GM Extends Employee Discount

General Motors Corp. said Tuesday that it would extend a popular discount program that allowed consumers to buy vehicles at the employee rate until Aug. 1. A few hours later Ford Motor Co. said it would match the promotion.

The GM discount program offers most of its 2005 model cars and trucks at the same price that GM employees pay and helped spark a 47% jump in the company’s U.S. vehicle sales volume in June to its highest level since 1986. The discount program had been scheduled to end Tuesday.

GM and Ford, the biggest U.S. automakers, have been struggling to reverse market-share losses to Asian rivals such as Toyota Motor Corp. and Nissan Motor Co.

DaimlerChrysler said last week that its Chrysler unit would offer an employee discount program of its own starting today.

Ford said its Ford Family Plan would offer most of its 2005 models at the employee price also beginning today. The promotion excludes the Ford Mustang, Mustang GT and Escape gas-electric hybrid SUV, which are already selling quickly.

“It was inevitable that the others followed,” said Maryann Keller, an auto analyst at Maryann Keller & Associates in Greenwich, Conn.

GM’s discount program excludes the Chevrolet Corvette, Pontiac GTO and GMC medium-duty trucks. The discounts reduced the average price of a GM vehicle in June by about $500 and reduced some sticker prices as much as $10,000 when other incentives were included.

For example, the price of a GMC Yukon sport utility vehicle dropped from the high $30,000s to the high $20,000s, said Leo Bunnin, owner of GM Supercenter in Oxnard.

“We’re very excited to have the program continue because it’s so successful,” he said.

Spokesmen for Toyota, Nissan and Honda Motor Co. said Tuesday that they wouldn’t match the U.S. carmakers’ plans.

Dealers and industry analysts credited GM with creating a discount program that grabbed buyers on an emotional level, even if the price reductions didn’t go much further than existing incentives.

“The brilliance of GM’s move was the wording: ‘You pay what we pay,’ ” said Fritz Hitchcock, president of Puente Hills Ford. “The facts are that both Ford and Chrysler’s rebates are very competitive.”

Hitchcock said he had hoped that Ford would not match the GM program because the discounts might hurt dealers’ profit margins by squeezing their ability to horse trade on financing and cars that customers trade in.

Analyst David Healy of Burnham Securities Inc. called the discounts “an act of desperation” to clear out overstocked inventory because the resulting run-up in summer sales would probably be offset by reduced sales later in the year.

However, he lauded the departure from price haggling that had long been commonplace at dealerships.

“Their old strategy of setting grossly exaggerated sticker prices and compensating with grossly exaggerated discounts wasn’t working,” Healey said. “This fall [the automakers] will be cutting sticker prices closer to the real price and cutting incentives.”

Bert Boeckmann, owner of Galpin Ford in North Hills, said he would have preferred a normal sales cycle to increased summer business in part because he would now have to pay employees overtime to meet the expected demand. Another one of his dealerships, which sells GM’s Saturns, saw an 80% increase in sales volume last month.

“I have to give GM a lot of credit,” Boeckmann said. “When they hit with this one, we all looked at each other and said, ‘Gee, I wonder if we’re going to do that.’ It will definitely create some new business.”

GM shares rose 12 cents to $34.77, Ford climbed 9 cents to $10.40 and DaimlerChrysler fell 38 cents to $40.10.

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Times wire services were used in compiling this report.