GM Unveils New Cut-Rate Financing Plan
General Motors announced a new cut-rate financing offer on a limited number of 1985 and 1986 model cars and light trucks Monday, and the other domestic auto companies are expected to follow suit.
But analysts warned that the new sales incentives may not be enough to avert a major drop-off in sales this month in the wake of September’s overheated pace.
GM, which last week ended a 7.7% discount financing program designed to clear out its inventories of unsold 1985 cars and trucks to make room for its 1986 models, said Monday that it will offer 8.8% financing on a much smaller number of 1985 and 1986 cars and trucks until Nov. 20.
The only 1985 models covered by the program are GM’s most expensive luxury cars, pickup trucks and utility vehicles, while the only 1986 cars covered are subcompact and sporty models sold by Pontiac and Chevrolet.
GM said the incentives are designed to clear out the last of its remaining 1985 models and to boost the sales of its smallest and most fuel-efficient 1986 cars in order to improve its fleetwide mileage rating.
Because of booming big-car sales, GM’s average fuel economy rating for its entire fleet has not met the federal government’s requirement since 1982. But, by selling more small cars, GM can improve its average mileage rating.
None of the other domestic firms immediately announced similar programs, but industry analysts expect all to keep pace with GM.
Chrysler Chairman Lee A. Iacocca said at a press conference Monday in Detroit that Chrysler would probably announce a program soon, while a Ford spokesman said that “we are looking a what GM did and trying to decide what to do ourselves.” An American Motors spokesman said the company is “looking at the competitive picture.”
Record September Sales
The GM incentives came less than a week after the domestic industry ended a comprehensive round of steeper discount financing incentives that had sparked a dramatic upturn in car sales in September. Domestic sales established a record for the month of 839,382 units, breaking the 1971 mark of 755,233 set before imports were a major factor in the market.
But analysts have been warning that October sales could plummet in the absence of such attractive incentives, and one said Monday that he didn’t think the new GM program will be enough to stop the slide.
“I think by the time we get to mid- and late-October, sales will be awful, even with these incentives,” said David Healy, automotive analyst with the New York investment banking firm of Drexel Burnham Lambert. “I’m sure Ford and Chrysler will come in with some incentives, but they will have to be broader than the GM program to make much of a difference.”
