Success begets success, except in the nation's automobile industry.
U.S. car manufacturers have had a winning summer, thanks to General Motors Corp.'s widely copied "employee discount" sales program, which offers cars and trucks to consumers at the same cut-rate prices charged to GM workers.
Buyers like the idea of paying one price, of not worrying about feeling foolish for spending more than another customer for the same car or truck. Besides offering bargains on 2005 models, with the best deals being on pickup trucks and sport-utility vehicles, the discount program takes the hassle out of car buying. That is a good thing.
It certainly was good enough to boost U.S. car and truck sales to record monthly levels for the second month in a row. Sales at DaimlerChrysler Corp.'s Chrysler Group were up 32 percent year-to-year in July. Ford Motor Co. posted a 29 percent sales gain; and GM's sales rose 20 percent.
The original idea was to get rid of bulging 2005 inventories, especially fuel-thirsty trucks, in an era of rising gasoline prices. The employee discount program accomplished that task admirably, reducing to a scant two weeks' supply some vehicle lines that had swollen well beyond the car industry's traditional "normal" vehicle supply level of 60 days.
Understandably, GM, Ford and Chrysler have chosen to extend their versions of employee discounts for the public through September. But that is a half step, a possible missed opportunity to bring some sanity to new-vehicle pricing in the United States.
The underlying genius of employee-discount selling is that it provides consumer peace of mind. Most people hate haggling over price. They have neither the time nor the patience for it.
That is why, for many consumers, buying a new car or truck is the adult equivalent of marching into a schoolroom on a Saturday morning to take a scholastic aptitude test. Few people yearn to go in. No one wants to leave the room a failure.
Racecar great Roger Penske, now the nation's second-largest new-car dealer, understands that consumer angst. He wants to get rid of it. He says employee-discount selling shows the way.
Employee discounts essentially are a form of "no-haggle selling," Penske said late last month in an interview with the Detroit Free Press. He said car companies should implement no-haggle pricing and selling across the board, because that is what consumers want.
"My own takeaway [from GM's employee discount program] is that the closer we can get to one price in this business, the better we are going to be long-term," Penske said in the interview. Such pricing calms the consumer because "the consumer sees the price, knows the price," he said.
Penske is chairman of United Auto Group Inc., an automotive dealership chain based in Bloomfield Hills, Mich. UAG sells new and used vehicles through 143 dealerships in the United States, and through 96 others internationally. In other words, Penske has more than enough street credit to speak on the no-haggle pricing issue.
But the evidence is that the car companies, wedded as they are to the price hike-rebate cycle, and anointed in the murky rituals of horse-trading, are not listening -- at least not very well.
GM's response, for example, has been to continue its discount-selling program for another month and to reduce the base prices on 30 of its 76 models for sale in 2006. GM also plans to standardize more equipment, such as its popular OnStar emergency communications and concierge system, on its cars and trucks. Ford is coming up with a similar program, and Chrysler is expected to do something similar as well.
But no car company, so far, seems willing to commit itself to an across-the-board, one-price, take-it-or-leave-it deal.
"Almost every year, the manufacturers say: 'That's it. We're getting rid of rebates. No more rebates,' " said John Possumato, a former Chrysler dealer who now serves as vice chairman of Driveitaway.com, which specializes in the sale of corporate used-car fleets.
"But every year, the car companies always go back" to the rebates game they say they and many of their customers don't like, Possumato said.
Rebates have become an addictive drug in new-car sales, even though many consumers suspect that car companies are discounting from unrealistically high prices in the first place, Possumato said. Consumers are "so conditioned" to discounts, "it's hard for the car companies to stop using them," he said.
U.S. car marketers say the same thing, and that's too bad because, clearly, based on the current results of employee discount selling, consumers are saying something else.