Monday, August 01, 2005

Defining value -- GM's doing what we hoped/expected with its Employee Discount For All program (officially over, as of today): they're recalibrating. Instead of the ceaseless rebates/financing deals/dealer incentives, they're going to lower MSRPs. If the EDFA was a transition to stickers that resemble out-the-door prices, great.

Farago has an excellent summary of the likely problems (and at least one teensy-weensy mistruth) with the General's new "value pricing." One thing he omits is the likely beneficial effect on product content.

As the costs of incentives go up, GM has had no option but to pull content out of its cars, which further widens the gap with competitors products, which heightens pressure to increase incentives, etc. Presumably, with MSRPs that better reflect what the customer is ultimately going to pay, product planners should be able to do a better job of setting equipment levels in a more rational, planned fashion.