General Motors Co. is offering dealers the chance to purchase their remaining Saturn and Pontiac vehicles at deeply discounted prices in an effort to clear their roles of the defunct brands.
In what is equivalent to a year-end fire sale, GM sent letters to dealers Dec 23 saying it would pay them 7,000 dollars for every new Saturn or Pontiac on their lot that is moved to rental-vehicle or service-vehicle fleets operated by the dealers.
Dealers can then sell the vehicles at a more attractive price, though they must be described to customers as used because the dealers technically will be the vehicles' first owner.
The offer expires January 4, the last day of the December car-sales month. GM will book the sales to dealers as fleet deliveries.
GM's move could speed the company's restructuring. Pontiac and Saturn, along with Hummer and Saab, were deleted from GM's lineup under its government-backed bankruptcy reorganization this summer. GM's remaining U.S. brands are Chevrolet, Buick, Cadillac and GMC.
The expense of the new program will add to GM's considerable cost of closing Saturn and Pontiac, a figure GM hasn't disclosed. GM spokesman Tom Henderson declined to comment on the financial impact of the new dealer incentives.
At the beginning of December GM dealers had 14,500 new Pontiacs and Saturns on their lots, which typically represents about two to three months of inventory depending on the model, according to Ward's Auto Reports.
Edmunds, another car-data service, estimates that GM will sell about 6,800 Pontiacs and 3,500 Saturns in December. That means dealers could have some 4,200 of the cars left.
Similar dealer-purchase programs in the past have provided a modest spark to industry sales. But GM's new offer dwarfs most prior efforts in that it involves a dozen nameplates, ranging from the Saturn Aura to the Pontiac Solstice, and is structured as a mechanism to speed the liquidation of two brands.
"Our goal is to provide these dealers with another tool to help them reduce their inventories of noncore brands," GM's Mr. Henderson said. "This in turn will help us move more quickly to focus on our Buick, Chevy, GMC and Cadillac brands."
Last December, GM sold about 250,000 vehicles. In recent months, however, it has been selling between 150,000 and 175,000 vehicles, meaning the Saturn and Pontiac clearance could provide a considerable boost to this month's results.
Asked about the short time window for GM dealers to respond to the offer, Mr. Henderson said, "We're trying to sell as many as we can at all times."
If a dealer passes along all the new incentive to a customer, Pontiac's cheapest vehicle, the G3 compact, could go for about 8,000 dollars, or 46 percent off the sticker price of about 15,000 dollars.
But the offer presents buyers with some risks. Because the brands are being discontinued - combined with the fact these vehicles technically are "used" - the later resale value of the cars could be significantly lower than the resale value of other ongoing car brands sold as new.
And while GM says these customers will receive the balance of the warranty period on the vehicles, and GM will continue to provide parts and service, some buyers may not feel comfortable owning an "orphan" brand.
GM executives need look no further than its own effort to discontinue Oldsmobile for evidence of how long it can take to shed an unwanted brand. The company announced Oldsmobile's closure in December 2000, but it took more than three years to exit the line.
Selling off Pontiac and Saturn inventory appeared to be motoring along in the days after GM's June 1 bankruptcy filing. At that point, dealers had 102,000 Saturns and Pontiacs in their inventory. Combined sales of the two brands averaged 32,500 per month in June through August.
But sales have fallen since, with deliveries averaging just 13,000 vehicless per month.
Because GM quit building Saturns and Pontiacs several months ago the selection of remaining vehicles is dwindling, meaning dealers could have a harder time moving existing stock as customers have to take what is available.
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