General Motors has no plans to cut back on its use of incentives to sell new vehicles, even as they grow more costly and less effective, chairman and chief executive officer Rick Wagoner said, according to Reuters.
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“It’s getting more expensive and it’s getting to require more creativity” to develop new incentive offers, Wagoner told reporters after giving a speech to the Detroit Economic Club, Reuters said. “I’m not saying in any way we’re backing off.”
According to the news agency, GM and Chrysler warned in April they might not meet 2003 earnings targets. Both cited a weak economy and heavy incentive costs.
Yet, Reuters noted, GM on Thursday extended what it called its most aggressive incentives ever — zero-percent interest financing for loans of up to five years across most of its range.
Reuters said the incentives boosted sales of GM pickup trucks, sport utility vehicles and minivans to record levels in April but car sales plunged more than 21% and the incentives failed to stem GM’s falling market share, which has dropped year-over-year in seven of the last eight months.
US vehicle sales surged to record highs after the zero-percent financing deals were first introduced in October 2001, Wagoner noted, according to Reuters. This helped the car maker post higher market share and stronger earnings.
“We didn’t see as big as impact as I would have hoped for from the incentives,” Bob Schnorbus, chief economist with JD Power and Associates, told Reuters. “The consumer is probably still washed out from the stress of the war.”
Reuters noted that foreign car makers have more recently ratcheted up their own incentives, and consumers have grown accustomed to the deals.
According to the news agency, Wagoner said that falling sales of its ageing line of entry-level cars have hurt GM’s market share.
“Where we’ve been running weakest is at the bottom of the market. Frankly our products are a little bit older,” Wagoner, in his first major speech since becoming chairman, said when asked about market share, according to Reuters. “Clearly we’re doing a great job in trucks.”
Reuters said Wagoner repeated his support for a US tax cut to stimulate the economy, lift vehicle sales and boost the stock markets, which would help grow the assets in GM’s under-funded pension plan.
According to Reuters, Wagoner and his Detroit rivals, the heads of Ford and Chrysler, met with President Bush in Michigan last week to lend their support to the administration’s tax cut plan.
“Personally, I believe that we all should be supporting a big stimulus package to get the US economy growing according to its capabilities again – and soon,” he said in his speech, according to Reuters.
