Detroit Renews SUV Price War
As GM Rolls Out Fresh Rebates
By SHOLNN FREEMAN
Staff Reporter of THE WALL STREET JOURNAL
The car industry's price war is heating back up. A day after reporting disappointing sales, General Motors boosted consumer rebates by as much as $750 on its best-selling pickups, sport-utility vehicles and minivans. GM added a $750 "bonus" discount to its popular new Trailblazer sport-utility vehicles and slapped another $500 on the hood of its Silverado pickup. The big auto maker also sweetened deals on its Avalanche sport-utility pickups, the big Suburban SUVs and Astro minivans.
For consumers, the latest cuts mark the beginning of what is expected to be a summer of car-buying bargains. The car industry introduces its new 2003 models in just a few months, and with sales slowing, prices on the remaining 2002 models are expected to get better and better as the summer unfolds. Shoppers who can wait for a month or two are likely to be rewarded with additional incentives.
"Dealers aren't going to order 2003s if their lots are stuck with 2002s," says Todd Caputo, vice president of Sun Chevrolet in Chittenango, N.Y. "The trucks aren't selling so they have to do something to get rid of those things."
GM has led the car industry's price-cutting moves since the Sept. 11 terrorist attacks. In recent months, however, GM and rival auto makers had tried to dial back the costly deals and raise prices on strong-selling models. GM's average incentive spending has declined from $2,664 a vehicle last October, at the height of the 0% financing sale, to $2,170 a vehicle in April, according to estimates by Burnham Securities auto analyst David Healy. But in May, GM's sales dropped 12%, while the overall industry fell 6%.
Pressure from rivals and GM's disappointment with its May sales led to the new truck incentives, said Elaine Redd, a GM spokeswoman. "The fierce competition forces us to play even more aggressively," she said.
Although other car makers didn't immediately follow GM's announcement, the competition is expected to remain intense. Ford said Tuesday that GM was simply moving to match its latest deals. For instance, Ford has been offering $1,500 off on its four-door Explorer, the competitive model to GM's Chevrolet Trailblazer.
In a related development, Chrysler said it was considering making permanent its current offer of a seven-year, 100,000-mile power-train warranty. That offer substitutes for a cash discount, and Chrysler dealers use it as an effective closing tool to clinch sales.
Big Savings
Combined with existing discounts, GM's latest rebates already add up to big savings for consumers. On a Trailblazer, which starts at $25,000, customers can get rebates of $1,500, up from $1,000 previously. Buyers of the popular Silverado pickup can save up to $2,500. The new deals are expected to last until July 1.
The new incentives are in addition to GM's current 1-2-3 discount program. The 1-2-3 offer is a reference to the range of finance rates -- 1.9%, 2.9% and 3.9% -- and the array of cash discounts -- $1,000, $2,000 and $3,000.
GM has also recently reintroduced a popular program related to leases. The offer gives shoppers new enticements to cut short their current GM leases if they buy or lease a new vehicle from GM. The new deal runs through July 31, and customers with leases expiring in August through December are eligible.
Payback
GM's new round of discounts comes as dealers are reporting that customer traffic is running way behind expectations during the height of the spring selling season. Some dealers are even suggesting that auto makers are facing at last the payback they thought they had avoided after the post-Sept. 11 0% financing sales.
GM and Ford said Monday they plan to stick to robust levels of production over the next several months. That means the big auto makers have to keep moving the metal, particularly as the 2002 model year heads toward its final weeks in late summer. And with competition from foreign auto makers intensifying in the truck and SUV segments, the industry forecast is for continued price cutting.
Write to Sholnn Freeman at sholnn.freeman@wsj.com
Updated June 4, 2002 8:38 p.m. EDT |
