed sales results in August as the hype over this summer’s employee discounts faded and Hurricane Katrina ravaged dealerships in the South. Several companies reported a drop in truck sales, a likely result of rising gas prices.

The Big Three U.S. automakers’ sales dropped 6.8 percent compared to last August, although sales were up 3.5 percent for the first eight months of the year. All had expected some drop in sales as excitement waned for discount programs that let customers pay the employee price. General Motors Corp.’s discount began in June and Ford Motor Co. and DaimlerChrysler AG’s Chrysler Group matched the program in July.

Asian automakers, who didn’t match the discounts, saw their sales steadily increase in August.

GM’s sales dropped 16 percent in August, the victim of the hugely popular discount program reduced the automaker’s inventory.

“We were down a little bit from where we expected to be, and the industry was a little softer than we expected it to be,” said Paul Ballew, General Motors Corp.’s executive director of global market and industry analysis.

Ballew said 35 GM dealers were affected by the storm, and he estimated the hurricane may have caused sales to drop by as much as 500,000 vehicles industrywide. Forty Ford, Lincoln and Mercury dealers were affected by the hurricane, said George Pipas, Ford Motor Co.’s U.S. sales analysis manager. A handful of those hope to reopen by this weekend, he said.

GM’s car sales were down 15 percent from last August, and its truck sales were down 17 percent. GM’s overall sales were up 2.4 percent in the first eight months of the year.

Ballew said the drop was expected after phenomenal sales in June and July. GM’s sales were up 41 percent in June, when it began letting consumers pay the price offered to its employees for vehicles, and 19 percent in July.

“We knew we had a pretty tough challenge in terms of the month performance,” Ballew said.

Ford said U.S. sales of Ford, Lincoln and Mercury vehicles were up 3 percent as consumers continued to take advantage of an employee discount program that began a month later than GM’s.

Ford’s car sales were up 25.3 percent, but truck sales were down 4.3 percent, due to gas prices and increasing consumer preference for smaller crossover vehicles. Pipas said demand for sport utility vehicles is expected to fall 10 percent industrywide this year, and gas prices have accelerated that trend. Sales of crossover vehicles like the Ford Freestyle are expected to surpass sales of traditional SUVs by next year, Pipas said.

Chrysler said its sales were up 1 percent despite a similar program that had been in place since July. Chrysler’s car sales were up 6.3 percent, and truck sales were flat. Chrysler’s overall sales were up 7.9 percent in the first eight months of the year.

Toyota Motor Corp. also reported a 1 percent drop in truck sales, although its car sales were up 18.3 percent. Sales of the company’s hybrid Prius compact car were up 115 percent over last August. Toyota and other Japanese automakers didn’t offer employee discounts this summer.

“Even as the impact of employee pricing wanes and pump prices climb, the industry presses ahead on the strength of new products and hybrid technology,” said Jim Press, Toyota’s North American president and chief operating officer.

Gas prices didn’t pinch Honda Motor Co., whose truck sales jumped 18.9 percent over last August. Honda enjoyed its best U.S. sales month ever, with an overall increase of 18.5 percent. Honda’s sales were up 5.7 percent in the first eight months of the year.

Nissan Motor Co. also saw its truck sales rise 9.2 percent over last August. The automaker’s car sales were up 11.7 percent, helping Nissan’s overall sales climb 21 percent in the first eight months of the year.

Hyundai Motor Co. said its truck sales were up 9.4 percent in August, while its car sales were up 3.5 percent. Hyundai’s sales were up 10 percent for the January-August period.

GM and Ford have extended their employee-discount programs through Sept. 30. Both automakers are including some 2006 vehicles in that program for now, although Ford said Thursday it may cut back on discounts for 2006 vehicles. DaimlerChrysler AG’s Chrysler Group said it will end employee pricing on 2005 vehicles Oct. 3 and won’t discount any 2006 vehicles.