STORM2K

IS THE CURRENT GM METHODOLOGY IN LOWERING PRICES A GOOD IDEA? WILL GM REGAIN PROFITABILITY BY LOWERING PRICES, AND WILL LOWERING OF THE PRICES RECOUP THE COSTS?

In the short-term GM will see profits go up, but in the long-term, profits will sag, as costs will catch up.

No responses.

They have to get rid of inventory, but other than that, I'm surprised that they are doing it since they are having financial problems to begin with.

Sales, expenses and profit $ will increase, but their profit margin % (rate) will decline. They're not making as much money over the cost of their product.

Yeah, what Stephanie said.

They don't need to drop inventopry. that's what the "Employee Pricing" debacle was all about. They've already admitted that was a huge mistake, but it eliminated any over-inventory issues they have.

Their cars are priced too high for what you get, so the discounts may help if the new price is enough to make a profit. The real solution is to get better designers and engineers so that they can successfully compete with the Japanese car makers at the slightly higher and mor eprofitable price point.

Stephanie wrote:They have to get rid of inventory, but other than that, I'm surprised that they are doing it since they are having financial problems to begin with.

Sales, expenses and profit $ will increase, but their profit margin % (rate) will decline. They're not making as much money over the cost of their product.

Expenses will remain the same with regards to manufacturing the vehicles because they will not have done anything to add or take away anything.

gtalum wrote:They don't need to drop inventopry. that's what the "Employee Pricing" debacle was all about. They've already admitted that was a huge mistake, but it eliminated any over-inventory issues they have.

Their cars are priced too high for what you get, so the discounts may help if the new price is enough to make a profit. The real solution is to get better designers and engineers so that they can successfully compete with the Japanese car makers at the slightly higher and mor eprofitable price point.

No, employee pricing was suppose to drop the pricing to a reasonable level to entice consumers to buy GM, it backfired when everyone else did it. Yes, they do need to drop the pricing, but improve quality. I say re-design their vehicles like this:

1) Use airplane style steering wheel;
2) Improve fuel mileage;
3) Their trucks need a different look and stronger efficient motor; and
4) Better and more comfortable captain seats w/massage.

wxcrazytwo wrote:No, employee pricing was suppose to drop the pricing to a reasonable level to entice consumers to buy GM, it backfired when everyone else did it.

I know for a fact that inventory dried up during and after the Employee Pricing event at GM. It worked in that it moved a ton of vehicles. The problem is that the price poiint was too low to be profitable.

You can rarely succeed in an unprofitable business in a competitive industry by simply lowering prices. They need to either cut their production costs per vehicle to go along with lower pricing, or a better long term solution is to improve the vehicles so they can sell at the profitable price point.

gtalum wrote:

wxcrazytwo wrote:No, employee pricing was suppose to drop the pricing to a reasonable level to entice consumers to buy GM, it backfired when everyone else did it.

I know for a fact that inventory dried up during and after the Employee Pricing event at GM. It worked in that it moved a ton of vehicles. The problem is that the price poiint was too low to be profitable.

You can rarely succeed in an unprofitable business in a competitive industry by simply lowering prices. They need to either cut their production costs per vehicle to go along with lower pricing, or a better long term solution is to improve the vehicles so they can sell at the profitable price point.

It's not just lowering prices, but cutting employee salaries, benefits, etc. lowering prices is a start. A companies inventory never dries up because you always have to have inventory in your supply barn.

wxcrazytwo wrote:

gtalum wrote:

wxcrazytwo wrote:No, employee pricing was suppose to drop the pricing to a reasonable level to entice consumers to buy GM, it backfired when everyone else did it.

I know for a fact that inventory dried up during and after the Employee Pricing event at GM. It worked in that it moved a ton of vehicles. The problem is that the price poiint was too low to be profitable.

You can rarely succeed in an unprofitable business in a competitive industry by simply lowering prices. They need to either cut their production costs per vehicle to go along with lower pricing, or a better long term solution is to improve the vehicles so they can sell at the profitable price point.

It's not just lowering prices, but cutting employee salaries, benefits, etc. lowering prices is a start. A companies inventory never dries up because you always have to have inventory in your supply barn.

Holy cow Crazy I think we agree on something. GM needs to basically trim itself to minimal levels in every aspect of business and once it has stopped the bleeding then proceed in building itself back up. Its time for GM to dump some unprofitable brands such as Hummer and Saab, lower salaries across the board, and do away with dividends (or lower them significantly). GM made a pact with the devil when it agreed to the labor unions demands in the 80's and it is now reaping the evils of those agreements. I would hate to see GM or Ford file for banckruptcy but with outrageous pension and disability plans bankruptcy and just a poor business model throughout the 90's, bankruptcy is one of the only viable options. Labor unions can look at themselves to see their part in the demise of GM and Ford.

fwbbreeze

There's an entire management principle out there used by Toyota called Lean Enterprise. If GM would make a quality product, like Toyota, they wouldnt have a problem with profit.

alicia-w wrote:There's an entire management principle out there used by Toyota called Lean Enterprise. If GM would make a quality product, like Toyota, they wouldnt have a problem with profit.

That is part of the entire picture.