Slow sales prompt GM, Ford to offer rebates
DETROIT -- General Motors Corp. and Ford Motor Co. intensified their incentives battle yesterday, dangling as much as $5,000 in cash for the purchase of some vehicles following disappointing sales in June.
The new offers were widely anticipated by analysts, who say the costly enticements are needed for the nation's two largest automakers to clear out bloated inventories and try to stem declining market share. Observers also say the new round of offers is likely to create heavy demand this month.
Number one GM raised cash rebates to $5,000 on most 2004 trucks and sport utility vehicles, and to $4,000 on most cars. The automaker also is offering interest-free financing for five years on most 2004 vehicles. The program runs through Aug. 2.
Number two Ford raised cash offers by $1,000 to $5,000 on the 2004 Freestar minivan and to $4,000 on the four-door 2004 Explorer SUV. Zero-percent financing for up to 60 months is available on a number of models, including the Crown Victoria, Focus, Taurus, and F-150 Heritage. Ford's new deals are good through Sept. 30.
''The current situation looks very much like the inventory build-up that occurred in April, which was addressed in May by big incentive increases and tiny production cuts," Merrill Lynch analyst John Casesa said in a research report. ''We expect the same response in July." He also said the average incentive per vehicle rose 3.9 percent in June from a year ago to $2,979 -- the lowest monthly year-over-year increase in about two years.
June's seasonally adjusted annual selling rate of 15.4 million units was the lowest since August 1998. GM and Ford were big losers, as their sales fell 15.6 percent and 11.5 percent, respectively, from a year ago.
Analyst Chris Ceraso of Credit Suisse First Boston said total domestic vehicle supplies rose to 2.9 million units in June, nearly 15 percent higher than the three-year historical average for the month. Adjusting for market share losses over the past three years, Ceraso said Big Three stock levels are roughly 500,000 units, or 20.8 percent, above normal.
