DETROIT — General Motors is reversing its reduction in incentives — at least until production cuts align inventory to market conditions by the second quarter, a senior executive says.
GM hopes it then can reduce its incentive spending and return to the pricing strategy it laid out in 2006.
"In terms of a pure strategy where we price right to market and have no incentive spending — we have very few vehicles where we'd do that," Mark LaNeve, GM's vice president of vehicle sales, service and marketing, told Automotive News. "We'll have some level of incentive spending almost across the board."
At the 2006 Detroit auto show, GM laid out a new pricing strategy. The company repriced most of its vehicles to bring the sticker price closer to the transaction price, thereby cutting the amount of incentives. The transaction price is the actual sales price.
But GM was unable to stick to the strategy for long as market conditions eroded. Slow sales led to rising inventories, forcing more incentives, LaNeve said.
"We continue to want to price our vehicles to the market. We'd like to see incentive spending wane once we get our inventories adjusted," he said. "I think it smoothes out after the first quarter. We're hardly building anything in the first quarter."
GM has said it will cut first-quarter production to 425,000 vehicles — fewer than half of what it built a year earlier.
Meanwhile, GM raised prices on 2009 models by 2.7 percent. According to an analysis by Automotive News, the average price increase amounts to about $790.
LaNeve said GM prefers to spend incentive money for competitive reasons — not to reduce inventory, as it has been doing, because the latter is "wasted money."