New incentives try to jump-start auto sales

Sales staffs at dealerships throughout the United States are working the phones this week, using fresh incentives as a reason to contact consumers who were shopping before the terrorist attacks.

While the discounts may prompt those already shopping for a new vehicle to close the deal, the industry is grappling with a bigger question: Will the price promotions propel fresh shoppers into a faltering auto market?

General Motors and Ford Motor Co. are relying on new price discounts, including zero-percent financing.

"We're going back to necessity buying. People have been living outside their means. This is a reality check," said Dick Withnell, Dodge Division National Dealer Council chairman and owner of Withnell Dodge in Salem, Ore. "We will see necessity buyers and bargain hunters. Not spontaneous buyers who say, 'My car is three years old, and I think I should trade it in'."

GM began the round of incentives Wednesday, Sept. 19, announcing its "Keep America Rolling" campaign. The "Ford Drives America" program followed on Thursday, Sept. 20.

On late Friday afternoon, the Chrysler group had not matched GM's and Ford's programs. But after discussions with company executives Friday, Withnell said, "DaimlerChrysler will keep up with competitors. They said they are coming up with a new plan."

Toyota vehicle inventories were lean before the Sept. 11 attacks, and the company is not considering an incentive program, John McCandless, spokesman for Toyota Motor Sales U.S.A. Inc., said Friday.

Calling back

In a letter to dealers, Bill Lovejoy, GM group vice president for sales, service and marketing, said GM market research shows "shoppers have been distracted but not abnormally so for the circumstances. Consumer credit application volumes are relatively steady at 80 percent of pre-attack levels."

Lovejoy said the zero-percent campaign is a response to President Bush's plea that consumers and business resume normal economic activity. Consumers need prodding to get out of the funk caused by the attack, he said.

By Friday morning last week, dealer Tony Castriota said the new incentives had led to the sale of three Chevrolet Cavaliers and a Chevrolet S10 pickup at Castriota Chevrolet Inc. in Pittsburgh.

"Our salespeople are going back and reviewing those who haven't bought yet, using the incentive to get them back into the showroom," Castriota said. He also created a cable TV commercial promoting $1,986 in interest savings on a $15,000 loan financed over 36 months at zero percent, compared with 7.9 percent.

Other dealers were spreading word of the promotion throughout their stores, not just the new-car showroom.

"We've instructed our service advisers to mention to customers that we have a fantastic program announced by GM," said Bill Miller, general manager of Ed Morse Cadillac in Brandon, Fla.

Close watch

This week will give automakers and dealers a better measure of consumer response as the discount deals are advertised.

"GM's program will help people with good credit. If you've got money, you can't beat the deal," said Ron Blaylock, general manager of Evans Pontiac-GMC-Buick in Dallas, Texas. "Our market area is blue collar. Half of the people are upside down on the cars they want to trade in," he said, referring to consumers who owe more than the value of the vehicle.

Domestic automakers are hit hardest in economic hard times, said Doug Scott, an industry analyst with Allison-Fisher International Inc., based in Southfield, Mich. Typical buyers of domestic-made vehicles get nervous, pulling back during a weak economy, he said. Typical buyers of imported and luxury vehicles may pull back initially but return to the market more quickly, Scott said.

- Staff Reporters Dave Guilford, Julie Cantwell and Robert Sherekfin contributed to this report.

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