AP NEWS
Related topics

Buyers Not Breaking Down Dealers’ Doors as Incentives End

October 7, 1986

DETROIT (AP) _ The end of the major U.S. automakers’ sales incentives this week likely will signal a collapse in auto sales for the rest of the year and a possible return of deep discount interest rates in early 1987, analysts said Tuesday.

″I think the auto industry has trained the average car buyer not to come into the showroom unless incentives are offered,″ said David Healy, an auto industry analyst with Drexel Burnham Lambert Inc. ″The industry has made incentive addicts out of consumers.″

General Motors Corp. launched an incentive battle in August with 2.9 percent annual interest rates aimed at reducing a more than 1 million-vehicl e, 80-day backlog of 1986 models. Although neither Ford Motor Co. nor Chrysler Corp. had similar backlogs, both entered the fray to keep their dealers competitive.

GM’s cut-rate interest and cash rebate incentive deals end at close of business Wednesday, as do Ford’s matching incentives. Chrysler’s 2.4 percent, two-year financing and other low-interest and rebate packages, also good on some 1987 models, end Sunday night. American Motors Corp. offered its own zero percent financing plan on some purchases, 2.9 percent on others.

The incentive battle spurred September car and truck sales to record one- month levels at GM and set a September sales record for the domestic industry as a whole.

At Ford and Chrysler, the rate wars that helped GM thin out its inventories probably will mean reduced third-quarter earnings but increased production and profitability in the fourth quarter, said Gary Glaser, industry analyst with First Boston Corp.

The bargain-basement rates served as a strong sales stimulant only for the first 10 sales days of September, after which sales dropped off. With no incentives, Healy predicted, ″car sales are going to collapse.″

Dealers contacted Tuesday by The Associated Press said customers weren’t breaking down their doors for last-chance purchases.

″There’s no sense of urgency in the consumer’s mind at all. They’re pretty well sure that it’s going to be extended or (the company’s) going to come out with something new,″ said Ronny Vann, sales supervisor at Boswell Chevrolet in Carrollton, Texas. ″We haven’t even seen the usual end-of-month push this month.″

Vann said it would be a ″big mistake″ if GM doesn’t come up with new financial bait for buyers.

GM spokesman Harold Jackson, however, promised that ″we have no intention of announcing any incentives with introduction of our 1987 models.″

Chrysler and Ford representatives also said no new incentives were planned as of Tuesday. Healy and Glaser, predicting a fourth-quarter sales slump, said automakers would hold back from offering new packages during inventory rebuilding and probably would wait until they see whether sales pick up on their own in early 1987.

Meanwhile, GM has corrected some of the product mistakes that led to the inventory backup and the interest rate war, Glaser said. The corporation also has begun paring unprofitable capital expenditures to more normal levels.

Glaser said GM’s cars lacked styling innovative enough to appeal to the 1986 buyer, and products made by different GM divisions were indistinguishable from each other.

But with the introduction of all-new, Chevrolet-only Corsica and Baretta compacts and later in the year a new mid-size vehicle to go up against Ford’s Taurus and Sable, GM could be more competitive in 1987, Glaser said.