GM Announces New Incentive Program Intended to Help Clear Vehicles Off Dealers' Lots

DETROIT March 9, 2005; Dee-Ann Durbin writing for the AP reported that General Motors Corp. announced a new round of consumer incentives Thursday intended to help clear slow-selling vehicles off dealers' lots this month.

GM will give cash bonuses of between $500 and $1,500 for vehicles that have been in dealer inventories for at least 125 days, GM spokeswoman Deborah Silverman said. Most of those vehicles will be eligible for $1,000 bonuses, but Cadillacs will be eligible for $1,500. Cadillac sales were strong at the end of 2004 but fell 3.3 percent last month, according to Autodata Corp.

The "March Madness" promotion is similar to a red tag sale GM held in December. GM's sales fell 7 percent overall that month, but the bonuses helped sales of individual brands like Chevrolet and Cadillac. Cadillac sales rose 19 percent in December, helping the luxury brand achieve its best sales year since 1990.

The world's largest automaker could use a boost after weak February business. GM posted a 12.7 percent decline last month and has cut first-quarter production. Second-quarter production schedules also are below last year's levels.

Burnham Securities analyst David Healy said he believes GM's average incentive per vehicle will end up a few hundred dollars higher in March than February. That would be in line with GM's current strategy of combining modest incentives with production cuts rather than relying on heavy incentives, he said.

"They've cut production and their inventories are too high, so they need to move them out," Healy said.

GM had the highest average incentive of any automaker in February at $3,814 per vehicle, up 8.6 percent from January, according to Autodata. But that was nearly 10 percent lower than February 2004, when GM's average was $4,211 per vehicle.

GM's chief U.S. competitors, Ford Motor Co. and DaimlerChrysler AG's Chrysler Group, said Thursday they don't plan to match GM's announcement.

Chrysler's incentives were averaging $3,763 per vehicle in February, when the division posted a 7.5 percent increase in sales. Ford's average incentive was the lowest of the Big Three in February at $3,229 per vehicle.