General Motors Corp. and Ford Motor Co.(F.N) sweetened incentives on Wednesday to lure consumers back to car dealerships after both U.S. automakers suffered a double-digit drop in June vehicle sales.
GM, the world’s largest automaker, said it raised cash rebates it offers on most of its sport utility vehicles to $5,000, and to $4,000 for most cars for the 2004 model year.
“That’s a major step up in the incentives,” said Frank Ursomarso Sr., owner of Union Park Pontiac-GMC car dealership in Wilmington, Delaware. “That shows me that (GM CEO) Rick Wagoner is in a mind-set that he’s going to do whatever it takes to capture back (market) share.”
Ford Motor Co. raised its incentives by $1,000 to a total of $4,000 on some of its SUVs, including the four-door Ford Explorer. Ford also raised discounts on its poor-selling Freestar minivan to $5,000.
GM’s sales dropped 15 percent in June, while Ford results fell about 11 percent, excluding its import brands.
Chrysler, who bucked the June trend with a 1 percent gain in sales, this week renewed its incentives, offering many of the same programs as last month, but raised the cash rebate for the Chrysler Pacifica sedan to $4,000 from $3,500 earlier, a spokesman said.
The Detroit Big Three also continue to offer interest-free financing for terms up to 5 years, despite the recent uptick in U.S. interest rates.
One Wall Street analyst said the new incentives only raised the offers back to spring levels, and he expected more. “It didn’t seem like a major step-up to me,” he said.
Lost share
June’s poor sales left GM and Ford with high inventories, estimated at around 30 percent above normal levels, leading analysts to conclude that higher incentives were on the way. GM and Ford have also lost market share to Asian competitors this year, and company officials have acknowledged that it will be difficult to recover that lost share.
High incentives have helped boost sales in months past, but also cut profit margins and hurt earnings, analysts said.
GM’s sales plunged in June after it cut its incentives by an average of about $234 per model, according to Autodata. But GM and Ford also suffering from an aging lineup of vehicles, poorer quality versus major Asian automakers and increased competition in many segments of the market.
Ursomarso, the auto dealer in Delaware, said that sales had already picked up in July from June, even before GM raised its incentives. “So far this month, I have delivered more GMC trucks than I did all of last month,” he said.
After almost two years of trying to reduce its discount spending on key models below arch rival GM, Ford appears to be increasing its spending on consumer incentives. For the first time this year in June, it overtook Chrysler in offering discounts, according to Autodata. Ford’s incentives rose to an average of $3,679 per vehicle in June, up from $3,515 in May.
“On some vehicles like Explorer where many, many new competitors are fighting for market share, we want to be aggressive,” Ford spokesman Jim Cain said.
