GM announced today that they will pay out up to $150 million to vehicle owners because they can not correct a problem that poses a fire hazard in some vehicles. The recall is one of the largest this year, and impacts 1.5 million GM cars. The company will disconnect a heater that is supposed to warm the windshield washer fluid prior to it spraying on the windshield. Toyota suffered a massive drop in sales on the heels of their recall and prior cover-up of safety issues.
The Issue could pave the way for Ford to move into the number 1 sales position in June. Whether or not that happens will depend on the media coverage that surrounds the recall. GM is offering consumers $100 each for the problem. This move may be enough to show that the company is being responsive and proactive. Ford sold only 23 thousand fewer vehicles than GM in May. Ford's image has been improving for a year, and has not suffered from the recall issues that the other two big OEM partners have. Look for Ford to step up their advertising and focus on ford quality.
What could be a unique solution would be for Sirius XM to step in and help their OEM partner by offering those impacted by the recall a free 1 year satellite radio subscription in lieu of the $100. Sirius XM could garner some new subscribers, and could work a deal with GM to give up the revenue share on that 1 year subscription. GM could market it as a $150.00 value, and perhaps make the consumer happier than a simple $100. GM could also offer up another choice with their OnStar service, giving the consumer perceived power in the process. This would be a valuable tool to ensuring customer satisfaction with the recall process. It would be a unique marketing effort that Sirius XM could gain from in more ways than one.
1. They would have an instant influx of subscribers that would not be eligible for churn for a year.
2. This would be subscribers that do not already have Sirius XM, and thus they would have a chance to prove the value of their service with a 1 year subscription that the consumer gets for "free".
3. They would save on revenue share on these subscription by accepting $100 from GM in lieu of the normal $150 that a 1 year subscription would cost. The revenue would equate to a family plan sub.
The boost in subscribers would be an instant benefit, but the exposure for could be worth even more. Figuring 60% penetration, it is likely that 900,000 of those cars are capable of delivering satellite radio. Even if someone is already a subscriber, they may want to take advantage and add a year to their current plan. If only 10% took advantage, that would be nealy 100,000 people that would be happy with Sirius XM all year long, and perhaps many will stay on. It is a marketing campaign such as this that could ignite a new wave of positive sentiment towards Sirius XM.
Position - Long Sirius XM Radio