GM Is Sweetening Deals

DETROIT December 5, 2002; General Motors Corp., loaded with unsold vehicles and committed to show market gains for the year, sweetened already-generous discounts on its best-selling sport-utility vehicles, pickups and other trucks.

For more than a year, GM has been aggressive with discounts and other promotions aimed at luring customers into showrooms, even as the economy has softened. For GM, which has enormous fixed costs and is facing big increases in expenses for pensions and retiree health care, the drive is critical to generating cash flow and profit. Despite the costly deals, GM is Detroit's most profitable auto maker, and executives are scrambling to sustain sales and eke out a gain in market share.

"Even if it is a tenth of a percent, it would be the first time in a generation that they will have two consecutive years of increased market share," said David Healey, auto analyst at Burnham Securities.

Slowing sales in recent months have left GM flush with unsold inventory. Earlier this week, GM actually added slightly to its fourth-quarter production plan, even after reporting a 18% decline in sales for November. No. 2 auto maker Ford Motor Co., which saw a 20% drop in November, trimmed output plans and so far hasn't matched GM's latest offers. Overall, U.S. auto sales were down 13% in November. Officials at DaimlerChrysler AG's Chrysler Group, which is promoting 0% financing for five-year loans on its Jeep Grand Cherokee, had no immediate changes to its offers.

Dealers say showroom traffic is at a standstill because consumers are worried about the economy.

"Right now, the support is coming from the manufacturer, not the consumer," said Dan Violette, the new-car sales manager at Gordon Chevrolet in Tampa, Fla. GM has 106 days' supply in trucks and SUVs, well above the 65-to-70-day supply the big auto makers view as ideal.

Analysts say General Motors has spent about $10 billion on discounts this year, though the company doesn't break out incentive spending in detail.

GM's new incentives, including 0% financing for a maximum of five years, cover the Chevrolet Trailblazer and the larger SUVS, including the Tahoe, Suburban, Envoy and Yukon models. Previously, GM was offering 3.9% financing for five-year loans on the products.

Additionally, GM has increased rebate money by $1,000 on other models. That boosts rebates to as much as $3,000 on the Buick Rendezvous and Pontiac Aztek SUVS, as well as the Silverado, Avalanche, Sierra and Sonoma pickup models. The program runs through Jan. 2.

GM has managed to stabilize its U.S. market share in the last two years, after more than a decade of losing ground, and executives have vowed to rebuild share further. But after November's sales results, GM's market share for the year to date was 28.3%, down from 28.4% in the same period of 2001.

The new discount push comes on top of other incentives on cars that include low interest rates and big cash discounts. For lease customers, GM had been running special offers for customers who turn in vehicles early. Dealers have also been pushing hard to meet GM sales targets to qualify for company-backed bonuses.