GM's Free Insurance Incentive – Innovation or Desperation?

National Legal & Policy Center ^ | July 18, 2011 | Mark Modica

[jazusamo]

General Motors recently launched a pilot program in the Pacific Northwest offering free auto insurance on GM vehicle purchases. The move immediately drew criticism from independent insurance agents who point to possible legal problems with the move, as reported by liveinsurancenews.com. The agents are obviously concerned with the potential loss of business, but they make valid points that there are regulatory and licensing requirements that go with the offering of insurance products.

Other concerns raised include provisions that might exist for consumers who have more than one vehicle and are required to insure the vehicles under the same carrier. Are the incentive gimmicks at GM innovative marketing or a sign that they are becoming desperate to drive sales?

GM has historically offered gimmicky incentives in an attempt to drive sales. This latest promotion seems to carry extra logistical challenges; why does GM continue to rely on controversial marketing strategies instead of focusing on the basics? While competitors like Hyundai and Kia are knocking the cover off the ball by offering quality vehicles with excellent value, GM is trying to drive sales with complex incentives and their version of a "bait and switch" technique that hypes the Chevy Volt in order to get consumers into showrooms where they can be flipped to Chevy Cruze sales.

When I worked as a business manager for a Saturn dealership, I was often baffled by the incentive strategies at GM. I counted 50 different incentives offered at one given time. Most of these incentives are not advertised and are referred to as "targeted" incentives. Typical incentives offered are "Loyalty" for GM owners and "Conquest" for non-GM owners. Wouldn't it make more sense to just offer one incentive that could be advertised for all buyers? It gets worse. Other incentives include "GM Driver Education", "My Railroad and Utility", "GM Mobility Adaptive Equipment", the list went on and on. There were incentives for horse owners and incentives for RV owners. You just can't make this stuff up!

GM staffs a full bureaucratic department to process incentives. Dealerships are audited and required to produce documentation in order to be reimbursed for incentives. Is this looking like a company that is run like an inefficient government entity yet? Did the folks at the Auto Task Force who were responsible for restructuring GM look in to the operations and compare them to how things are done at more profitable auto makers?

Here's the point. GM was and is run less efficiently than many of its competitors. The bureaucratic environment that was partially responsible for GM's first bankruptcy still seems to exist. There was a missed opportunity to restructure GM into the most competitive player possible. President Obama chose not to include auto industry experts for his Auto Task Force. The selection of union negotiator, Ron Bloom, to be the eventual head of the group responsible for restructuring GM exposes that the main focus of the Task Force was to protect the UAW rather than to rebuild GM in to the best run company it could be. The current leadership at GM has been hand picked by the Obama Administration. It is time for shareholders, including taxpayers, to ask if the people running the show at GM are the best ones to lead the company towards sustainable profitability.

Mark Modica is an NLPC Associate Fellow.

[ken5050]

Remember the GM credit card..you earned rewards $$ from your purchases, and you could use them when you bought your next GM car..

whatever happened to it...?

[PGR88]

There are also numerous other reports out there that GM’s “channel stuffing” is way beyond record levels. That means they are shipping cars to dealers and recording the sale, while the unsold cars sit on dealers’ lots.

All the US Gov’t did was revive GM to create another speculative short opportunity a few years later. Who knew a company could go bankrupt twice? Election day, 2012 - if you own it, make sure you are out of GM stock by that time.

[cranked]

Desperation.

If one equates what GM is doing by offering free car insurance for one year to innovation, then likewise many of you would also equate GMs call to raise the fuel tax by one dollar as being innovative, huh? =.=

[PeterPrinciple]

https://www.gmcard.com/GMCard/

This alive and well?

[jazusamo]

Don’t remember it, the last new GM car for me was a ‘65. What time frame was the credit card come-on?

[jazusamo]

Yep, the “channel surfing” with pickups is a real big deal, I understand they have about twice the normal stock numbers.

[ken5050]

Late 90s..I think..

[ken5050]

Late 90s..I think..

[jazusamo]

Please bump the Freepathon or click above and donate or become a monthly donor!

[Political Junkie Too]

Will the IRS treat the " free" insurance as income they way that game show winners get "free" stuff? Anyone who accepts this "free" insurance should have to pay taxes on it as income.

-PJ

[jazusamo]

That’s a good point. GM is laying out cash dollars to the insurance company for the buyer, seems like a gift to me.

[FrankR]

Desperation, definitely.

A shining example of Americans voting with their wallets - a mass rejection of GM, obama, and the unions in one, fell, swoop of a massive GM boycott that is liable to go on for years to come.

I have two GM cars I had for years, and they will be the last GM cars that I will ever buy.

GM, you sold your soul to a heartless marxist, and Americans don't like those types very much...so, live with it.

[KarlInOhio]

I just got another GM card application mailed to me in the past month. Dropped it in the shredder right away.

[NEMDF]

I have one. Just used $2,500 toward a new car, also in 1999. They still give 5% credit.

[ken5050]

Probably not...GM would say it’s a form of a “rebate”..which is NOT taxable..

[Political Junkie Too]

Insurance is an ongoing operating expense. It is not a part of the purchase price of the car.

-PJ

[truthguy]

People on the West Coast are extremely anti-US Car. Just go to any of the 3 West Coast States and you will see 75% of the passenger cars as being foreign. Trucks are different but even there you will see a much higher percentage of imports. You can make up your own mind as to why this is. I happen to believe it's because there are so many foreign born in these 3 states and about 90% of these newcomers drive imports. They have zero brand loyalty to GM, Ford and Chrysler.

This move by GM is nothing more than an instrument to break the hold the foreign car manufacturer's have in this market. This is offered nowhere else. Note that this is only offered in Washington and Oregon.

[jazusamo]

If your theory was true which I don’t believe for a second the third west coast state (California) you referred to would have been the state GM would have offered the come-on in instaed of WA and OR. Check census numbers:

http://quickfacts.census.gov/qfd/states/06000.html

[Rich21IE]

The anti-US car notion on the left coast is really nothing new; I’m surprised it’s still thriving to that extent.

What I don’t understand is why GM has a sales problem; they make quality products; their trucks sell like hotcakes here in Texas, Louisana, Arkansas and Oklahoma, (the oil patch); they’ve got a good line of new cars.

Frankly, I think their biggest problems are twofold: 1) their dealerships pretty much suck and 2) they have simply completely forgotten how to advertize. They forgot the babe in the Bikini, the thrill of the open road stuff. Their adverts are purely and simply awful.