Behind the Wheel with Phil Lebeau

Spring is Here...And so are the Incentives

General Motors

Give General Motors credit. It's trying, it really is. But with mediocre auto sales, the company is bringing back zero percent financing in order to goose springtime sales. The 20 day promotion with 0% financing for three years on certain vehicles and lower rates on other 6 year deals. GM is also throwing in a $1,000 bucks. As incentive offers go, it's not a huge one. But it's an important and telling move.

GM has shown pretty good discipline with it's pricing the last couple of months. When the company said last year that it was pulling back on incentives in an effort to boost transaction prices (the price buyers actually pay) and profit margins. But so far, sales in 2007 have been lackluster at best. In fact, when I talked with GM Chairman and CEO Rick Wagoner yesterday he called January and February sales "so-so" and the first half of March "mediocre". It's left GM with little choice but to do something to spark buyers. So it's offering zero percent and a sweeter deal on most of it's vehicles (Cadillac, Hummer and Saab are excluded).

If GM can spark a little bit of traffic and better sales with just a little richer of an offer, then this is no big deal. The question is what happens if sales remain lackluster? Does GM come up with more money? And how will the other automakers respond? Will they start throwing more money at potential buyers as well? Wagoner said after releasing 4Q earnings that he expects sales to pick up in the second half of this year. If GM can make it through this mediocre spring without having to re-ignite the incentives war, then GM has a shot at truly turning the corner with it's auto business in the U.S.

Questions?  Comments?