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GM offers incentives to closed dealers' customers


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GM offers incentives to closed dealers' customers



NOVEMBER 23, 2009 - 2:10 PM ET

UPDATED: 11/23/09 3:41 P.M. ET

WASHINGTON -- General Motors Co. is offering 45-day discounts of as much as $2,000 a vehicle to 950,000 customers of the company's closed dealerships -- a move criticized as “inappropriate” by a leader of a group of rejected dealers.

The automaker started sending letters Nov. 16 to some customers of stores that have already shut down or lost a franchise, company spokeswoman Jordana Strosberg said today.

The incentive program offers discounts of between $1,000 and $2,000 on most models of its four surviving U.S. brands, according to a copy of a GM letter to dealers outlining the program.

The size of the discount depends on the customer's “likelihood to purchase a GM vehicle and the relative distance to the next closest dealer,” the letter said.

“This is our way of trying to keep our current customers in the GM family by making it easy for them to get back into a dealership,” Strosberg said.

It is not clear what impact if any the GM offer will have on ongoing negotiations with rejected dealers over possible restoration of their rights.

Still, the new GM incentives left one dealer advocate distressed about the timing.

“This is an inappropriate time to take such an aggressive measure,” said Tamara Darvish, a leader of the Committee to Restore Dealer Rights, a group of rejected dealers that is participating in the talks. “If in fact dealer rights are to be restored, why would GM go in and move all those customers?”

Other incentives

Customers who want the discount have to bring in the certificate enclosed with the letter as well as a proof of identity, Strosberg said. The offer extends to Jan. 4.

GM plans to begin a second wave of the program early next year that will include Saturn customers, Strosberg said.

The automaker also is issuing a service offer that includes a vehicle inspection and tire rotation to all customers of closed stores, the letter said. This offer is good through May.

GM's U.S. sales chief Susan Docherty said Nov. 16 that the company was launching an incentive program for its four surviving U.S. brands in an attempt to flush out excess 2009 inventory. She did not discuss details.

“GM has to use aggressive marketing to try to keep those customers in the fold,” said Michelle Krebs, a senior analyst with the Edmunds.com research firm. “There are other brands waiting to pick those people up.”

Chrysler Group announced last week that it was offering cash incentives of $1,000 to $1,500 on many vehicles.

Boosting sales

“GM is working with a new foundation of fewer brands," J.D. Power analyst Jeff Schuster said in an e-mail today.

"New product is obviously a key component to success, but the rebuilding can’t continue without a strong customer base. Loyalty is the name of the game here. It is much harder to get back a displaced customer than bring in a new one and GM is proactively going after buyers that may be at risk."

GM's November retail sales were on pace to increase 10 to 15 percent from a year earlier, Docherty said last week.

In October, GM's U.S. sales rose 5 percent for its first year-over-year gain since January 2008.

GM sales plunged 34 percent during the first 10 months of the year compared with the same period a year ago.

A total of 1,839 GM dealerships have agreed to shut down by October 2010, the company said in a Nov. 16 filing with the government.

GM now has 5,860 dealerships and plans to scale back to between 3,600 and 4,000 over the long term, the filing said.

The negotiations, which also involve Chrysler, seek an alternative to legislation that would reverse dealer terminations. The legislation passed the House last summer but has stalled in the Senate

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