Chicago Tribune

As promised, General Motors will follow up on its current employee-pricing program on “05 models with lower sticker prices on its ’06 models. Dealers will contribute to the cause because one way to lower the manufacturer’s suggested retail price on ’06 models is to raise the invoice price dealers pay the factory.

But dealers won’t absorb the full cost of lower MSRPs. While invoice prices will rise, GM will also reduce its option prices to help bring down sticker prices, according to dealers who this week received pricing on selected ’06 models as well as details on incentives for ’06.

Dealers expect the ’06 sticker prices to be reduced more on such vital high-profit vehicles as full-size sport-utility vehicles than on low-volume units such as Uplander.

GM spokesman Jeff Kuhlman declined to comment on ’06 pricing.

“We’ll price individual models as they get close to being shipped to dealers over the next few weeks,” he said.

GM executives have talked to dealers about its pricing strategy and despite higher invoice prices, the overall reaction has been positive, Kuhlman said.

Don’t know how positive dealers will be, however, if sales fail to rise as a result of their monetary contribution.

One dealer said paying a higher invoice price hardly makes him happy, but the action was expected as the way for GM to lower the sticker without reducing its own profit.

“Some invoice prices will go up, and dealers will get less profit from higher invoices, but that’s only a piece of the strategy,” Kuhlman said.

“The money dealers make on options will be enhanced across the board in the dealers’ favor,” he said, though not explaining how when option prices are being reduced.

Either dealers are going to pay less for options or will be able to add more high-profit dealer-installed options. Stay tuned.

“Our biggest goal is to get the ’06 MSRP closer to the transaction price and get off the psychology of big incentives so consumers compare vehicles against one another, not incentive offers,” Kuhlman said.

The fact that GM has informed dealers of a rebate or discount financing programs on selected “06 models is proof rebates aren’t going away, but will shrink in size.

Under the new ’06 rebate/financing plan, GM is offering $500 to $1,000 rebates or a choice of 1.9 percent to 3.9 percent financing for 36 to 60 months on the Buick LaCrosse, Pontiac G6 and Grand Prix, GMC Yukon and Sierra.

Specifically, Chevrolet will offer a $500 rebate or discount financing on the “06 Uplander and a $1,000 rebate or discount financing on the “06 Suburban and Tahoe SUVs, Silverado and Colorado pickups and Impala sedan, less than half the rebate offered now.

Some models will be excluded from rebates, such as the low-volume “06 Cobalt SS and new for “06 HHR at Chevrolet, though HHR will offer discount financing.

Despite the rebate/financing plan, most “06 models aren’t in showrooms yet and as long as dealers have leftover ’05 inventories, they aren’t in any hurry to promote ’06s.

For example, an ’05 Impala that lists for $23,090 is employee-priced at $18,262 including a $2,500 rebate. While the ’06 hasn’t been priced and isn’t in showrooms yet, it will only carry a $1,000 rebate.

A dealer who asked to remain anonymous echoed the feeling among most dealers when it comes to ’06 models.

“Even with our sales in June (GM sales rose 47 percent with employee pricing) and now in July, I’ve got some ’05s left, but in the less popular colors and with either too many or too few options,” the dealer said.

“I’m not going to talk “06s until I get rid of my “05s. Why buy an “06 with a $500 rebate when they can buy an “05 with a $1,000 rebate plus employee pricing?”

The question that remains to be answered is whether lower stickers and smaller rebates will move the hardware. Or will consumers spoiled by employee pricing and higher rebates sit back and force GM, as well as Ford and Chrysler, to boost rebates on vehicles with stickers not padded to allow room for larger rebates.