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GM Announces 1.9 Percent Financing, Rebates; Analyst Predicts Big Losses

August 6, 1987

DETROIT (AP) _ Lagging sales prompted General Motors Corp. to offer financing as low as 1.9 percent and rebates of up to $2,000 on some cars, but the company faces huge losses because of the buyer incentives, an analyst said.

The world’s No. 1 automaker, which once swore off buyer incentives as too costly, announced the program Wednesday on selected 1987 models.

As a result, GM probably will suffer a third-quarter 1987 operating loss of a ″couple hundred million dollars,″ said industry analyst Michael Luckey of Shearson Lehman Bros. Inc. in New York.

He said GM was expected to lose as much as $100 million in the third quarter because it has cut production by 18 percent since last year.

″I don’t think these incentives will work as well as they did last year, but they will stimulate sales,″ Luckey said.

″Incentives throughout all this year just haven’t had the impact they used to simply because customers are used to them and consider them a normal way of doing business,″ he said.

The new GM incentive program, which started today and will run through Sept. 30, and covers most Chevrolet, Pontiac, Oldsmobile and Buick models and the Cadillac Cimarron.

Customers can choose financing at 1.9 percent on 24-month loans, 3.9 percent for 36 months, 4.8 percent for 48 months and 8.9 percent for 60 months or rebates ranging from $200 on a Korean-made Pontiac LeMans to $1,000 on full-size Buick and Oldsmobile luxury models.

On its Cadillac Deville, Fleetwood and Fleetwood Brougham models, GM will give $2,000 cash rebates but no discount financing.

The only less expensive financing were the no-interest loans offered by American Motors Corp. during last year’s incentives binge.

Last year, GM’s 2.9 percent financing incentive program ran from Aug. 28 to Oct. 8, but GM executives blamed the incentives for a $338.5 million third- quarter operating loss.

GM Chairman Roger Smith had said the company would reduce production rather than offer such incentives again.

Since then, the automaker has used incentives more sparingly and interspersed rebates and low-interest loans with discounts on option packages, which many analysts said was confusing customers.

By the end of July, however, GM’s car sales were 20.9 percent lower than a year ago and its truck sales were down 5.1 percent.

In addition, GM’s share of the combined import and domestic car market had fallen to 35.7 percent from 41 percent a year ago, or nearly 570,000 fewer domestic cars sold so far this year compared to last year.

Ford spokesman Bill Carroll said Ford’s current incentive program, which expires Monday, covers a selection of cars and trucks and offers a 24-month loan at 3.9 percent or rebates ranging from $300 to $1,000.

Chrysler’s latest incentive program, which began June 30, has no expiration date and covers a selection of cars and trucks with financing as low as 3.7 percent and rebates from $300 to $1,000, said spokesman Tom Jakobowski.

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