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GM's Truckloads of Cash: Will It Put The Brakes on Toyota?

Tuesday, 10 Jul 2007 | 8:16 AM ET
GM Pickup Truck with money
CNBC.com photo composite
GM Pickup Truck with money

Forget the ads touting which full size pick-up has more hauling capacity, or which one can stop just before going over the edge of a cliff, or even which truck makes you feel more American, rural, or cowboy. None of that matters.

Here's what talks with truck buyers: cash. The more the better. And right now, pick-up buyers are picking up deals that have them sitting in the catbird seat. In fact, GM is doubling the cash back it's offering people who buy a new Chevy Silverado or GMC Sierra. That's an extra $1,000 on top of 0% financing.

Why would GM throw out such a an offer on new trucks that just came out last fall? To keep up with Toyota , that's why. Yes, the Japanese automaker is finally hurting the Big 3 where it really hurts--in pick-up sales. Last month, thanks to generous deals including 0% financing, Toyota Tundra sales shot up 21%. Meanwhile GM's total sales in June plunged thanks to weaker than expected truck sales. When I talked with people in motown last week, it was clear the hit in truck sales is not sitting well with American auto executives.

Since GM is #1 in trucks, and trucks are the vehicle in terms of profit, the boys in Detroit are giving dealers more ammunition to win over buyers. Will it help stop the erosion is sales? Perhaps at first. But this is not a long solution. Greater incentives hurt GM profit margins on trucks.

Unfortunately, the Big 3 incentive genie is out of the bottle and may be here for a while. Toyota is getting the Tundra sales it wants (2007 goal: roughly 200,000 annual sales) with greater incentives. If they have to keep rolling out 0% financing, the guys at Toyota will do that.

All of this is good for pick-up buyers who want a deal. These are the best offers in roughly a year, and they aren't going away. For those of you who think Toyota's truck strategy is "all hat, no cowboy", think again. With richer rebates and 0% financing the Tundra is ready to take on the big buyers

Questions? Comments? BehindTheWheel@cnbc.com

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  • Phil LeBeau is a CNBC auto and airline industry reporter based in the Chicago bureau and editor of the Behind the Wheel section on CNBC.com.

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