GM Cuts Prices on Many '06 Models

Published August 02, 2005

| Reuters

General Motors Corp. (GM), which has led Detroit's profit-draining price war for nearly four years now, Monday said it was cutting sticker prices and boosting features on many of its 2006 model-year vehicles in another bid to boost its U.S. sales.

GM's new "Total Value Promise" strategy is aimed at weaning car buyers away from big rebates by offering prices that are closer to final transaction prices and highlighting the value and quality of its vehicles.

The world's largest automaker, however, said it will continue to use incentives in a targeted way because of the "intensively competitive automotive market."

Deep discounting and high costs contributed to a $2.5 billion loss in GM's North American automotive operations in the first half of the year.

The company, which is struggling with high costs for everything from raw materials to health care, has led Detroit's incentives war almost single-handedly since it introduced interest-free loans to pump up sales after the attacks of Sept. 11, 2001.

Cross-town rival Ford Motor Co. (F) Monday also slashed sticker prices on some 2006 model-year Ford and Lincoln-Mercury vehicles, including its Explorer sport utility vehicle, Focus car, Freestar and Mercury Monterey minivan.

Ford is expected to give details of its strategy later.

The new GM promotion, which replaces its popular "Employee Discount for Everyone (search)" program, reduces sticker prices on about 30 of its 76 models by a range of few hundred to thousands of dollars. For example, the price of GM's best-selling Silverado Crew cab pickup truck has been cut by $3,055.

Sticker prices are especially important among the growing number of car buyers who shop on the Internet.

GM also said it has extended its bumper-to-bumper limited warranty on all Hummer and Buick brand vehicles to four years or 50,000 miles.

Both GM and Ford, which are fighting to regain U.S. market share from Asian rivals, have been hit hard by this year's dramatic slowdown in sales of mid- and full-sized sport utility vehicles, their most profitable models.

GM's U.S. sales jumped 41 percent in June because of its employee discount plan, touted by industry observers as one of the most successful consumer incentives program in automotive history. Ford and DaimlerChrysler's (DCX) Chrysler division matched the discounts in July after GM extended its employee pricing through August 1.

But analysts said there could be a "payback" effect when the discount program ends. Exceptionally strong sales in any one month can weigh on sales of mass market brands like Chevrolet, Dodge and Ford later on.

GM shares edged up 13 cents to $36.95 on the New York Stock Exchange (search). Ford rose 21 cents to $10.95.

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