Right now Detroit crosstown rivals Ford (NYSE: F ) and General Motors' (NYSE: GM ) luxury brands are about as opposite as can be. According to AutoNews, Cadillac has had its best surge since 1976 while Lincoln has definitely seen better days – or decades. While Ford is toning down Lincoln's complimentary maintenance program from four years to two, Cadillac is maintaining its complementary service for four years or 50,000 miles. GM is now taking it to another level; it's taking a page from its luxury strategy and bringing it to its standard models.
GM to lure consumers
GM recently announced it would be including free maintenance for two years or 24,000 miles for all of its 2014 Chevrolet, Buick, and GMC models. It's a smart move by CEO Dan Akerson and will help on two fronts that GM is currently struggling in – market share and consumer loyalty.
In the first quarter this year something happened that we haven't witnessed in two decades – all three Detroit automakers gained share in the U.S. market. That doesn't tell the whole story for GM though, as it currently sits near historic record lows of market share.
GM has no one to blame but previous management that refused to acknowledge it was producing vehicles very few desired to buy. Eventually these poor decisions forced GM, as well as Chrysler, into bankruptcy. The lingering aftereffects of bankruptcy and the abrupt sales decline during the recession left little cash for GM to revamp its vehicle lineup.
Now as the company gains financial stability and has cash to spend, it plans to completely revamp 90% of its vehicle lineup by 2016 by refreshing, completely redesigning, or scrapping the vehicles offered. This alone should have a positive influence on GM's market share, but for those shoppers still on the fence the additional comfort of a two-year or 24,000 miles complementary free maintenance package could be just enough to seal the deal.
For those that were going to buy a GM vehicle regardless, this move still has a positive effect on GM's consumer loyalty. There's no doubt GM has a damaged brand image, while rival Ford is the public champion. It will take time and money, such as this extra incentive, for GM to earn back its consumers.
"We know that customers who service their vehicles at our dealerships are much more likely to purchase another GM product down the road," said Akerson in a press release. "It's all the more important to bring customers to our service facilities for routine maintenance to further enhance the quality and reliability of their GM vehicles."
The 2014 Silverado is hitting the showrooms and its effect can't be underestimated. It's GM's most profitable vehicle in one of the industry's hottest segments. It has a year head start on Ford's F-150 and needs to increase its sales lead over Chrysler's Ram. This maintenance fee needs to be enough incentive to lure consumers that might be waiting for Ford's next-generation truck, and keep consumers from testing Chrysler's Ram truck.
The next 18 months for GM will be filled with vehicle launches and tough decisions. This is but one step GM needs to take full advantage of newer models while auto industry sales surge, and only time will tell if it pays off in terms of market share and consumer loyalty. For current and potential GM investors, the next 18 months will be make or break for the company.
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