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'03 Incentives & Info

zimmthumps

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GM Will Offer Discount Deals On 2003 Models

September 4, 2002

General Motors Corp., which has helped keep the economy rolling with its generous 0% financing programs for much of the past year, is keeping the heat on by offering 0%-interest-rate three-year loans for many of its 2003 models, a sign that the U.S. auto industry's price wars will continue.

GM is expected to disclose details of its latest round of discount deals for new-car buyers today, as U.S. auto makers report sales for August. Spurred by generous rebates to move 2002 models, industry officials expect strong August numbers. For months, demand for new vehicles has been one of the bright spots in an otherwise murky economic picture.

But with stocks of unsold 2002 cars and trucks dwindling, the real action from now on will be on 2003 models. In its new program, GM will offer 0% interest rates on three-year loans across much of its 2003 model-year lineup. Longer loans will carry modest rates -- 2.9% on four-year loans and 3.9% on five-year loans. On many vehicles, customers will have a choice of cash rebates as well, typically $1,000 on sport-utility vehicles and full-size pickups and $1,500 on cars and small pickups. GM's Saab and Hummer brands and the Chevrolet Corvette are excluded, and cash rebates aren't available on Cadillacs, although discounted financing rates are.

Ford Motor Co., which typically has followed GM's incentive lead during the past year, announced its latest round of programs last month. Besides increasing its 2002 model-year incentives, it announced incentives of $500 to $1,000 and financing rates of 3.9% to 5.9% on most 2003 model-year vehicles. Its strong selling Thunderbird, new Expedition and Escape small SUV were excluded.

But GM's decision to offer 0% deals, even if only for three-year contracts that many consumers can't afford, puts pressure on Ford at a time when the No. 2 auto maker is struggling to boost profits. The uncertain outlook for the U.S. economy and the auto sector's fortunes took down shares in GM, DaimlerChrysler AG and other auto makers. As of 4 p.m. in New York Stock Exchange composite trading, GM fell $2.31 to $45.55, and DaimlerChrysler slid $2.99, or 7%, to $39.87. Shares of Japan's Toyota Motor Corp. and Honda Motor Co. also declined.

The downbeat view of the auto sector among investors contrasts sharply with the continued robust demand for new cars and trucks. Auto sales, along with home sales, have helped lead the economy since Sept. 11. GM announced its "Keep America Rolling" incentive program, or no-interest loans for as long as five years on its lineup, in the weeks following the terrorist attacks.

A key to the auto industry's strong sales, however, is that cutthroat competition for market share has forced major auto makers to hold prices down and offer deals that make new vehicles more affordable -- compared to consumer paychecks -- than they have been for years.

The problem for the Detroit auto makers now is figuring out how to move away from a marketing program so powerful that it threatens to undermine their efforts to build brand images separate from bargain-basement deals.




 
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