GM will stick to pricing plan despite sales drop

General Motors (GM) expects its United States market share to continue to fall in the first quarter of this year due to aggressive competition, but said it won’t reverse its strategy of lowering prices and relying less heavily on discounts, GM marketers said on Monday.

“We’re certainly not pleased with current share levels and we’re not satisfied with it, but we have to run this play,” Paul Ballew, GM’s executive director of market and industry analysis, said during a teleconference with media.

Ballew said GM’s US market share—which is critical to the company’s North American turnaround—will be about 24% in March, down from 27% the previous year. Ballew said GM’s first-quarter US market share is expected to fall by 1%, or about 250 000 vehicles, to about 24%.

GM’s predicted market share loss comes at a time when total vehicle sales are expected to fall, according to Edmunds.com, an online vehicle research site. It predicts that overall industry sales will fall by 3% in March.
Automakers report on March sales next week.

“The market is healthy,” said Jesse Toprak, executive director of industry analysis for Edmunds.com. “The year-over-year decline is mainly because of the exceptional sales volume we experienced last March.”

But the numbers are particularly important to GM, which lost $10,6-billion in 2005 and has been struggling with declining sales at the same time its labour and health care costs are rising. The world’s biggest automaker last week offered buyouts to 113 000 workers and is expected to make further cuts to its salaried ranks this week.

GM said on Monday that its pricing strategy is paying off. The company announced in January it was lowering prices on 80% of its models and would rely less on costly incentives. Mark LaNeve, GM’s vice-president of sales and marketing, said the company has seen a spike in online shoppers comparing prices with other brands.

LaNeve also expects less volatility in the marketplace this year since prices will be steady, unlike last year when big discounts inflated summertime sales.

GM also is spending significantly less on incentives than it did last year, even as some rivals have increased such spending. GM said its March spending is down $1 523 to an average of $2 702 per vehicle. By comparison, DaimlerChrysler AG’s Chrysler Group is spending $4 133 per vehicle, while Ford is spending $3 583 according to the Power Information Network, a division of JD Power and Associates. The industry average for incentives is $2 257 per vehicle this month.

“When I look at what some of the other manufacturers are doing, I think, `Been there, done that’ and I know what the ending looks like,” LaNeve said. “We’ve got to manage our way through it.”

GM said sales of its redesigned vehicles, including the Chevrolet Tahoe and Chevrolet Impala, are strong. Sales of new GM vehicles rose 23% in the first two months of this year, compared with a 7% drop for older vehicles.

The world’s number one automaker also reported a 3% to 4% increase in its average transaction price in the first quarter, compared with an industrywide increase of 1% to 2%. That’s because GM’s product lineup is more heavily tilted

to trucks and sport utility vehicles, which give automakers a higher return than smaller cars. GM also is lowering its sales to rental fleets, which have a lower return.

GM shares rose 28 cents to $22,93 in trading on Monday on the New York Stock Exchange. - Sapa-AP

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