Novice Investing - GM Desperado

Date: Monday 01st 2008f December 2008 04:25:49 PM

GM Desperado - 11/15/2005

By: Novice Investing Staff

Several days after we wrote the first article concerning GM, the company unveils a new strategy that causes it trouble on the first place. General Motor Corporation (GM) announced yet another discount pricing.

It is not an employee discount this time. It is called 'red tag' which they explained on their website as "The price on our tag is the price you pay. Not a penny more." After incentives, buyer can get a Chevy Tahoe for $ 32,000 instead of $ 39,000. On average, consumer will enjoy a discount of between $ 5,000 to $ 7,000.

Have they lost their mind? This is yet another desperate move in their part. GM's average selling price is $ 3,500 lower than Toyota and this is part of the reason why. It makes more sense for GM to focus on making quality cars with appealing design.

Another thing that GM needs to do is to reduce its cost structure. Our previous article noted that GM is giving away $ 100,000 a year per idled worker. This is the most generous compensation that you would come across. Even most of us can't get that much money when we work, let alone when we don't work.

Sure, bringing the whole new product lines takes time. Hopefully, this 'red tag' gimmick is just another way to hold off their market share before their real product line come online. But if this discounting is their main strategy to get people into the lot, then you better think twice before owning GM's stock. It might save you a lot of money.



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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding General Motor Corp. (GM) or any other securities.

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