Gm has a fair amount of fixed costs they incur whether they sell a vehicle or not. The money they are getting for these cars (though less than they would like) is defintiely still additive. One of the issues they have is a contract they signed with the UAW where "laid off" or "furloughed" workers get close to their full pay whether they work or not, so effectively these are fixed costs. So all their corporate costs are fixed, labor costs essentially fixed, money already been spent builindg all the factories and tooling the lines for the specific vehicles - all of these combined are a pretty big compnent of their costs per vehicle. The variable costs would be marketing, parts, and shipping to dealers, and I would think the money they get even at discounted prices easily cover these costs.
The differential between the 3 domestic brands is not that great, so once GM has success with this program (similar to the 0% promotion post 9/11), F and Chrysler are forced to match. Also, similar to the 0% post 9/11 GM got a nice one month benefit by being the first to come up with this offer.
The differential between the 3 domestic brands is not that great, so once GM has success with this program (similar to the 0% promotion post 9/11), F and Chrysler are forced to match. Also, similar to the 0% post 9/11 GM got a nice one month benefit by being the first to come up with this offer.
