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General Motors To Offer Cut-Rate Financing

December 26, 1985

DETROIT (AP) _ General Motors Corp. opened a new round of auto pricing competition Thursday by announcing 7.9 percent financing on some cars and trucks, and Ford Motor Co. quickly followed with the same incentives.

GM, the No. 1 automaker and industry price leader, announced it would offer the rates on roughly 40 percent of its cars. Ford announced a few hours later that it, too, would offer 7.9 percent financing on about 40 percent of its cars.

″Essentially, it is a competitive response to help us maintain our sales momentum,″ said John Seig, spokesman for No. 2 Ford.

GM sparked a cut-rate loan and rebate war in August and September, doubling domestic auto sales overnight. However, the automaker lost market share during the pricing war with other domestic automakers.

GM has been losing market share to Ford and Chrysler Corp. for more than a year. Its dealers have a 110-day backlog of unsold cars compared with the desired level of 60 days, said Arvid Jouppi, an auto industry analyst in Detroit.

″The consumer has again indicated that he or she will not pay the current prices,″ Jouppi said. ″The consumer is dictating to the manufacturer the future of the market.

″I think it means we’re going to have this kind of marketing irregularities for the rest of the model year.″

In the most recent sales reporting period, the first 10 days of December, GM reported a 10.2 percent decline in sales from the same period in 1984, while Ford sales were down 18.1 percent and Chrysler sales were off 11.4 percent.

Chrysler, the No. 3 domestic automaker, has no plans to replace its current incentive program, which features 8.6 percent financing and rebates of $500 to $1,000 on some cars, said Chrysler spokesman B.F. Mullins.

″Nothing is planned; GM’s just catching up,″ he said.

Both Ford and GM said the 7.9 percent rates would be offered on deliveries taken from existing inventories through Feb. 22.

″We expect this highly attractive 7.9 percent financing, together with the good stocks dealers have of most new 1986 GM cars and light trucks, to give GM a fast sales start in the New Year,″ said James G. Vorhes, vice president in charge of GM customer sales and service staff, said in a statement.

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