GM OUTLOOK TO DEALERS

February 12, 2006—While acknowledging recent GM financial concerns, GM representatives worked to strike an optimistic note at the annual make meeting. Spokesmen used most of the session to reinforce GM's positive messages about its product lineup. In the face of rising gas prices and softening SUV sales, GM touted the improved fuel efficiency of its engines and the range of technology that will be available to consumers—hybrids, diesels, ethanol, and super-efficient gasoline.

Dealer Stephen O'Regan says he's "still a believer": "SUVs are not a dead duck. People are still buying them, and when they compare [GM offerings] with other products, they'll find good mileage and powerful drive trains."

Dealers did voice concerns about how the automaker's plans to sell GMAC will affect them. "Some people are concerned about it being sold off, while others are concerned that GMAC's not doing anything for dealers, anyway," said dealer Loren Campbell of El Cajon, Calif.  One attendee said his approval rate with GMAC went from 75 percent to 25 percent, with no explanation, said Campbell. His own relationship with the captive is not good—"They're very fickle. If you don't floor-plan with them, they don't want anything to do with you."

On the bright side, dealers expressed support for GM's new pricing strategy, aimed at kicking its incentives habit once and for all.  Dealer Hooman Nissani, Culver City, Calif., believes the gamble will work "in the long term" and has seen a small upturn in floor traffic since GM announced the change.

O'Regan says GM "has given every indication that they understand the need [to eliminate heavy incentives], they know that reverting back is not an option, and they're committed to staying the course" until consumers get the message.

"I hope that GM can get the message through to the marketplace quickly so there won't be a loss of sales," O'Regan added.