JIM HENRY

Why there are no more incentive wars

Jim Henry is a special correspondent for Automotive News
Leave it to Tom Webb, chief economist for Manheim Consulting, to come up with the best explanation I’ve heard yet why the car companies and auto lenders won’t go crazy with incentives, artificially inflate auto sales, and bring about another boom-and-bust scenario:

“Because they don’t have to.”

He pointed out in an interview on Saturday that the car companies made decent money in 2010 with U.S. light-vehicles sales of only 11.6 million, and they should make even more money this year. With lower breakeven points thanks to bankruptcy restructuring for Chrysler and General Motors, and a strategic downsizing for Ford, the car companies aren’t under pressure to produce too many cars.

Webb acknowledges the “other camp” in this argument has a pretty good argument, too: “There’s always going to be a fight for market share.”

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