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GM's Red Tag Sale: Do They Really Need It?

General Motors
General Motors

The question now is whether GM's new red tag sale is the prudent use of incentives to clear some inventory, or if it's a sign of things to come for the automakers struggling with flat sales? I think it's a one-time thing.

GM's done a good job of holding the line on incentives over the last 9 months or so. Heck, for a while it looked 2007 could go down as the year Detroit finally kicked the "rebate, low financing, and anything we can do to get this car off the lot" habit. That's been a good thing.

Since the Big 3 don't feel compelled to keep up with each other when someone runs a deep discount, pricing on new vehicles has been improving. Need proof: look at Ford's results the last two quarters. So what's up with this "Red Tag Sale?"

GM, like the other automakers, will say this is a strategic sales campaign similar to what it runs at the end of the year, every year. But make no mistake, GM also needs a campaign like this to help move cars, trucks and SUV's. The "consumer" appears to have slowed down with the economy and weak housing market. So why NOT throw a little extra cash on the hood to convince people this is still a good time to buy.

Questions? Comments? BehindTheWheel@cnbc.com

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