Domestic Auto Advertising DJ News

Discussion in 'Wall St. News' started by Enfinity, Dec 1, 2005.

  1. By Stephen Wisnefski

    CHICAGO (Dow Jones)--Detroit's Big Three auto makers, eager to build sales
    momentum heading into the New Year and recover market share lost to foreign
    competitors, significantly increased their spending on incentives in
    November, according to data released late Wednesday by
    The consumer research firm said that incentives spending by General Motors
    Corp. (GM), Ford Motor Co. (F) and Chrysler Group averaged $3,398 per vehicle
    sold in November, a 22% increase over the amount spent in October and a record
    for the month of November.
    Chrysler, the U.S. unit of Germany's DaimlerChrysler AG (DCX) spent the most
    on incentives, at $3,922 per vehicle sold, an increase of $882 from the
    previous month. GM's incentives spending rose by $556 to $3,255 and Ford's was
    up $452 to $3,137.
    Domestic manufacturers launched their year-end promotions earlier than
    normal this year after posting dismal sales results in recent months. GM and
    Ford, the two largest U.S. auto makers, each posted declines of 26% in
    October, as sales of SUVs and trucks plunged owing to concerns about rising
    fuel prices. GM launched its "Red Tag" year-end promotion in mid-November,
    pressuring Ford and Chrysler to implement similar campaigns shortly
    "The recent round of new promotions reflects the ineffectiveness of (the
    auto makers') attempts at 'value pricing,' and again demonstrates consumers'
    preference for discounts and promotions, especially for certain models," said
    Jane Liu, vice president of data analysis for
    U.S. auto makers have said they plan to transition to a so-called
    value-pricing model that simplifies the purchase process by lowering the
    sticker prices and doing away with the hefty rebates that consumers have come
    to expect the past four years. The discount schemes, such as the
    employee-discount-for-everyone programs implemented by the Big Three over the
    summer, give sales a boost but take a bite out of profits.
    The automotive operations of GM and Ford lost a combined $3 billion in North
    America in the third quarter owing to high cost structures and an inability to
    remain competitive with their Japanese peers.
    Thanks to an overall product offering that consumers find more appealing,
    companies such as Toyota Motor Corp. (7203.TO) and Honda Motor Co. (7267.TO)
    haven't had to resort to steep discounts. In November, according to, incentives spending by Japanese manufacturers amounted to $1,030
    per vehicle sold in the U.S., up $80 from the previous month.
    European manufacturers decreased incentives spending in November by $11 to
    $1,884 per vehicle sold. That's roughly in line with the $1,724 per vehicle
    spent by Korean auto makers during the month.
    Among vehicle segments, large SUVs continued to offer the highest average
    incentives, at $5,540 per vehicle sold, which is equivalent to 13.2% of the
    average manufacturers suggested retail price, said. That compares
    with just 2.1% of MSRP for sports cars.
    The increased spending on incentives, coupled with a decline in gas prices,
    likely gave sales a boost in the second half of November. It won't be enough,
    however, to keep the overall sales figure for the month from declining
    compared to the year-earlier period, industry analysts say. U.S. sales of cars
    and light trucks fell 14% in October from the previous year, hitting a
    seven-year low, after posting a 7.6% decline in September.
    Auto manufacturers are scheduled to release U.S. sales figures for November
    on Thursday. GM and Ford, which are planning to significantly restructure
    their North American operations, are once again expected to lead the decline,
    posting sales drops of more than 10%, most analysts say. Toyota is expected to
    register a double-digit increase.
    Concern about the upcoming sales report helped push shares in GM and Ford
    down sharply on the New York Stock Exchange Wednesday. GM fell 4.8% to close
    regular trading hours at $21.90, while Ford tumbled 4.6% to $8.13.
    Through the end of October, GM had a 26.2% share of the U.S. market, down
    from 27.5% a year earlier, while Ford saw its share fall to 17.6% from 18.4%.
    Chrysler Group had a U.S. market share of 13.6% in the first ten months of
    2005, up from 13% in the year-earlier period and giving it a lead of less than
    half a point over Toyota for third place in the U.S. market.

    -By Stephen Wisnefski, Dow Jones Newswires; (312) 750-4142;

    (END) Dow Jones Newswires
    12-01-05 0736ET
    Copyright (c) 2005 Dow Jones & Company, Inc.