Published: Saturday, September 12, 2009
GM’s money-back gamble
Will 60-day return deal lure back car buyers from Honda, Toyota?
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Associated Press
A customer looks at vehicles at a General Motors dealership in Burlingame, Calif.
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Bob Lutz
DETROIT — For years, General Motors Co. and its Detroit rivals have argued that their cars are as good or better than those made by Japanese brands, but consumers either didn’t believe them or didn’t hear the message.
So in a desperate attempt to lure back skeptical buyers, GM is introducing a 60-day guarantee offering people their money back if they aren’t satisfied with its vehicles.
The deal, aimed mainly at car buyers who fled GM due to quality problems in the 1970s and ’80s, is a bold move that could boost sales and repair a tarnished image. But it also could cost the automaker dearly if its cars don’t measure up to those made by Honda and Toyota, which consumers now view as superior.
“We’ve got to earn the consumer’s confidence and demonstrate why buying one of our products is a wise choice, and we’re actually trying to make it a risk-free choice,” GM Vice Chairman Bob Lutz told reporters when he rolled out the campaign this week.
Here are some questions and answers about the company’s offer.
Question: How does the guarantee work?
Answer: Consumers who buy new 2009 and 2010 Buick, Chevrolet, GMC and Cadillac models can return them with no questions asked, between 31 and 60 days of purchase, for a refund of the purchase price and sales tax. Cars cannot have more than 4,000 miles on them and the owners must be current in their payments.
Only one return is allowed per household. Leased vehicles are not covered.
Q: Has this been tried before, and has it worked?
A: Lutz said GM’s British Vauxhall brand ran a similar program a few years ago. Saturn had a 30-day, 1,500-mile money-back guarantee from the time the brand was launched by GM in 1990 to the beginning of the 2004 model year. Saturn is up for sale now, and Vauxhall likely will be sold with GM’s Opel brand.
Q: What are the risks for GM?
A: Lutz said Vauxhall customers returned 2 percent to 3 percent of the cars it sold during its offer. If those numbers hold true for GM, the company could wind up taking back around 14,000 vehicles and have to sell them as used — though that’s not a huge number for an automaker the size of GM.
But David Koehler, a clinical marketing professor at the University of Illinois at Chicago, said it’s worth a try for GM because other campaigns haven’t changed people’s perceptions that their cars are lousy.
Q: How will GM benefit if it works?
A: GM will get publicity and generate interest in its products. It could sell more cars and again become profitable, making its stock attractive when it goes on sale next year. Proceeds from the sale will help repay at least part of the $50 billion it has received from the U.S. government.
Also, by showcasing new products, GM could rebuild consumer loyalty and confidence and help erase memories of bankruptcy court protection.
“It’s like asking for a date,” said Koehler. “You just try to get your foot in the door.”
If people buy GM cars and trucks, they are likely to stick with the company, according to data from J.D. Power and Associates. Through August, 65 percent of consumers who bought or leased GM products traded in another GM vehicle. At Toyota, 37 percent of its customers traded in another Toyota. The industry average is 44 percent.
Q: What happens when cars are returned?
A: Dealers will give refunds to consumers and will put the returned vehicles up for sale on their used car lots.
So in a desperate attempt to lure back skeptical buyers, GM is introducing a 60-day guarantee offering people their money back if they aren’t satisfied with its vehicles.
The deal, aimed mainly at car buyers who fled GM due to quality problems in the 1970s and ’80s, is a bold move that could boost sales and repair a tarnished image. But it also could cost the automaker dearly if its cars don’t measure up to those made by Honda and Toyota, which consumers now view as superior.
“We’ve got to earn the consumer’s confidence and demonstrate why buying one of our products is a wise choice, and we’re actually trying to make it a risk-free choice,” GM Vice Chairman Bob Lutz told reporters when he rolled out the campaign this week.
Here are some questions and answers about the company’s offer.
Question: How does the guarantee work?
Answer: Consumers who buy new 2009 and 2010 Buick, Chevrolet, GMC and Cadillac models can return them with no questions asked, between 31 and 60 days of purchase, for a refund of the purchase price and sales tax. Cars cannot have more than 4,000 miles on them and the owners must be current in their payments.
Only one return is allowed per household. Leased vehicles are not covered.
Q: Has this been tried before, and has it worked?
A: Lutz said GM’s British Vauxhall brand ran a similar program a few years ago. Saturn had a 30-day, 1,500-mile money-back guarantee from the time the brand was launched by GM in 1990 to the beginning of the 2004 model year. Saturn is up for sale now, and Vauxhall likely will be sold with GM’s Opel brand.
Q: What are the risks for GM?
A: Lutz said Vauxhall customers returned 2 percent to 3 percent of the cars it sold during its offer. If those numbers hold true for GM, the company could wind up taking back around 14,000 vehicles and have to sell them as used — though that’s not a huge number for an automaker the size of GM.
But David Koehler, a clinical marketing professor at the University of Illinois at Chicago, said it’s worth a try for GM because other campaigns haven’t changed people’s perceptions that their cars are lousy.
Q: How will GM benefit if it works?
A: GM will get publicity and generate interest in its products. It could sell more cars and again become profitable, making its stock attractive when it goes on sale next year. Proceeds from the sale will help repay at least part of the $50 billion it has received from the U.S. government.
Also, by showcasing new products, GM could rebuild consumer loyalty and confidence and help erase memories of bankruptcy court protection.
“It’s like asking for a date,” said Koehler. “You just try to get your foot in the door.”
If people buy GM cars and trucks, they are likely to stick with the company, according to data from J.D. Power and Associates. Through August, 65 percent of consumers who bought or leased GM products traded in another GM vehicle. At Toyota, 37 percent of its customers traded in another Toyota. The industry average is 44 percent.
Q: What happens when cars are returned?
A: Dealers will give refunds to consumers and will put the returned vehicles up for sale on their used car lots.
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