The Big 3 are spending far more to coax U.S. buyers into showrooms this year.
Incentive spending in the first quarter of 1998 by the three companies was up as much as $525 per vehicle over the first quarter of 1997.
At General Motors, incentive costs ballooned from $860 per vehicle to $1,305.
Chrysler Corp. said its average U.S. retail incentive per vehicle was $1,230. That compares with $1,185 in the fourth quarter of 1997 and $705 in the year-ago quarter.
Chrysler Controller Jim Donlon III predicted incentives will increase even more this year, but intensive cost cutting will bolster Chrysler's profits.
'Even if incentives go up 5 to 10 percent more this year, we will do well,' he said.
Ford does not break out incentives from overall marketing costs in the United States. However, Ford's first-quarter marketing costs as a percent of revenue were up 1.5 percentage points to 10.9 percent, from 9.4 percent in the first quarter of 1997.
Analyst Scott Merlis of Merlis Automotive International in Westport, Conn., estimates Ford spent $1,225 per vehicle on incentives in the first quarter, vs. about $1,000 in the 1997 quarter.
'The success of Ford's new truck products has moderated Ford's incentive growth somewhat compared to GM,' says Merlis. 'There's been some pretty wild discounting on cars, and that tracks pretty well with the overcapacity issue in that segment.'
To be sure, current incentives are heavily concentrated on cars. Customer rebates on 1998 Ford and Mercury cars range from $500 to $1,000.
Chrysler Corp. is offering rebates of $1,000 to $2,000 on cars and $750 to $1,000 on its minivans.
GM's top rebate on 1998 cars is $2,000. It is offered on the Oldsmobile Aurora, the Buick Riviera, the clear-out Pontiac Grand Am and the Pontiac Sunfire and Chevrolet Cavalier convertibles.
The Big 3 are not alone in the incentive wars. Nissan Division, for example, has the highest incentive rates of any major marque, according to two firms that track incentives data, AutoFacts' Incentives Monitor and CNW Marketing Research (see story on Page 1).
GM turned up the price war a notch last week with rebates of $500 to $1,000 to the original owners of any 1986-98 GM vehicle except Saturn. The so-called loyalty rebate expires June 30.
John Devine, Ford's chief financial officer, went out of his way last week to say GM's recent incentive binge will not force Ford to follow suit.
'Incentives are going to be higher this year,' he said. 'But it's not a result of what one company is doing. And it is not just this quarter; it was last year and the year before.'
But Devine said Ford will adjust incentive spending to match competitors if necessary.
'If that's what it takes to be competitive, that's what we'll do,' he said. 'But we have to offset it (the expense). We have to improve our margins.'
Staff Reporters Jim Henry and Ralph Kisiel contributed to this report