Analysts Look for GM to Offer Incentives

From Reuters

Auto industry analysts are waiting for industry leader General Motors to “drop the other shoe” and announce an incentive program that will stimulate its sagging auto sales.

“It’s mystifying why they haven’t come out with more incentives,” said analyst Douglas Laughlin of Bear, Stearns & Co..

But the giant auto maker says it is satisfied, for now, with its current program combining rebates and low-rate financing on selected models and plans no revision soon.

U.S. auto sales so far this year are down nearly 10% from last year’s levels, and truck sales, which for the past five years have climbed steadily, are off 2%.


More important, the annual selling rate, which reflects the pace of auto sales over a year’s time, has dropped to 7 million units. That compares to the 7.5 million cars sold in 1988.

U.S. auto makers had expected sales to be somewhat slower this year simply because last year’s pace was unexpectedly strong.

But GM, which once took almost half of U.S. car sales, had designated 1989 as the year it would halt a market share decline that has lasted for the past five years.

Instead, GM’s auto sales are down 14.5% and it has continued to lose U.S. car market share. At the end of 1988, its share stood at 36.1%. But it has slipped to 35.8% in the first 10 weeks of the year.

The auto maker, whose inventories are well above the supplies seen as normal for winter, has closed several plants temporarily to curb supplies and plans to shut its Framingham, Mass., plant indefinitely in August.

Analysts expect that GM eventually will be forced to launch a major incentive program similar to the 2.9% financing plan that boosted late summer sales in 1987.

They thought such a program would be announced last week, but GM instead came out with a broader version of a program already in place that included offers of rebates, free gasoline for a year on some models and financing of 4.9% on short-term loans.

Speaking to reporters Monday, GM President Robert Stempel said the company was satisfied with its inventory situation and actually was short of some models. He said GM had no plans to improve the 4.9% financing offer.