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GM Cries Uncle

By LouAnn Lofton (TMF Bling)
September 10, 2003
General Motors (NYSE: GM) would like to get off the incentive merry-go-round, please. Yes, it realizes that it pretty much started whipping the thing around and kept the momentum going all year, but it's had enough now, thank you.

GM head Rick Wagoner, attending the International Auto Show in Frankfurt, said in an interview with The Wall Street Journal that he hopes as the U.S. economy strengthens "maybe we get some easing off of incentives." He wouldn't go as far as to say when this could come about, but hopes to see some relief for 2004 models.

GM, along with fellow auto maker Ford (NYSE: F), has been making up for consumers' weak demand for new cars by making them deals too tasty to turn down. It's worked; 0% financing, rebates, and incentives out the wazoo have spurred demand, but at the expense of already slim profit margins.

The move from incentive-laden sales back to more normalized deals will be a tricky one. Customers have come to expect those generous packages. How can Detroit convince them to keep buying without practically giving the things away? New models and redesigns are the first solutions, with Ford introducing its newly retooled and spiffed-up F-150 pick-up truck this fall and GM rolling out its new Chevrolet Colorado and GMC Canyon line of trucks.

Whether GM will be able to pull off more higher-priced sales here remains to be seen. Not surprisingly, though, both Ford and GM said recently that they are committed to keeping up the incentive war in Europe, leading to yet another vicious cycle of demand and profitability overseas.

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