GM’s Strategy for Strengthening Residual Values and Boosting Profit

Leasing

Gen­er­al Motors Corp. is aim­ing at boost­ing its prof­it mar­gin by $200 mil­lion annu­al­ly . Resid­ual val­ues rose to 44% last year from 36.5% in 2009 dur­ing bank­rupt­cy reor­ga­ni­za­tion, ALG says. Strong resid­u­als mean that GM can offer cus­tomers low­er month­ly lease pay­ments, as the cost is based on pro­ject­ed resale val­ues when the con­tract ends.

As for GM’s mar­ket­ing strat­e­gy to raise resid­u­als…

1. The Big 3 – great prod­ucts, pric­ing, and incen­tive dis­ci­pline, GM North Amer­i­ca CFO Chuck Stevens said at a Bank of Amer­i­ca forum.
2. Boost­ing oper­at­ing mar­gins to be more com­pet­i­tive with Ford and Volk­swa­gen – which is being pushed by CEO Dan Aker­son.
3. Roll out new prod­uct – GM has 20 new mod­els debut­ing in the US this after its mod­els had grown stale.
4. Rolling out fresh mod­els like Chevro­let Cruze with a strat­e­gy to avoid hurt­ing them with too many dis­counts and cap­ping sales to rental car com­pa­nies.
5. Brand­ing is going well for Cadil­lac, which saw the largest improve­ment among GM four US brands, ris­ing from 34.7% to 45.6%. For Chevro­let, the Impala is an impor­tant ingre­di­ent in its brand strat­e­gy.
6. GM is boost­ing sales in Cal­i­for­nia and the East Coast, which do more leas­ing than in oth­er mar­kets.

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