DETROIT -- Talk to a rival automaker or a Wall Street analyst about General Motors and you'll probably hear the complaints: GM's barrage of incentives is trashing the automotive industry's brands and profits.
To critics, 0 percent loans and $4,000 rebates are self-destructive. But GM executives are unapologetic - and tick off a list of benefits GM derives from incentives.
Chairman Rick Wagoner told industry critics to "stop whining" in a blunt January speech to the National Automobile Dealers Association. In that speech, Wagoner said easing up on incentives would result in "lower production, lower productivity, lower profitability and cash flow, fewer jobs (and) declining dealer profitability."
With the big incentives, GM has learned that incentives motivate consumers to buy pricier, high-margin vehicles. And they keep the factories running, getting production out of workers GM would have to pay anyway.
GM's cost advantage over Ford Motor Co. and the Chrysler group also allows it to do what dominant companies typically do in recessions: Turn up pressure on weaker rivals.
Despite its generous incentives, GM has weathered the weak economy of the last three years in relatively good shape, avoiding the massive losses seen in past downturns. GM posted net income of about $4.7 billion in the last 2.5 years; archrival Ford lost about $5.1 billion.
But many analysts counter that GM would have done better if it had slashed production to meet demand.
Saul Rubin, senior auto analyst for UBS Warburg LLC in New York, says that in the short run, GM would have higher profits if it cut production and accepted a lower U.S. market share.
But Rubin says GM may be following the right long-term strategy by chasing market share.
"GM wants higher market share because it believes if it gives it away today, it might not be able to get it back," Rubin says. "It's willing to take some short-term earnings pain."
Analyst Scott Sprinzen of Standard & Poor's, in a recent report, says GM's "market strength has been attributable to its aggressive discounting."
But the credit-rating agency continues to signal that it might downgrade GM's credit rating, in part because of concern about GM's "deteriorating automotive profitability."