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DETROIT -- How do you make more profit while selling fewer vehicles? By controlling inventory and squeezing more revenue out of each transaction.

General Motors is capping production of the Chevrolet Impala sedan at 250,000 units for sale in the United States and Canada this year, a knowledgeable source says. That means GM is sacrificing about 60,000 sales of its best-selling car. GM also will emphasize higher trim levels to increase transaction prices.

The automaker is trading unit volume for what it expects will be higher transaction prices, lower incentives and higher residual values. One key goal: Cut fleet sales of the Impala, which hit 50 percent of total Impala sales last year.

GM also will cut costs by cutting the third shift at the Oshawa, Ontario, plant where the Impala is assembled.

GM is adjusting production on other good sellers to manage inventory and extract more revenue out of each transaction. The source says GM will hold production of the Chevrolet HHR at 120,000 units rather than add capacity to build more of the popular sport wagon.

By contrast, GM is increasing production of higher-priced versions of the so-far-successful new Tahoe large SUV.

Sale prices rise

GM's is seeing higher transaction prices for the new Impala, which came out last fall, and the new Tahoe.

According to J.D. Power and Associates' Power Information Network, the 2006 Impala's average transaction price last month was $22,082, compared with the 2005 model's average transaction of $20,387 a year earlier. (See box.) The base Impala starts at $20,990, including shipping. The top Impala model starts at $26,990.

The 2007 Tahoe's average transaction price in February was $41,233, compared with the 2006 model's average transaction price last February of $34,546, according to the PIN data.

The 2007 Tahoe's average turn rate is 13 days, compared with 94 days for the 2006 model. The top-line model Tahoe has a sticker price at $38,990, including shipping.

U.S. Tahoe sales for the first two months of 2006 were 28,524, up 49.8 percent from the year-ago period, according to the Automotive News Data Center.

Chevrolet General Manager Ed Peper says demand is strong for the high-trim versions of the Tahoe, prompting GM to build more 3LT and LTZ models.

Chevrolet executives monitor dealers' orders daily and make production adjustments, Peper says. One surprise, he says, has been sales of the high-trim Impala SS models with V-8 engines, which the old model didn't have.

In 2004 GM built 296,594 Impala sedans, and last year built 258,524 as it phased out the old version and ramped up to build the new one. GM sold 311,135 Impalas in the United States and Canada in 2004, the last full year of production of the old model.

GM could easily sell 300,000 Impalas this year, the source estimates. But GM is set to cut a third shift sometime this year at the Oshawa plant. GM added the shift in June 2002.

GM would have to keep that shift if it were to build the maximum capacity, the source says.

Peper would not comment on the shift. But he says GM wants to limit fleet sales and increase retail sales to bolster residual values.

50% fleet

Last year, fleet sales were slightly more than 50 percent of Impala sales, says a source familiar with the data who asked to not be identified. Those data include 2005 and 2006 models. Fleet sales of a key competitor, the Toyota Camry, were less than 10 percent of overall 2005 sales, the source said.

According to figures from Automotive Lease Guide in Santa Barbara, Calif., the 36-month residual on the 2006 base Impala LS is 42 percent. That jumps to 44 percent on the LT model with the 3.8-liter V-6 and 45 percent on the high-trim SS model.

The 36-month residual on the base Camry is 49 percent, and it's 51 percent on the top-line Camry XLE V-6, according to Automotive Lease Guide.

At the end of last year, Chevrolet increased production of the HHR and will boost it again this year, Peper says. He declined to give a specific number. But a knowledgeable source says that after "several capacity adjustments," GM plans to build about 120,000 HHRs this model year.

"That's max without building additional capacity," the source adds.

Chevrolet launched the HHR last June and sold 41,011 of the sport wagons in 2005. During the first two months of this year Chevrolet sold 16,610, according to the Automotive News Data Center.

Managing Tahoe production is complicated by the fact that it is part of a group of full-sized SUVs coming out of the Janesville, Wis.; Arlington, Texas; and Silao, Mexico, assembly plants. That means that any changes to Tahoe production must take into account the coming launches of the Chevrolet Suburban SUV, due in late April, and the Avalanche pickup, due this summer.

Other full-sized SUVs built in those plants are the GMC Yukon and Yukon XL and the Cadillac Escalade, Escalade EXT and Escalade ESV.

In 2005, according to the Automotive News Data Center, GM built 495,201 trucks at all three plants combined, on two shifts.

autoweek
 

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Good plan, fleet sales only cheapen a brand and undermine resale values etc.

How to kill a brand 101: Ford did this to the Taurus, they took the #1 selling family car in the country, yes it was beating the Camary and Accord, ignored it's development, cause SUV's were becoming hot sellers, and propped the sales numbers up with fleet sales. So it became a car that no one wanted because it screamed rental car cheap and the trade-in value sucked.
 

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prored2000 said:
Good plan, fleet sales only cheapen a brand and undermine resale values etc.

How to kill a brand 101: Ford did this to the Taurus, they took the #1 selling family car in the country, yes it was beating the Camary and Accord, ignored it's development, cause SUV's were becoming hot sellers, and propped the sales numbers up with fleet sales. So it became a car that no one wanted because it screamed rental car cheap and the trade-in value sucked.

