GM catches a break, finally

Posted by: David Welch on February 15, 2006

Just when everyone thought high gasoline prices would kill off the big-sport utility vehicle business, General Motors Corp’s new gas hogs are showing signs of real life in the market. Sales of the all-new 2007 Chevrolet Tahoe were up 53% in January—the truck’s first month on the market—and J.D. Power says buyers are paying a lot more for the newly-designed vehicles. In January, the 2007 model Tahoe had an average after-rebate sale price of $42,400—a $7,000 spike over the old model.

There are some other good signs, too. Dealers say the Cadillac Escalade is a pretty hot item. Dallas Cadillac dealer Carl Sewell says he has enough orders to burn through more than two months of stock. And last month, some Internet profiteers were trying to sell Tahoes on eBay for more than the sticker price.

One tailwind for GM: gasoline prices. Even though today’s average price of $2.27 a gallon is 38 cents above pump prices from a year ago, they’re way off the September 2005 peak of $3.07 a gallon, says AAA. That not only makes big suvs seem a little less foolish, but the recent drop in prices for gasoline and natural gas help out the household budgets of middle class consumers. That always helps domestic carmakers, whose buyers are less affluent—and by extension more exposed to inflation—than import buyers.

This doesn’t mean GM is saved. Not by a mile. They still need to find a way to make real money on smaller vehicles. And plenty of suv owners were already burned by last year’s painful price peak at the pump. Many may not go back to gas guzzlers. But for a company that has had nothing but bad news for more than a year, falling gas prices and a good start to their big suvs spell relief.

Reader Comments

West

February 15, 2006 3:10 PM

Blind optimism. Here's a quote from GM:

"Dealers sold 3,000 new 2007 model Tahoes in January, says Paul Ballew, GM's executive director of global market and industry analysis. That's twice as many as GM had hoped for, he says."

So 3000 is a 53% increase?

"Bowsher says consumers will pay close to sticker price."

Since when was "close to sticker price" good for a new release? I seem to remember the Chrysler 300, Ford Mustang, and 2000 Chevrolet Tahoes commanding AT OR ABOVE sticker prices for months on end.

"GM shipped Tahoes to dealers in mid-January. It started building and shipping Yukons in the second half of January, so sales were minimal at about 200 Yukons for January, Ballew says. GM has shipped only 400 new Escalades, he adds."

So the Caddy dealer can sell 800 Escalades? Wow that's so many it may same GM alone!

GM is off to a subpar if not outright troubling start. Back in 2000 people were lined up to buy a Tahoe but now dealer lots have plenty of them. There will always be the few people that will pay whatever it takes to have the new toy and once their demand is filled, who's next? GM hasn't yet shown that the Tahoe has a "next" plan. Until we see 6+ months of sales data, I would hesitate to call the Tahoe a success.

http://www.autonews.com/apps/pbcs.dll/article?AID=/20060206/SUB/60203060/1003/newsletter12

Bob Fay

February 28, 2006 7:49 PM

We have a 2001 Accord and a 2004 Odyssey thank you. God bless our local Honda and Dodge dealers for their honesty.

douglas mcintyre

March 6, 2006 8:47 PM

The fact that they could raise prices on this model is essential to the story. Cutting costs is only part of the formula to get GM turned around. At some point soon, they are going to have to be able to get a reasonable price for the cars.

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Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

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