Dennis DesRosiers
The incentive war that is driving light truck sales in Canada to astonishing highs has now also turned into a war of words.
Auto analyst Dennis DesRosiers - a proud economist by training, rigorous by temperament and slightly combative by inclination - is suggesting that the incentive levels driving light truck sales and pickup sale in particular are "stupidly high," adding that in the case of General Motors, "Incentives levels like this were also the reason GM ended up in bankruptcy in 2009, but I digress."
DesRosiers was prompted to send a note to clients clarifying an earlier comment about incentives on GM's pickup. Here's the problem: In comments about the Top 10 selling cars and trucks in Canada, he said "If the buyer qualified for all these (GM pickup) incentives they could get up to $20K off their purchase of a GM pickup truck … only 2010 models mind you but they have a number in stock, so supply is not likely to be an issue."
GM Canada took offence, pointing out that the buyer able to take full advantage of all the available sales sweeteners on, say, a 2010 GM Sierra/Chevrolet Silverado heavy duty pickup would be able to qualify for only up to $16,000. To which DesRosiers said the incentives listed by GM Canada "did NOT include the subvention of interest rates. We use an estimate of $800 to $1,000 dollars of incentive dollars per point of interest rate subvention and depending on what interest rate you use this would add another $2,000 to $3,000 to these incentive dollars.
"So to be fair to GM, the maximum level of incentives on their pickup trucks would be closer to $17,000 to $18,000, rather than $20,000, so I stand corrected." He apologized to GM for his error, too. Very nice. He also went on to discuss pickup incentives at Ford of Canada, which are also very rich. The same at Chrysler Canada on the Dodge Ram pickup (see the end of this story for details).
DesRosiers then dove into a discussion about how car companies book revenue from an accounting point of view. That is, car companies book as revenue a vehicle that leaves the factory and is "floor-planned" by a dealer.
In simple terms, this means car company revenue is NOT a direct reflection of sales to consumers, but of deliveries to dealers who then must sell what's on the lot to you and me. He then suggests the inventory build-up is a major reason why the marketplace is filled with such generous and profit-sapping incentives.
Ever the free market capitalist, the main point DesRosiers wants to make is that it is folly to run car factories to produce vehicles real customers won't buy without thousands of dollars in the trunk - or in the pickup bed, in this case. His might be referred to a call for sanity.
"I hope GM succeeds and I believe that GM is making a lot of progress," writes DesRosiers. "But GM still is a very long way from being out of the woods on their return to being a viable vehicle company.
"GM won't listen to a 'nobody' auto analyst in Canada, but my one piece of advice: Don't repeat the dozens of bad management decisions that forced you to become Government Motors to survive. If the market is stalled, slow down your production lines. Tell the truth. The truth will hurt but it will keep you out of the trouble you've been in for about two decades now."
I'd only point out that in my regular Deals of the Week column in Globe Drive, I've recently detailed pickup truck incentives at Ford, GM and Chrysler. Here's what I reported in November:
2010 Dodge Ram 2500 SLT 2WD 149-inch bed
MSRP: $42,145
Freight, dealer prep and air conditioning tax: $1,500
Dealer discount (estimated): $2,000
Factory discount: $7,000 (Consumer Cash factory to dealer rebate; can be combined with Special Finance Rates of 0.0 per cent)
Taxable subtotal: $34,645
Total price with 13% HST: $39,148.85
2010 Ford F250 Super Duty XLT Crew Cab 2WD
MSRP: $43,399
Freight, dealer prep, air conditioning tax: $1,500
Dealer discount (estimated): $2,500
Factory discount: $10,000 (Delivery Allowance, factory-to-dealer rebate)
Factory discount: $1,500 (Ford Finance factory-to-customer rebate)
Taxable subtotal: $30,899
Total price with 13% HST: $$34,915.87
Factory discount: $3,000 (Recycle Your Ride)
Government Discount: $300 (Retire Your Ride)
Factory Discount: $1,000 (Loyalty Bonus)
Final price: $30,615.87
2010 Chevrolet Silverado HD2500 LT 2WD Crew Cab
MSRP: $44,620
Freight, dealer prep: $1,450
Dealer discount: $2,500 (The dealer discount is the estimated amount a tough negotiator may be able to achieve. There is no factory involvement here.)
Factory rebate: $10,000 (Stackable Cash factory-to-dealer rebate)
Factory rebate: $1,500 (Holiday Bonus, factory-to-customer rebate)
Taxable subtotal: $32,070
Total price with 13% HST: $36,239.10
Factory discount: $3,000 (Cash for Clunkers)
Government discount: $300 (Retire Your Ride)
Factory discount: $1,500 (Discontinued Brands)
Factory discount: $500 (Canadian Forces Appreciation Program discount)
Final price: $30,939.10
Note: 3.0 per cent financing for 48 months and 90 days no payments
Pricing information source: www.carcostcanada.com. Calculations based on Ontario customers. Please note that while the information above is accurate at the time of publication, incentives are given at the discretion of individual dealers, and may be changed or discontinued at any time. Dealer discounts are negotiated with the customer on a case-by-case basis.