By Maxine Shapiro, KERA 90.1 business commentator
Dallas, TX – Quick question: what would you rather do - go to the dentist or buy a car? Even with all the "insider information" available, the fear of "who can you trust?" looms in the consumer gut. And thank you, GM, for justifying that emotion. I'm Maxine Shapiro with KERA Marketplace Midday.
I could probably spend two hours alone just questioning why the continued distrust of car dealerships. As an ex-auto salesperson, frustration held me hostage as customers persistently fought with the numbers they themselves brought in from reliable sources. Believe me here, the sales person is the bottom of this moneymaking totem pole. So let's stay with the premise - you can't trust auto-makers.
For quite a while now, the consumer has delighted in the woes of the auto industry by gulping up huge rebates on cars. At the same time, we've been told what's good for the consumer is bad for profits. But the Wall Street Journal reports General Motors presented a slightly different angle when they spoke with analysts last week. Sure, customers are getting rebates, but the price of the vehicles has been going up. John Smith, GM's group vice president for sales, service and marketing, told the analysts, "Between 1996 and 2003, we raised prices close to 16.7 %."
The idea behind a new complex pricing model - even the best of the consumer books - will be hard pressed to figure out is how to identify the Achilles heel, where demand is high and so are profits. If you're getting a $3000 rebate, that leather you always wanted sounds nice and affordable. Even if you went into the dealership with good intentions of buying the base model car - trust me, that's not the one you're going to see on the showroom floor. And if you do, it's hidden in some corner. The industry hopes the hypnotic smell and vision of yourself behind the wheel with leather and a few other bells and whistles - ether they call it - will last until you drive off. It's worked. So in this "Don't Cry For Me Argentina" speech, Smith informed the analysts that with all the rebates and zero percent financing, revenues were up $7.5 billion last year.
For KERA Marketplace Midday, I'm Maxine Shapiro.
Marketplace Midday Reports air on KERA 90.1 Monday - Friday at 1:04 p.m.
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