Can automakers refrain from piling on spiffs?

NEW YORK -- Can automakers keep production at realistic levels and avoid the need to push vehicles at dealers and throw generous spiffs at customers?

In short, can automakers exercise some discipline and stay on the wagon? George Magliano, director of automotive research for IHS Global Insight, told an audience last week at a conference sponsored by his company and the National Automobile Dealers Association that incentive spending would be "intense" for at least the first half of 2010 as automakers fight for market share. "The consumer is responding," he said.

"Everything is up for grabs," he said.

And for Fiat boss and Chrysler Group CEO Sergio Marchionne, that's part of the problem. Marchionne said he is worried that short-term sales gains and a growing U.S. economic recovery will prompt the industry to slack off from efforts to cut costs and production.

"Recovery is the opiate of restructuring industries," he said at the conference.

"History will look at this moment as the decisive one," he said. "Will we be content to stick with a business model that has deep and unsustainable structural flaws? ... We have no intention of wasting this opportunity."

Short-term fix

Brian Johnson, New York-based auto industry analyst for Barclays Capital, described March sales results as a breakdown in "pricing discipline." If a high level of incentives continues, Johnson said in a written report to investors, he will have to raise his 2010 sales forecast of 11.7 million units but cut his estimates for automakers' profits.

Automakers may not be able to avoid the temptation of offering incentives because spiffs work, if the primary goal is to move the metal.

Toyota's recent 0 percent finance offers provide the latest example. Its March sales were up 41 percent from the March 2009 level.

Other automakers responded.

American Honda Motor Co., for example, offered no-money-down leases. The Detroit 3's incentives were also high."

Jim Lentz, COO of Toyota Motor Sales U.S.A. Inc., wouldn't say when the company would drop its latest offers, but he said at the conference that the company would not stick with big incentives for long.

"Incentives are not a strategy for Toyota; they are a tactic, he said. "Our intention is not to stay on incentives for a long time."

You can reach Jim Henry at

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