General Motors, the world's largest car maker, is taking a bold step in announcing the end of the 0% financing scheme that has maintained its sales for nearly a year. While cash rebates will remain, carmakers know their margins need improving. But whether GM has really mended its ways is another question...

General Motors has announced that from September 3 its 0% finance scheme in the US will come to an end on its 2002 models, nearly a year after the company embarked upon its 'Keep America Rolling' campaign post-September 11.

GM hopes to create a surge in demand before the scheme ends to clear out remaining stock, in order for its dealers to make way for the new 2003 models.
It would appear that its rivals are not prepared to follow suit. Ford has
already announced cash rebates and low rates of finance on its 2003 models, and upped the ante on its 2002 model line by increasing rebates.

Ford currently has a greater need to discount than GM in its home market, where it has lost market share to its chief rival and Japanese manufacturers such as Honda and Toyota. It is understandable that lost ground needs to be reclaimed.

However, in the UK the strategy is less easy to defend.

Ford has had the UK's number one selling car for an almost unbroken run over the past 20 years or more, covering varying versions of Escorts, Fiestas and, more recently the Focus, which has now remained in the number one spot for longer than any other vehicle.

The fact that Ford UK continues to lose money is surprising given such statistics, and must in part be due to low vehicle margins. Its new Fiesta, launched earlier this year, is already being discounted in order to sustain volumes. However, it remains to be seen whether GM has seen the light, or whether the discounts will be rolled back out next year.

SOURCE: DATAMONITOR COMMENTWIRE

(c) 2002 Datamonitor. All rights reserved. Republication or redistribution, including by framing or similar means, is expressly prohibited without prior written consent. Datamonitor shall not be liable for errors or delays in the content, or for any actions taken in reliance thereon.