No one is going to like it, but it might make sense to stop all the incentives for a while.
I remember the Dark Ages, when you used to get S&H Green Stamps with your gasoline. It was a pretty good incentive until all the gas stations were offering green stamps.
Now that we are nearing the end of the 2006-model cleanup, we might realize that if we halt those incentives for six months or so, they will have a lot more impact if it's necessary to bring them back.
Incentives have been so overused that they have lost a lot of their ability to generate floor traffic. They might still be an effective closer, but they don't seem to be bringing customers into the dealership.
It is interesting to reflect that it was just five years ago that General Motors announced its big 0 percent interest promotion right after 9/11. That was a big idea that kept our entire economy going when everyone thought it was going to tank.
The U.S. economy is still dependent on the automobile industry, even if Washington doesn't want to admit it or do anything to help it. There may be too many transplants in the country these days to try to single out the only two U.S.-owned auto companies, so Washington decides that it should ignore the entire industry. It's not a good idea, but it doesn't surprise anyone.
There is nothing like a rash of new models in the showrooms to touch off an economic spurt. It's good business, and there will be plenty of new choices from everyone to spark sales this fall.
But if new-car sales falter just a bit, the automakers will be tempted to turn on the incentive spigot. Maybe this time, the car companies will decide to bite the bullet and cut production, as painful as that might be.
The actual loss of profit might be about the same, although no manufacturer is eager to see its market share fall.
Unless someone comes up with another winner like GM's five years ago, it might make the most sense simply to adjust production.