GM ups profit-eating incentives on SUVs

DETROIT, Jan 30, 2003; Tom Brown writing for Reuters reports that General Motors Corp. on Thursday ratcheted up consumer incentives on many of its most popular sport utility vehicles in an escalation of Detroit's profit-eating price war.

The world's largest automaker said it was raising cash rebates by $500, to a total of $2,500, on the highly profitable Chevrolet Tahoe, Suburban, Trailblazer, and GMC Yukon, Yukon XL, Envoy and Oldsmobile Bravada SUVs.

GM, which raised cash rebates on most of its full-size pickup trucks just last week, said it was also boosting the cash incentive on its Savana and Express vans by $500 to $2,500.

The cash-back offer on full-size pickups, which GM upped to $2,500 last week, had been expected to expire on Friday. But GM spokesman Jeff Roegner said it was being extended through February as the automaker seeks to lure buyers with new discounts and interest-free loan deals.

"There is a great deal of competition out in the marketplace right now and we will continue to show leadership," Roegner told Reuters.

GM is considered the front-runner in the incentives race that has offset weak consumer confidence and bolstered U.S. auto sales since the Sept. 11, 2001 attacks on America.

Wall Street analysts say GM's sales likely fell about 10 percent this month, however. They cite its heavy discounts and strong results at the end of last year, which pulled some sales ahead.

It was not immediately clear if Ford Motor Co. and the Chrysler side of DaimlerChrysler AG would match GM by rolling out new incentives of their own.

But both companies have followed GM reluctantly in the past, while complaining about its aggressiveness and the bottom line effect of discounting on industry profits.

"BAD HABITS"

"GM's just reverting to their bad habits," said Ford spokesman Jim Cain, who added that the world's No. 2 automaker was studying possible changes in its own incentives.

"It's certainly good for consumers," he added of GM's move. "But whether it's good business? I don't think you'd find anyone who would say it's a sustainable practice."

Chrysler spokesman Marc Henretta said it too was studying GM's latest incentives move and might have an announcement later.

But in remarks to reporters during a visit to Toronto, Chrysler President and Chief Executive Dieter Zetsche said he had no desire to go toe-to-toe with his cross-town rivals on pricing.

"We will always try to stay somewhat below the level of incentives of our competitors," Zetsche said.

Detroit's automakers are not alone in playing the incentives game to entice customers into showrooms amid mounting concerns about the economy and the prospect of a U.S.-led war with Iraq. But foreign automakers have generally been much more conservative than their U.S. counterparts.

The Big Three hit consumers with a blizzard of rebates and zero-percent loan deals in December that piled an average of $3,119 in incentives on every vehicle they sold