Detroit's Big Three renewing incentives
By Bill Koenig
Bloomberg News Service
DETROIT — General Motors Corp. has brought back no-interest loans on some models as an alternative to as much as $2,002 cash back, while Ford Motor Co. and DaimlerChrysler AG's Chrysler responded by extending incentives to compete for sales.
The latest plan from General Motors, which began no-interest loans in September and switched to cash rebates in January, runs through this month. On Tuesday, Ford will extend its rebates of up to $2,500 or zero-percent financing through April 8. Chrysler is continuing cash-back of as much as $2,500 through March.
General Motors' incentive move comes as the automaker yesterday said its U.S. sales rose 0.4 percent last month, while Ford fell 12 percent and Chrysler declined 11 percent. General Motors led with discount loans after the Sept. 11 attacks and its biggest rivals followed, giving up some profit to spur sales.
"We're not thrilled" with the latest round of incentives, said Chris Wiles, president of Rockhaven Asset Management LLC, which owns about 25,000 convertible preferred shares of General Motors and about 19,000 of Ford. "I'd like to see companies concentrating on profitability."
Total U.S. sales rose in the three months after September, and then fell in January. The February industrywide decline was 3.5 percent. Sales rose 15 percent at Hyundai Motor Co., 8.2 percent at Nissan Motor Co. and 1.7 percent at Toyota Motor Corp.
General Motors shares rose $1.99, or 3.8 percent, to $54.97. Ford gained 76 cents, or 5.1 percent, to $15.64. U.S. shares of Germany-based DaimlerChrysler increased $1.62, or 4.1 percent, to $41.50.
'Keep our momentum'
For Detroit-based General Motors, bringing back no-interest loans while continuing cash rebates is intended to boost sales to individual consumers and "help us keep our momentum going," spokesman Jeff Roegner said. The company's U.S. market share rose 1.2 points to 31 percent last month, Autodata Corp. said.
The largest automaker's new plan offers rebates or no interest on 36-month loans on some models, Roegner said. General Motors excluded Cadillac, Saturn, Saab and Hummer vehicles, the Chevrolet Corvette sports car and all 2003 models.
Ford, the second largest automaker, also will pay as much as $1,500 to its lease customers who take a new vehicle when they return their current car or truck, spokeswoman Susan Krusel said. The Dearborn, Mich.-based company may adjust the amount of rebates on some models Monday, she said.
Chrysler's rebates start at $500, with most at $1,500 or $1,500, and some buyers can also choose discount financing. The third largest U.S. automaker's latest offer exempts the Jeep Liberty sport utility vehicle, spokesman Marc Henretta said.
Incentive spending
General Motors incentives in January averaged $2,284 per vehicle, while Ford was at $2,015 and Chrysler was at $1,769, said Burnham Securities analyst David Healy, who owns Ford shares. In the year-earlier month, General Motors averaged $1,597, Ford $1,538 and Chrysler $1,955.
"I don't think you can call it anybody winning," he said.
General Motors' February spending on incentives was comparable to its expenses in the fourth quarter and January, said Paul Ballew, the company's market analyst.
Ford and Chrysler may boost their incentive spending to be closer to General Motors, Healy said.
Those levels still would be lower than the industry average of more than $2,600 a vehicle in October, he said.
Sales of some vehicles without incentives or with lower rebates fell last month.
Ford's Focus small car declined 28 percent from the year-earlier month to 16,146. The car has incentives of $1,000 cash back or financing of as low as 0 percent, less than what's available on other vehicles, said Ford sales analyst George Pipas.
"We are giving up some sales and market share in that product," he said.
The company's Escape small sport utility, which had a 33 percent sales decline in February to 9,108, hasn't had incentives since November.
"We'll have to evaluate that on a month-by-month basis," Pipas said.
