General Motors Corp. will launch discount programs today for six of its eight vehicle brands to pump up sales on the back end of the busy summer selling season.
The program will feature new cash incentives on select 2007 models and a menu of zero-percent financing options on remaining 2006 models that may turn out to be well-timed.
In the face of rising interest rates, a growing number of car buyers are choosing attractive financing deals over other discounts, new research shows.
With the promotion — which includes Chevrolet, Buick, Pontiac, GMC, Saab and Saturn — GM is resisting reviving last year's hugely successful employee-pricing-for-everyone offer.
For now, the automaker is sticking with a new strategy that favors more realistic sticker prices over profit-eating incentives, even as its sales and market share continue to slip.
The strategy is part of a sweeping plan to overhaul GM's North American auto business, which accounted for much of the company's $10.6 billion loss last year.
But GM has taken its lumps for pulling back on incentives as rivals go full-throttle with deals.
Through June, GM's sales are down 12 percent and its U.S. market share has fallen to 24.1 percent, from 26.8 percent a year ago, according to Autodata Corp.
But GM is making the right moves to fix its business, even if the process is painful now, said Tom Libby of J.D. Power and Associates' Power Information Network.
“When you adopt that program, you're going to see short-term struggling,” he said. “But what they're doing is right on the money.”
The new incentives come as GM prepares to report second-quarter earnings next week. Analysts are expecting the automaker to report a loss for the three months that ended June 30, mainly due to writing down the costs associated with 35,000 workers taking cash buyouts and early retirement offers.
But GM Chairman and CEO Rick Wagoner expects earnings to increase after the second quarter.
“We need to look behind that and look at the underlying business,” Wagoner told reporters at the London auto show Tuesday. “We hope to continue to drive for significantly improved results.”
Some analysts expect to see signs of progress in GM's second quarter results. Brad Rubin, an auto industry analyst with BNP Paribas in New York, said that, excluding the buyout charges, GM earnings “are probably better than people think.”
The improvement is due partly to lower incentive spending and less dependence on fleet sales, although those gains could be offset by a surge in raw material costs and lower production volumes.
“More than likely it will be a down quarter, but it won't be as severe as last year,” Rubin said. “GM is in a much better position.”
GM's new summer sales promotion runs through Sept. 5 and is chiefly aimed at clearing out the last of the 2006 models, said John McDonald, a GM spokesman.
In keeping with a push to better distinguish GM's brands, he said, the automaker today will launch advertising for the discounts that is different for each participating brand.
Saturn's program, for instance, lets customers subtract 10 percent from the sum of the sticker price and destination charges, or choose other GM discounts. Other brands will pitch rebates and financing deals.
Cadillac and Hummer will not get new ads because their discounts launched earlier in July.
While the summer promotion mainly targets 2006 models, it will extend new cash and financing offers on some 2007 full-size SUVs and pickups, but no zero-percent interest deals.
But the central piece of the promotion is free financing for 36 months on many 2006 models. A select number of 2006 models will be eligible for free financing for 60 months, while GM will extend a zero-percent-for-72-months offer on big SUVs and pickups.
Competitive financing offers coupled with rising interest rates have spurred more consumers to finance vehicles rather than pay cash or lease, and to choose lower interest rates over other deals.
In the first nine days of July, more than 66 percent of new car buyers opted to finance, up from about 55 percent typically, said J.D. Power's Libby said.
GM dealers say they got a big boost early this month from the automaker's 72-hour sale over the Fourth of July weekend that offered zero-percent financing deals on a range of models.
That program brought GM within striking distance of its sales goal for July, dealers said. But the automaker's July sales are still expected to show a steep decline from last year's employee pricing-fueled boom.
