GM of­fers $10,000 dis­count on Es­calade

Au­tomaker try­ing to fend off in­roads by Lin­coln Nav­i­ga­tor.

Austin American-Statesman - - MONEY & MARKETS - By Keith Naughton and David Welch

In Cadil­lac and Lin­coln show­rooms, the bat­tle of the be­he­moths is on.

Gen­eral Mo­tors is step­ping up its de­fense of the Es­calade SUV, a cash cow for Cadil­lac and the com­pany, by of­fer­ing $10,000 dis­counts to some cur­rent cus­tomers to keep them from stray­ing to Ford’s hot-sell­ing new Lin­coln Nav­i­ga­tor.

The na­tion­wide deal ap­plies to lessees of all 2016 model Es­calades, and own­ers are be­ing of­fered a $7,500 dis­count.

The pro­mo­tion runs through May 31, ac­cord­ing to a memo GM sent deal­ers that was ob­tained by Bloomberg News. Jim Cain, a GM spokesman, con­firmed its au­then­tic­ity, call­ing it “an ex­clu­sive pri­vate of­fer” de­signed to “keep peo­ple in the fam­ily.”

GM has am­ple rea­son to keep Es­calade buy­ers com­ing back. The big sport util­ity ve­hi­cle gen­er­ates out­size profit from rel­a­tively mod­est sales: Mor­gan Stan­ley an­a­lyst Adam Jonas has es­ti­mated it pro­duces about $1 bil­lion in an­nual profit, con­tribut­ing to a $2 bil­lion earn­ings ad­van­tage GM has across all its large SUVs over Ford.

“GM i s try­ing to keep Es­calade buy­ers out of Nav­i­ga­tors, for sure,” said Jeff Schus­ter, an an­a­lyst at LMC Au­to­mo­tive. “You’ve got a fresh Nav­i­ga­tor and you’ve got an Es­calade that is not new and is start­ing to age.”

While the Es­calade out­sells the Nav­i­ga­tor, Lin­coln’s con­tender is quickly gain­ing ground. Nav­i­ga­tor de­liv­er­ies have risen 63 per­cent this year.

Last month, each one of the new SUVs lasted on dealer lots an av­er­age of just 10 days. The high-end Black La­bel Nav­i­ga­tors — which can top $100,000 — spent only about seven days in show­rooms, ac­cord­ing to the com­pany.

The av­er­age price paid in March for Nav­i­ga­tors bal­looned by about $25,600 from a year ear­lier to $82,500, roughly on par with the Es­calade, Mark LaNeve, Ford’s U.S. sales chief, said dur­ing an April 3 monthly sales con­fer­ence call.

The seg­ment’ s hefty prices give GM more room to ma­neu­ver when it comes to in­cen­tives. An­a­lysts es­ti­mate that profit per ve­hi­cle can top $20,000 on the Es­calade.

“GM is will­ing to forgo a lit­tle profit to keep loy­alty within the brand, but they’re still mak­ing money,” Schus­ter said. “The new Nav­i­ga­tor has sent a sig­nal to Cadil­lac that they need to be in front of this and be ag­gres­sive.”

This is at least the sec­ond sig­nif­i­cant deal GM has dan­gled to blunt the im­pact from the new Nav­i­ga­tor. In Novem­ber, GM of­fered Lin­coln own­ers a $5,000 in­cen­tive to trade in any model since 1999 for a new Es­calade.

The moves seem to be work­ing: Es­calade sales are up this year, and av­er­age trans­ac­tion prices have risen slightly, ac­cord­ing to Cain, the GM spokesman. Big lux­ury SUVs that are see­ing de­liv­er­ies de­clines through March in­clude the Mercedes-Benz GLS, Land Rover Range Rover and Lexus LX.

“This is a par­tic­u­lar bat­tle that GM doesn’t want to lose ground in,” LMC’s Schus­ter said. “It speaks to the im­por­tance of the Es­calade.”

GEN­ERAL MO­TORS

Mor­gan Stan­ley an­a­lyst Adam Jonas es­ti­mates the Es­calade pro­duces about $1 bil­lion in an­nual profit, part of a $2B earn­ings lead GM has over Ford across large SUVs.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.