Ford Motor Co. and General Motors Corp. raised incentives slightly Wednesday after posting disappointing U.S. sales last month, and analysts expect the profit-eroding price war to escalate this year if the two U.S. automakers continue to lose market share.
Ford, which saw sales drop 5.4 percent last month, said it will offer a desktop computer from Dell Inc. with the purchase of its 2005 model-year Focus sedan.
The second-largest U.S. automaker also raised cash rebates on 2005 model-year Freestar minivan by $1,000 up to a total of $3,000 and it E-Series commercial van by $500 to a maximum of $1,500, Ford spokesman David Reuter said.
The new rebates run through March 31, Reuter said.
GM, which lost U.S. market share last month despite sales rising 1.1 percent, said it would offer interest-free loans for terms of 37 months to 60 months on most mid-size and full-size sport utility vehicles and on pickup trucks.
The new GM incentives, which run through March 31, do not include its Cadillac vehicles and Hummer SUVs.
The world’s largest automaker also said it was ending its popular owner loyalty program that offered current GM vehicle owners up to $1,500 cash for a new vehicle.
One Michigan GM dealer said the lack of the loyalty bonus could hurt sales at his dealership. “That’s a big one. It now costs $1,500 more for a car,” he said.
GM and Ford entered 2005 with high inventories of unsold vehicles and trimmed targeted production this quarter after posting weak January sales.
U.S. vehicle sales across the industry fell to a seasonally adjusted annual rate of 16.2 million units, down slightly from the 16.3 million rate a year earlier.
Ford division president Steve Lyons said on Wednesday the automaker is planning to raise incentives on its best-selling F-150 pickup trucks later this year, but the rebates may vary by region.
Dealers and analysts expect rival GM, which has led Detroit’s profit-eroding price war since it first rolled out its interest-free loan offers shortly after the Sept. 11 attacks, to also offer increased consumer rebates.
“Should GM’s market share decline exceed its tolerance any one month, perhaps a half-point year-over-year, then it will once again escalate the industry price war,” Merrill Lynch analyst John Casesa said in a research note.
