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Jul 18, 2005 | 06:22 PM

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Buyers swamp Big Three showrooms in response to employee discounts

Some General Motors Corp. dealers are extending hours to handle the traffic. Chrysler's new pitchman Lee Iacocca is prompting consumers to inundate its call centers. And Ford Motor Co.'s newest models are moving off lots at a faster clip.

Detroit's latest marketing gambit -- employee discount prices for all -- is proving to be more than a one-month wonder, drawing heavy showroom traffic so far in July after propelling GM to a record June, according to dealers and analysts.

While there's no shortage of concern that today's sales party will mean tomorrow's hangover, dealers are elated that customers continue to snap up end-of-model-year cars and trucks that otherwise might have gathered dust.

Some Big Three dealers are reporting July sales are up as much as 50 percent from a year ago.

Overall, U.S. auto sales are on pace to reach 1.65 million vehicles in July, a 6 percent increase from a year ago, said Art Spinella, an analyst with Bandon, Ore.-based CNW Marketing Research.

"These are deals you just can't pass up," he said.

To handle the rush, Liberty Chevrolet in New Hudson is extending hours, opening on Saturdays and cranking out paperwork.

Booming thunderstorms and sheets of rain Saturday weren't enough to discourage Gary and Suzanne Wick from stopping at Liberty Chevrolet to take advantage of the employee discount sale.

The Novi couple didn't immediately need the 2005 Chevrolet TrailBlazer they drove home, but they couldn't resist the deal that saved them $5,000. "It definitely sparked our interest," said Gary Wick, 32.

Neither could Bill and Dorothy Wilkins, a retired couple from New Hudson, pass up $2,000 in savings on a 2005 Chevrolet Malibu sedan.

"It pushed us over the edge," Dorothy Wilkins said.

GM, struggling with lackluster sales, bloated inventories, and North American automotive losses, jump-started industry sales in June when it introduced employee pricing on new cars and trucks for all consumers.

The result was a 47 percent spike in June sales. Total industry sales jumped 16 percent, and are now up 1.9 percent this year after a weak start.

Ford and DaimlerChrysler AG's Chrysler Group -- which initially scoffed at GM's offer -- essentially matched the deal in early July.

Chrysler even lured back Iacocca to appear in television commercials to hawk its new discounts.

"We are just absolutely slammed," said Jerry Reynolds, who owns Ford dealerships in Garland, Texas, and Edmond, Okla. "As of Wednesday we were up about 35 percent with a ton of deals pending."

Tawny Arnaud, vice president at Galpin Ford, the world's largest Ford dealer, in North Hills, Calif., has seen floor traffic boom.

"We're probably up ... maybe 45 to 50 percent over last year," Arnaud said.

For some GM dealers, showroom traffic has slowed since June because of dwindling stockpiles.

Liberty Chevrolet salesman Marv Chomer, who sold a record 20 vehicles in June, likens the dip to the run of a blockbuster movie, such as the final "Star Wars" installment.

"The first week it's a huge hit," Chomer said. "The second week it may not do as much business, but it's still a huge hit."

He sold six vehicles through the first two weeks of the month, but says he has several deals pending.

Sales manager Mark Pawelski expects business to pick up this week after the dealership extended weekday hours by one hour and opened on Saturday.

"I'm very optimistic," he said.

Steve Cook, owner of the GM Superstore in Vassar, says the dealership is ahead of last July's sales pace.

GM figures, he said, show the automaker's U.S. dealers have seen sales during the first 12 days of the month jump to 130,000 vehicles, up from 104,000 last year.

Ford spokesman David Reuter said it's too early to offer a specific sales forecast, but added, "We're seeing strength in all areas, but it's particularly strong for new products."

CNW research shows, however, the pace of July sales is more robust in some regions.

"It's strong in Los Angeles, where dealers are putting a lot of effort into it, and in Chicago," Spinella said. "But some other regions like Texas are tapering off because of its high concentration of military people who are away."

Chrysler's decision to tap Iacocca has triggered a wave of calls from potential customers and is beginning to draw shoppers. "Overall, we feel the advertising has certainly cut through," Chrysler spokeswoman Lori McTavish said.

Earl Hesterberg, president and CEO of Houston-based Group 1 Automotive, which owns 96 dealerships in the United States, has yet to see the effects of the Iacocca commercials at its Chrysler stores.

"The Chrysler thing hasn't picked up much for us," Hesterberg said. "They seemed to start the advertising a little later. But the Ford thing -- they have really been cranking."

At River Oaks Chrysler Jeep in suburban Houston, owner Alan Helfman said he's sold about 70 cars this month, topping the first two weeks of last July. But hot product is driving sales more than employee discounts or Iacocca.

"It's all the 300," Helfman said, referring to the popular Chrysler 300 sedan. "But it's still a good deal and it's getting people moving like crazy."

The torrid summer sales pace, however, has some dealers and industry analysts worrying the employee discount deals are merely stealing sales from later in the year.

But marketing analyst Jim Sanfilippo, with Bloomfield Hills consultants AMCI Inc., believes those worries may be unfounded.

"The pull-ahead may be overstated with the robust economy and consumer sentiment high," Sanfilippo said. "When there are lower prices, it significantly pulls in people from the used car ranks."

Even if future sales have been pulled ahead, it's of no concern to Group 1 Automotive's Hesterberg, who said: "There's always pull-ahead when you have a good price-related promotion. But, frankly, all of us ... needed to move this inventory out."

The big question now: What will automakers offer when the employee discount programs expire on Aug. 1?

GM plans to lower prices on 2006 models, but other automakers have not tipped their hands.

Sanfilippo said foreign car companies, especially Japanese and Korean companies, who have been less aggressive with incentives, are watching the sales frenzy enjoyed by Detroit's automakers closely.

"When GM can get a 30 percent share, that's not something they're going to ignore," he said.

http://www.detnews.com/2005/autosins...A01-251332.htm

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