GM, Ford Rev Up Incentives

DETROIT January 23, 2003; Michael Ellis writing for Reuters reports that General Motors Corp. and Ford Motor Co. escalated their price war on Thursday, offering costly new consumer incentives to lure buyers amid signs of slowing U.S. vehicle sales, officials said.

GM, the world's largest automaker, said it would waive up to five months of remaining lease payments to its current customers if they opt for a new vehicle.

Ford began quietly offering cash payments of $500 to $1,000 to dealers to boost sales of some of its popular Ford brand vehicles. GM and Ford also raised cash rebates by $500 on most of their full-size pickup trucks to $2,500.

"It's a clear sign that GM's volumes (sales) are lower than they want them to be. Ford is prepared to go toe-to-toe with them on pricing," one industry analyst said.

Wall Street analysts said that U.S. light vehicle sales for January are expected to fall about three to four percent from strong levels a year ago to a seasonally-adjusted annual rate of about 16.4 million.

Sales for GM, considered the leader in the incentive battle, could fall about 10 percent for January due to its heavy discounts and strong results at the end of last year, which pulled some sales ahead.

Analysts also said they expect Ford sales to climb in January.

"People just aren't going out shopping," said Art Spinella, president of the Bandon, Oregon-based forecasting group CNW Marketing Research. Since the middle of the month, dealership traffic has slowed sharply, Spinella said, adding U.S. consumers have grown concerned about gas prices, a possible war with Iraq, job stability and hikes in local taxes.

FORD NOT SURRENDERING

Lloyd Hansen, Ford's head of revenue management said in an interview with Reuters that U.S. incentives are so high that any further increases would hurt profits more than boost sales. But he added that Ford would not surrender market share to an aggressive GM.

"Am I willing to give up market share to make money in the short term? The answer is no," Hansen said.

GM said it will offer to waive remaining payments to its customers whose lease on their current GM vehicle expires between April 1 and Aug. 31, if they lease or buy a new GM car or truck.

GM's new incentive program, which runs through March 31 and excludes the Saab and Hummer brands, comes a week after Ford said it would waive up to eight months of current lease payments on four of its top-selling Ford brand vehicles, providing those current customers lease or buy a new Ford car or truck.

GM is also offering dealers up to $1,000 on every car or truck that has gone unsold for more than 120 days. Ford has its own dealer incentive program, some dealers said. Ford is offering them $1,000 for every Ford Explorer sport utility vehicle they sell, and $500 on an additional six Ford models -- including the Taurus, Windstar, Expedition, F-Series light duty pickup, Explorer Sport Trac and Explorer Sport two-door SUV.

GM's new incentives come even as it detailed plans to slow production at two U.S. assembly plants due to flagging demand from the slow economic recovery.

Beginning next week, GM's Flint, Michigan, commercial truck chassis plant will halt work for a total of eight weeks before the end of September, impacting about 500 workers at the plant, GM spokesman Dan Flores said.

The plant will be shut for a week each month, except July, when the facility is closed for an additional two weeks for the annual summer shutdown, when all plants are closed.

WEAK ECONOMY

The weak economy is causing small businesses to curtail investments in capital goods. An outfitter which converts GM's commercial truck chassis into a dump truck or a tow truck or another application, can charge $100,000 for each vehicle, Flores said.

GM also said it will halt production for two weeks at its Wilmington, Delaware plant, where it makes the slow-selling Saturn L Series mid-size car.

GM's two-week shutdown of its Wilmington plant will impact about 1,300 workers. Total U.S. sales of the Saturn L Series, competing in the competitive mid-size segment, fell 17 percent last year to 81,172.

Despite those cuts in production, GM still expects its total vehicle production in North America in the first quarter to grow to 1.43 million vehicles, up more than 5 percent from 1.353 million a year ago.