Autos Suck Wind -GM Adds Incentives to Spur Sales
Tuesday July 6, 4:51 pm ET
By Michael Ellis
DETROIT (Reuters) - General Motors Corp. has added new sales incentives to spur demand after its U.S. sales fell more than 15 percent in June, dealers said on Tuesday. GM, the world's largest automaker, has cut lease payments on some vehicles by as much as $1,500 to boost sales, one Michigan Buick dealer told Reuters. "We've been calling customers from last month, and we've been able to drop their payments by $30 (a month) or more," the dealer said. GM also extended an offer to buy out the remaining months on lease contracts for consumers whose lease expires before March next year if they buy a new GM vehicle, dealers said. Other dealers said they expected the automaker to announce new cash rebates and interest-free loans soon. "They said there is supposed to be some extra money coming out," a Chevrolet dealer in Michigan said after talking to a GM sales official.
A GM spokesman said the automaker would announce new offers on Wednesday. Ford Motor Co., which posted an 11 percent drop in its U.S. sales for June excluding its foreign brands, is also expected to announce new incentives later this week, a Ford spokesman said. GM and Ford's U.S. sales fell further than both the company and industry analysts expected due to lower incentives last month and an aging lineup of pickups and SUVs. Both automakers have lost market share to Asian rivals this year. Following June's weak sales, company officials acknowledged that they were unlikely to recover the lost share. GM's incentives averaged $4,091 per vehicle in June, down from $4,325 on average in May, according to Autodata, which tracks industry sales and incentives. Ford's incentives rose in June to an average of $3,679, up from $3,515 in May, Autodata said. GM, Ford and the Chrysler arm of DaimlerChrysler AG have continually raised incentive levels over the past few years as foreign automakers rolled out new models to compete in new segments of the market. Even the upswing in the U.S. economy may not cause incentives to roll back much, because there is little pent-up demand due to the lucrative sales offers, analysts said.
June's poor sales caused inventories of unsold cars, trucks and SUVs to grow to above-normal levels, leading analysts to predict that the Detroit automakers may be forced to cut production later this year, in addition to boosting incentives. "Weak sales in June have driven inventories high once again, repeating the boom-bust pattern that has plagued the industry since the outbreak of zero percent financing after September 11th (2001)," Merrill Lynch analyst John Casesa wrote in a research report. Following a similar build-up in inventories in April, the industry unveiled higher incentives in May, which caused sales to soar to a nine-month high. "We expect the same response (with new incentives) in July," Casesa said.
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