GM Prices Buick Regal; Losing Money on Every One?

By Michelle Krebs January 21, 2010

Buick Regal 2011 front.jpgGeneral Motors announced an attractive price on its 2011 Buick Regal, which is generating a lot of positive buzz. But the automaker likely will lose money or at least not make much on every one it sells in the early going.

The Regal, which begins arriving in dealerships in spring, will start at just under $27,000. But pricing the Regal was tricky business.

The new Regal is based on the German-made Opel Insignia, and the earliest versions to be sold in the U.S. will be made in Europe. That means the dollar-euro exchange rate is highly unfavorable. The situation changes in the first quarter of 2011 when Regal production shifts from Russelsheim, Germany, to GM's plant in Oshawa, Ontario, Canada.

 

GM Vice Chairman Bob Lutz told reporters at the Detroit auto show last week that GM had two choices in establishing pricing for the Regal.

"We could either price it where the euro-dollar exchange would want it priced -- where it would be almost sales proof," he quipped. "Or we could forego any significant profitability on the vehicle until we can get the plant in Canada producing the Regal.

"We're taking Plan B because it would be ridiculous to overprice the car for the first eight or nine months and then drop the price when it is produced here," he said.

As a result, Lutz warned Regal production -- and thus sales -- will be relatively low volume, about 35,000 in its first year.

No Price Leader To Promote

Buick also is challenged by the fact that it can't advertise its least expensive model, the CX. The entry Regal does not go into production until the Canada plant is up and running in early 2011. GM has not priced that 2012 Buick Regal CX, but Edmunds.com pricing analyst Ivan Drury predicts it will list at about $23,000. A top-of-the-line CXS version arrives at the same time.

For now, the lowest priced 2011 Buick Regal -- the midlevel CXL -- starts at $26,995 (including a $750 delivery fee), precisely the same price as the base model of the Buick LaCrosse. The CXL will be the only trim level available initially. A turbo version starts at $29,495.

The Regal comes with a 182-horsepower 2.4-liter direct-injection engine. The 2.0-liter turbocharged, direct-injection version, rated at an estimated 220 horsepower, arrived in late summer.

buick-trim-level.gifCannibalization Prevention

With only four brands remaining, GM is desperately trying to position its vehicles in marketing and pricing against non-GM competitors.

However, the Regal, in the early going, is being cross-shopped against its own siblings and its cousins. Edmunds.com's analysis of shopping traffic on its Web site shows nearly half -- 46 percent -- of people who have a Regal on their shopping list also consider Buick LaCrosse. Fourteen percent consider Buick Lucerne. Nearly 12 percent check out Chevrolet Malibu. Of the most cross-shopped vehicles, the only non-GM product to be considered by Regal buyers is the Ford Taurus.

buick-regal-cross-shopped.gifThose patterns may shift as the Regal hits the streets. Indeed, buzz on Edmunds.com sites has been substantial since the production version was unveiled at the Los Angeles auto show in December and the concept Regal GS made its debut last week at the Detroit auto show. Writing on Edmunds' Inside Line, one reader called the Regal "sexy." Another said it "looks like I'll be driving a Buick for the first time in my life." -- Michelle Krebs, Senior Analyst and Editor at Large

Photo by GM

GM unveiled the Buick Regal GS Concept at last week's Detroit auto show.

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billddrummer says: 4:46 PM, 01.21.10

An example of what got GM in trouble to begin with--selling cars for less than they cost to produce.

In 2008 the company lost $37,000 on every vehicle it sold. At least with this car, the loss is narrower.

guy1974 says: 9:54 AM, 01.22.10

I wish people would stop moaning like Bill. What would you want GM to do, price it high and then reduce the price in 9 months when production moves to Canada? Or would you just wait nad let a great car age by 9 months in this competitive industry?

GM has a good plan, limited volume to limit the losses, minimise the loss by having only CXL and establish the car and name in the marketplace.

fulcrumb says: 9:51 PM, 01.22.10

What I would like GM to do is stop being stupid with our money.

Tooling up in Germany where the union labor costs are higher, and at an unfavorable exchange rate, higher shipping because of, well, ships; all for a rather optimistic 35,000 cars. More like 20,000. Or less.

What is the point? Beat Chrysler to the market before the Sebring replacement is out?
The Regal's Main conquest sales will come from the Malibu and the La Crosse
They should have taken plan C; just wait until Oshawa comes online. I can't wait to see the True Cost of Incentives.

David Greene says: 2:48 PM, 01.25.10

I'm really annoyed that GM is planning to sell Regal at cost or at a slight loss, but the reality is that 35k units of Regal sales is 35k units that competitors won't be selling for a profit. It's a very defensive sales strategy; customers are going to buy a car when they want one, most would not wait nine months for the Regal to go on sale.

steve_ says: 8:37 PM, 01.26.10

Losing money on every one?

That's ok - they'll make it on volume.

/badda bing

orbit9090 says: 6:04 AM, 08.31.10

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Too bad the Buick Regal is an import.

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