I'm starting to feel sorry for GM (NYSE:GM). Unlike competitors such as Honda (NYSE:HMC) and Toyota (NYSE:TM), it can't seem to interest buyers in its cars without major price breaks. So after retiring the summer's incentive programs, and then suffering a disastrous few weeks of slumping sales, GM -- like its rival Ford (NYSE:F) -- has come up with an exciting new way to woo consumers back.
Markdowns.
No wait, hear GM out. Instead of the gimmicky "employee pricing," which helped the company get some revenues, if not profits, earlier this year, GM is now announcing a "Red Tag" sale. Here's the premise, straight from the GM website: "The price on our tag is the price you pay. Not a penny more.*"
That little asterisk sends you to a disclaimer that should be read by one of those fast-talking radio small-print guys: "Tax, title, license, dealer fees, and [other] optional equipment extra."
In other words, this is just another sale. Yes, you can get a $39,000 Chevy Tahoe for closer to $32,000 after incentives. In fact, after playing with GM's online pricing tool, it seems that an awful lot of the heavy trucks are discounted by a good $5,000 to $7,000. That makes sense, considering that consumers seem to have gotten a bit spooked by $3-a-gallon gas after Katrina.
To this Foolish investor's mind, the new sale is just the final evidence that GM killed the goose that laid the golden eggs. The company's big sales events have only conditioned consumers to wait for major price breaks. With the financing division -- the only part of the company making any money -- being hawked in order to raise money and shore up the rest of GM's junk credit rating, what's left for the car biz?
Let's hope it's not the same thing that's left for the auto-parts biz.
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Seth Jayson is starting to wonder what a GM-free world might look like. At the time of publication, he had no position in any company mentioned. View his stock holdings and Fool profile here. Fool rules are here.
