GM brings back 0% Finance, Ford Lease Help All To Boost Sales

The Detroit News is reporting that despite growing optimism about the outlook for new vehicle sales in 2002 and signs of strength in February's sales results, top automakers continue to ratchet up expensive incentives to pump up sales. To that end General Motors will launch two new incentive plans. One revisits the automaker's successful zero-percent financing program after a two-month hiatus and a second gives its current leasees an opportunity to return vehicles early without penalty if they re-lease or purchase a new GM vehicle.

Its top rival, Ford Motor Co., today will offer leasees "loyalty coupons" worth $1,000 for cars and $1,500 on trucks and sport-utility vehicles. The program will run through April 8. Ford's current incentive program -- offering up to $2,500 cash or zero-percent financing -- continues through March 5. Ford is still determining what it will do after the program expires, said spokeswoman Susan Krusel. "Obviously the incentives are very aggressive, more aggressive than we've had in the past," Krusel said. "But we do believe they are driving sales." Automakers will report February sales today, and while the results are expected to be below an unusually strong February 2001, the industry's outlook is looking up along with the overall economy.

Automakers and analysts have begun raising their estimates for industry-wide U.S. sales in 2002 to around 16 million units, up from 15 million to 15.5 million just two months ago. Burnham Securities analyst David Healy said the rate of February sales could match or slightly exceed January's rate of 16.3 million units. In February 2001, the annualized sales rate topped 17.8 million -- an unusually high level. "If February sales estimates hold up, it's further evidence that the 'payback' from the fourth-quarter's zero percent-induced 19.1 million rate continues to be quite mild," Healy said in a recent report. "If sales are topping a 16 million rate in the midst of a recession and incentive withdrawal symptoms, it's reasonable to expect a recovery in the sales rate as 2002 progresses." Analysts expect GM, Ford and DaimlerChrysler AG to post sales declines compared with a year ago, setting the stage for European, Japanese and Korean automakers to grab more market share. "The jury is still out, but there's a possibility it could be a record sales month (for Toyota)," said Sam Butto, spokesman for Toyota Motor Corp. Fast-growing Hyundai Motor Co. expects to post its 13th consecutive record sales month. Honda Motor Co. said its sales should be about the same as last year. Although GM said a sharp drop-off in sales to daily rental fleets will hurt its February results, the automaker expects strong retail sales. "We'll have a good February," said Bill Lovejoy, GM group vice-president of sales, service and marketing. "I feel 100 percent better this year (about sales and inventory) than I did last year." Encouraged by February demand, GM earlier this week boosted its top-end forecast for industry sales from 15.5 million units to 16 million and hiked production plans.

Scott Hill, an analyst with Sanford Bernstein, believes a February sales rate above 15.25 million units will prompt other automakers to increase output, "given the low inventory levels and stronger-than-expected demand going into the spring selling season." Ever since the Sept. 11 terrorist attacks sent shock waves through the economy, automakers have kept new vehicle sales strong with aggressive incentives, beginning with GM's "Keep America Rolling" program. The program offered zero-percent financing on almost all GM vehicles. GM ended the program on Jan. 2, replacing it with a combination of $2,002 cash and 5.9 percent financing. But dealers say customers prefer the zero-interest loans.