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GM moves to boost loyalty, extends U.S. free-maintenance program
June 6, 2013 / 2:17 PM / in 5 years

GM moves to boost loyalty, extends U.S. free-maintenance program

DETROIT (Reuters) - General Motors Co on Thursday expanded a maintenance program for its cars and trucks in a move meant to boost revenue by making U.S. customers more loyal to its brands.

General Motors Chairman and CEO Dan Akerson meets with the media following GM's annual shareholders meeting in Detroit, Michigan June 6, 2013. REUTERS/ Rebecca Cook

Chief Executive Dan Akerson said Chevrolet, Buick and GMC customers in the United States will be covered by the new program, which includes free scheduled service for two years or 24,000 miles, whichever comes first. GM estimates that each percentage point increase in its owner loyalty rate boosts overall revenue by $700 million.

Akerson, speaking at the U.S. automaker’s annual shareholders meeting, said the company would also consider a stock dividend or share buyback, but the main focus was on investing in new programs, such as the free-maintenance program or new vehicles.

In a recent study, research firm Polk said all four of GM’s brands increased their owner loyalty rates in the first quarter faster than the industry average growth rate.

The move, covering most 2014 vehicles in those brands, is an expansion of a free-maintenance program introduced earlier this year for its full-size pickup trucks, the Chevy Silverado and GMC Sierra. The program, which covers leased vehicles, includes such things as oil changes and vehicle inspection.

“It makes sense to do this to kick the ownership experience off on the right foot,” Akerson told shareholders at the company’s Detroit headquarters. “It’s also strategic because we know that customers who service their vehicles at our dealerships are much more likely to purchase another GM product down the road.”

The offer, which covers up to four service visits and is transferable to subsequent owners, is meant to increase owner loyalty at its brands.

GM’s Cadillac luxury brand already has a four-year, 50,000-mile maintenance program.

Speaking separately to reporters, Akerson said GM would continue to consider a dividend and buybacks going forward. He cited the company’s December repurchase of a block of U.S. Treasury shares for $5.5 billion and said GM may take a similar approach again.

“Right now, we’re taking our cash and pouring it into new products, new facilities,” Akerson said when asked about the possibility of the company paying a dividend. “We’re trying to optimize our profitability.”

He referred to an SEC rule allowing shareholders to sell shares each quarter without any restrictions once their stake falls below 10 percent. Treasury’s stake in GM will fall to 13.8 percent once a sale it announced Wednesday is completed.

A group of labour activists protest in front of General Motors (GM) headquarters during the company's annual shareholders meeting in Detroit, Michigan June 6, 2013. REUTERS/Rebecca Cook


Akerson said GM has stabilized its money-losing European business despite industry sales in the region dropping to 20-year lows.

“We’re even seeing green shoots from our restructuring activities and new product launches, which will help us reach our objective to deliver break-even (operating earnings) by mid-decade,” he said.

General Motors Chairman and CEO Dan Akerson walks away from the podium after meeting with the media following GM's annual shareholders meeting in Detroit, Michigan June 6, 2013. REUTERS/Rebecca Cook

In May, GM posted a stronger-than-expected first-quarter profit that included a smaller than anticipated loss in Europe, where the U.S. automaker has reported 13 straight years of losses. Analysts had expected a quarterly European loss of $469 million, but GM instead reported a loss of $175 million.

GM went public in the autumn of 2010, after its 2009 bankruptcy restructuring and $49.5 billion U.S.-taxpayer bailout. As a result, the U.S. Treasury Department initially held a 60.8 percent stake in GM, but has been selling shares since then.

On Wednesday, Treasury announced plans to sell another 30 million shares of GM common stock as part of its ongoing effort to wind down the government’s stake in the bailed-out automaker. It has said it plans to sell its remaining shares by April 2014.

Akerson said he didn’t know whether Treasury might exit its GM stake before the end of the year, something analysts have suggested could occur.

The offering, which will take place along with the sale of 20 million shares of GM stock held by the UAW Retiree Medical Benefits Trust, will occur in conjunction with the company’s inclusion to the Standard & Poor’s 500 index at the close of trading on Thursday.

After the sales, Treasury will own more than 189 million, or 13.8 percent, of GM’s common shares, while the UAW Trust will own more than 185 million, or 13.1 percent, of shares, according to documents filed with the U.S. Securities and Exchange Commission.

Akerson also reaffirmed that GM is still aiming to increase its share of new-vehicle sales in the U.S. market.

GM shares were up 8 cents at $34.10 in morning trading on the New York Stock Exchange.

Reporting by Ben Klayman in Detroit; editing by Sofina Mirza-Reid

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