UPDATED: Friday, April 13, 2012 - 8:53am
NEW YORK - General Motors will offer auto dealers large incentives to move vehicles from its defunct Saturn and Pontiac brands, in a sale that deeply discounts the cars' sticker prices, the company said Tuesday.
GM (MTLQQ) spokesman Tom Henderson confirmed a Wall Street Journal report that said the embattled automaker sent letters to dealers Dec. 23 detailing the plan to pay them $7,000 for each Saturn and Pontiac brand car they can move off their lots and into rental- or service-vehicle fleets
Under the plan, dealers technically become the first owner of the cars in order to get the incentive. They can then pass on the incentives by selling the "used" vehicles to customers at a deep discount. The deal expires Jan. 4.
The factory-to-dealer incentive plan is an unusual move. If GM had taken the common approach of placing the $7,000 as a customer incentive, the company would have had to wait for buyers to come into the showroom and take the deal.
Instead, GM's plan allows the company to clear the inventory off its books right away and leaves it to the dealers to pass on the incentive.
GM, the largest U.S. automaker, filed for bankruptcy June 1 and reorganized, with the Saturn, Pontiac, Hummer and Saab brands discontinued.
Pontiac was a GM staple that included muscle cars such as the Firebird, but the line was cut when the company announced a pre-bankruptcy focus on "core" brands. Efforts to develop Pontiac as a "niche brand" failed, and GM officially announced in April that all remaining Pontiac models would be phased out by the end of 2010.
When the Saturn brand launched in 1990, it was intended to help GM gain market share on smaller, imported cars. But the lineup failed to sell well over the years. Despite discussions with car dealership operator Penske Automotive Group, GM announced in October that the 2010 models would be Saturn's last.
One possible concern for would-be buyers — resale value — may not be a big problem, as GM has said it will stand behind warranties and dealers of the company's other brands will still be in business, said Eric Ibara, director of residual value consulting at Kelley Blue Book.
"Some models will be affected more than others in the short term, but three years from now the market will have forgotten the $7,000 incentive," Ibara said.
Models that face a lot of competition from other brands, such as the Pontiac G6 sedan, stand to lose the most value, Ibara said. By contrast, unique cars such as the sister roadsters Pontiac Solstice and Saturn Sky, likely have a bright future, he said.
"Something like the Pontiac G8, a muscle car that hasn't been around too long, will probably be more attractive a few years from now," Ibara said. "Now with the additional incentive, it's a great buy."
Ibara cited Kelley data that showed resale values of Oldsmobiles fell only 5-10% after GM discontinued that line in 2000. Still, Ibara noted that the years-long phase out of Oldsmobile was far different from the immediate halt of production on Pontiac and Saturn vehicles, so this approach's effect remains to be seen.