GM Attempts Partnership with Credit Unions in Cynical Marketing Push

From a draft press release (GM Draft Press Release 12/3/08) distributed December 3, 2008 to Illinois credit unions:
Credit unions in Ohio, Michigan, Indiana and Illinois announce partnership with General Motors as the first phase of "Invest in America," a plan to boost domestic automaker sales and strengthen the U.S. economy.

DETROIT, Michigan – December 7, 2008 – General Motors Corporation and a consortium representing over 1,100 Midwest credit unions announced today the Invest in America Partnership. At a time when economic stress is sweeping the nation and threatening the survival of the U.S. auto industry, this partnership will provide affordable financing and exclusive discounts for 12 million credit union members in four states as well as anyone who becomes a member of a participating credit union. Eligibility rules have recently been relaxed to allow virtually anyone to join a credit union. The four states represent a population of approximately 30 million and each state’s economy has been particularly battered by manufacturer downsizing and the national housing crisis.
Through this Invest in America promotion, GM is offering to discount from MSRP (Manufacturer's Suggested Retail Price, i.e., "the sticker") 4.5% on Buick, Cadillac, Hummer, Saab, Chevrolet, GM, Saturn and Pontiac vehicles.  Plus, as part of the "Red Tag" promotion, an additional $250 during the month of December.   This pricing is being offered to Credit Union members with the implication that "Invest in America" is GM's best price.

The problem is, any consumer—whether a credit union member or not—can walk in off the street and get a better price.  A much better price.

Why?  Because dealers control the final sales price, and dealers are desperate to sell cars.  Especially those on GM model lots.

Another issue is that GM's press release claims, "MIDWEST CREDIT UNIONS PLEDGE $10 BILLION IN LOW-COST AUTO LOANS TO BOOST GM AUTO SALES AS PART TO (sic) THE “INVEST IN AMERICA” PARTNERSHIP."  Credit Unions may be willing to help consumers, but no institution will give away money or take extra risks with loan approvals.  GM just pulled the "pledge" number from thin air to help drive consumers to their showroom. 

What will happen when the credit union member selects a vehicle, and is sitting in front of the dealership's finance manager?  There is nothing in the Invest in America program that promises to drive business back to the credit union.  That finance manager earns commissions on loan business steered to specific lenders. Also recall that GM owns a majority interest in GMAC, probably a bigger competitor to credit unions for auto loans than banks. 

Financial institution regulators might also want to know more about GM's claim that "Eligibility rules have recently been relaxed to allow virtually anyone to join a credit union." 

Just exactly how are banks going to react to GM's efforts to court credit union members?  Probably a non-event for banks, who are the likely beneficiaries of any indirect loan business that Invest in America may generate.

This marketing push, which will largely be waged in media, may be one of the most cynical promotions any car maker has ever undertaken.  GM is waving the flag, making empty claims about loan rates, implying that credit unions will gain loans and membership, all in the hopes that consumers will pay more for GM cars. 







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Posted by Mark Rodrigues at 12/4/2008 2:49 PM
Categories: Credit Unions,Management,Lending
 

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