At the time, however, this was a smart business decision. They could sell SUVs for more than they could sell cars. I would have made the same decision to increase SUV development at the expense of the cars, however, I would not have neglected cars to the extent that they did.
 

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This is great. Between Ford and GM, we are seeing what it takes to really revamp and become more profitable in the face of possible extinction. These next 5 years will be very exciting to watch with changes in sales strategy, competitor strategy, marketing and brand imaging.
 

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hobie237 said:
At the time, however, this was a smart business decision. They could sell SUVs for more than they could sell cars. I would have made the same decision to increase SUV development at the expense of the cars, however, I would not have neglected cars to the extent that they did.
Couldn't agree more. The problem is this with the "big 3":

Bring out a good car that sells well.

Since it sells well for a couple of years they'll move on to the next thing and ignore it.

Sales slow down as people turn to newer models from the competition, bring on the fleet sales to shore up sales.

Thus the brand gets cheapened. Taurus, Cavalier (back in the 80's the Z24 was cool lookin') and many other name plates have come and gone.


Let's look at Honda, the Civic is 33 years old, the Accord 30.

Having a long lived nameplates is good for a company Look at the Mustang, 41 years, still a strong seller. There were some bad years with the Mustang II but overall a great car.
 

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prored2000 said:
Let's look at Honda, the Civic is 33 years old, the Accord 30.

Having a long lived nameplates is good for a company Look at the Mustang, 41 years, still a strong seller. There were some bad years with the Mustang II but overall a great car.

The Impala and Malibu are two of the longest-running nameplates still in production...


but yes, there is too much moving on overall. Although one could make the argument that the Prelude was killed before its time...

I dont feel like trying to sort out the logic of this... lol
 

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hobie237 said:
The Impala and Malibu are two of the longest-running nameplates still in production...


but yes, there is too much moving on overall. Although one could make the argument that the Prelude was killed before its time...

I dont feel like trying to sort out the logic of this... lol

The Impala and Malibu are not continuoslly running name plates, lest we forget the Lumina? Chevy brought back the names to capitalize on their nostalgia factor. Plain and simple.

bojacks said:
wait wait, people are actually buying the HHR? and they are going to buy 120,000 units this year?
Actually, in AZ I see more HHR's (about 3 a day) than I see PT Cruisers.
 

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Peteex said:
The Impala and Malibu are not continuoslly running name plates, lest we forget the Lumina? Chevy brought back the names to capitalize on their nostalgia factor. Plain and simple.
.
inconsistent name plates eh? they made so many and they come and gone.
 

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Peteex said:
The Impala and Malibu are not continuoslly running name plates, lest we forget the Lumina? Chevy brought back the names to capitalize on their nostalgia factor. Plain and simple.
Very well said. I feel that the nostalgia factor is what we're seeing with the Corvette(although never really stopped), mustang(<like the other one), charger, camaro, challenger and a host of others to come im sure.

The only problem i really see is that the nostalgia factor is a fad. not only is it a fad but it's also very difficult to take a modern car turned retro and make it more retro or more modern without suffering the pain of a million enthusiasts' wrath(see 2004-2006 Pontiac GTO).
 

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LevelSevenCivic said:
Very well said. I feel that the nostalgia factor is what we're seeing with the Corvette(although never really stopped), mustang(<like the other one), charger, camaro, challenger and a host of others to come im sure.

The only problem i really see is that the nostalgia factor is a fad. not only is it a fad but it's also very difficult to take a modern car turned retro and make it more retro or more modern without suffering the pain of a million enthusiasts' wrath(see 2004-2006 Pontiac GTO).
Mustang sales are not a fad, they've been selling 150K to 200K for years, not just the new retro model. Don't know 'Vette sales. Camaro and Challenger could end up being fad cars. VW new Beetle, fad car, first couple of years it was hot but the sales have cooled.
 

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prored2000 said:
Mustang sales are not a fad, they've been selling 150K to 200K for years, not just the new retro model. Don't know 'Vette sales. Camaro and Challenger could end up being fad cars. VW new Beetle, fad car, first couple of years it was hot but the sales have cooled.
yes i must say.. the true pony car = mustang. wow.. they never stop selling and they sell in large number too. salute!!! unlike GM. kill revive strategy
 

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dodolaje said:
yes i must say.. the true pony car = mustang. wow.. they never stop selling and they sell in large number too. salute!!! unlike GM. kill revive strategy

True American sports car- Corvette. They just keep selling them and they've sold 1.4 million so far. Not too bad. Oh wait, that was GM.
 

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hobie237 said:
True American sports car- Corvette. They just keep selling them and they've sold 1.4 million so far. Not too bad. Oh wait, that was GM.
really didnt know vette sold so many.. more than stang? hm.. interesting..does anyone know the mustang number?
 

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dodolaje said:
really didnt know vette sold so many.. more than stang? hm.. interesting..does anyone know the mustang number?

I think they made a million Mustangs in the last 3 years or something. Its way more than the Vette, I'm just pointing out that Ford isnt the only company with long-running successful cars.
 

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hobie237 said:
I think they made a million Mustangs in the last 3 years or something. Its way more than the Vette, I'm just pointing out that Ford isnt the only company with long-running successful cars.
well ford and chevy trucks been here awhile now... cars.. come and gone.. low volume is diff than the high volume.
 
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