GM plans to save $200 million per year by increasing resale values, therefore shrinking the gap with competitors who don’t have to offer so much for lease deals.
GM residual values increased to 44% in 2012 from 36.5% in 2009 when the company almost went bankrupt. High residual values help car makers give smaller monthly lease payments as the cost relies on he projected resale value when the contract ends. GM’s lower resale values in comparison with those of its rivals, mean that the automaker spends with $150 million to $200 million more annually to make its lease payments competitive.
“The key will be great products and pricing and incentive discipline,” said Chuck Stevens, chief financial officer for GM North America. “It’s that simple.”
GM CEO Dan Akerson tries to boost operating margins to make the automaker more competitive with VW and Ford. This year GM will introduce 20 new vehicles in the US market, after last year the market’s share dropped to an 88-year-low.
“Residual values, at the end of the day, are the ultimate acid test of whether the vehicle has been successful,” said Alan Batey, GM’s top U.S. sales executive and interim chief marketing officer. “Was it well received, did it have good quality and is it desirable, did people really want to buy it?”