GM’s Free Insurance Incentive – Innovation or Desperation?

car insurance graphicGeneral Motors recently launched a pilot program in the Pacific Northwest offering free auto insurance on GM vehicle purchases. The move immediately drew criticism from independent insurance agents who point to possible legal problems with the move, as reported by The agents are obviously concerned with the potential loss of business, but they make valid points that there are regulatory and licensing requirements that go with the offering of insurance products.

Other concerns raised include provisions that might exist for consumers who have more than one vehicle and are required to insure the vehicles under the same carrier. Are the incentive gimmicks at GM innovative marketing or a sign that they are becoming desperate to drive sales?

GM has historically offered gimmicky incentives in an attempt to drive sales. This latest promotion seems to carry extra logistical challenges; why does GM continue to rely on controversial marketing strategies instead of focusing on the basics? While competitors like Hyundai and Kia are knocking the cover off the ball by offering quality vehicles with excellent value, GM is trying to drive sales with complex incentives and their version of a “bait and switch” technique that hypes the Chevy Volt in order to get consumers into showrooms where they can be flipped to Chevy Cruze sales.

When I worked as a business manager for a Saturn dealership, I was often baffled by the incentive strategies at GM. I counted 50 different incentives offered at one given time. Most of these incentives are not advertised and are referred to as “targeted” incentives. Typical incentives offered are “Loyalty” for GM owners and “Conquest” for non-GM owners. Wouldn’t it make more sense to just offer one incentive that could be advertised for all buyers? It gets worse. Other incentives include “GM Driver Education”, “My Railroad and Utility”, “GM Mobility Adaptive Equipment”, the list went on and on. There were incentives for horse owners and incentives for RV owners. You just can’t make this stuff up!

GM staffs a full bureaucratic department to process incentives. Dealerships are audited and required to produce documentation in order to be reimbursed for incentives. Is this looking like a company that is run like an inefficient government entity yet? Did the folks at the Auto Task Force who were responsible for restructuring GM look in to the operations and compare them to how things are done at more profitable auto makers?

Here’s the point. GM was and is run less efficiently than many of its competitors. The bureaucratic environment that was partially responsible for GM’s first bankruptcy still seems to exist. There was a missed opportunity to restructure GM into the most competitive player possible. President Obama chose not to include auto industry experts for his Auto Task Force. The selection of union negotiator, Ron Bloom, to be the eventual head of the group responsible for restructuring GM exposes that the main focus of the Task Force was to protect the UAW rather than to rebuild GM in to the best run company it could be. The current leadership at GM has been hand picked by the Obama Administration. It is time for shareholders, including taxpayers, to ask if the people running the show at GM are the best ones to lead the company towards sustainable profitability.

Mark Modica is an NLPC Associate Fellow.