Amid Recalls, Don't Expect GM to Turn on the Deals
Embroiled in an ignition-switch recall that affects 2.6 million cars worldwide and 2.2 million in the U.S., GM has been making headlines for nearly three months. Does the controversy mean lost sales and better deals for car shoppers as the automaker tries to make up lost ground?
Not so much. On May 1, GM announced that April sales were up 6.9 percent, outpacing most analysts' expectations. Even Chevrolet, the brand whose Cobalt compact and HHR hatchback topped the recalls, gained 5.3 percent.
Still, by day's end it was clear the General would lose some market share; after all, industry sales gained 8.1 percent overall. And when May incentives rolled out the next day, GM had raised cash offers on a number of cars. The 2014 Chevrolet Malibu, Camaro and Traverse saw upticks in cash-back and cash-with-financing deals versus month-ago and year-ago levels (on 2013 models at the time). GMC, Buick and Cadillac saw fewer incentive increases, but the 2014 Buick LaCrosse and Encore did see more cash on the hood versus year-ago 2013 levels. In fact, year-over-year purchase incentives across GM's lineup appreciably decreased on just two models.
GM sales spokesman Jim Cain insisted that the new deals were "incidental" and not tied to the recalls. Incentives are "up a little bit year-over-year," Cain said, but "in aggregate, our strategy really hasn't [changed], which is really to be competitive."
Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions, agreed. GM incentives are "on par with what they normally are with the market," Fiorani said. "They're up a little bit, [but] incentives go up and down a little bit month-to-month, year-to-year."
Why No Deals?
Given all the negative press, why didn't GM turn on the deal spigot? Probably because the jury's still out on how much the ignition recall will hurt sales, if at all. For starters, it's hard to gauge how many owners of the 2.2 million U.S. cars under recall were in the market for a new car, anyway.
"They're vehicles no longer being sold," said Chris Hopson, a senior analyst at IHS Automotive. "Perhaps high-level damage on brand perception might occur on this, but that might not really come out in month-to-month sales results."
For affected owners, GM has an incentive plan — employee pricing on a new car or $500 off a certified pre-owned model. Outside that pool, damage to the brand could be limited because awareness of recalls has plunged in recent decades. In a March 2014 report, CNW Research said more than 50 percent of Americans routinely took notice of major auto recalls in the 1970s and early 1980s. By the late 2000s, awareness had fallen to well less than 20 percent.
"The big recalls in the '70s were much harsher recalls," Fiorani explained. "Today there are recalls for everything. The recall numbers are large, but there are relatively few that are catastrophic. And the public perception is, ‘Oh it's just another recall.' "
Still, if there is any fallout — the sort of stuff that IHS' Hopson said "might come out later down the road in loyalty data" — GM can ill afford to sit still. But any action that benefits car shoppers could be unconventional.
"When you have an issue like this, it's not so much how much [incentive] money's on the table, but the trust in the vehicle," Fiorani said. "Issues like this would probably be covered with a better warranty. When Isuzu and Hyundai and Mitsubishi were all having issues years ago, they all added 10-year warranties. This helps shore up the buyer's belief in the vehicle."
Any warranty changes would come atop GM's existing provisions, which are competitive given that the automaker pairs them with two years' free maintenance. If GM makes any move, it could be there — or something more outside the box, like Hyundai's Assurance program.
In any case, don't expect big new incentives. Fiorani says it would be the wrong move.
"If I get an extra $500 or $1,000 [off], that's not going to necessarily help my confidence in the car, long-term," he said. "It's just going to make it cheaper right now."
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