GM DEALERS TAKE DESPERATE MEASURES TO BOOST STALLED SALES

Global Finance, Nov 2004 by Platt, Gordon

UNITED STATES

General Motors enjoyed enormous publicity in September when Oprah Winfrey gave away a free Pontiac G6 to each of the 276 audience members at the 19th season premiere of her popular talk show.

Now, some GM dealers in Kansas City, Missouri, are offering a free Chevrolet Aveo sub-compact to buyers of pricier sport utility vehicles.

Consumers know it's best to buy a new car at the end of the model year because that's when the best deals can be had. Carmakers have been offering generous incentives such as low- or even zero-financing charges and rebates for the past six years, but this year's "buy one get one free" deals are eye-popping indeed.

Analysts say the offers demonstrate the depth of the difficulties facing the industry, which is desperate to reduce bloated inventories in the face of sluggish demand, not only in the US but in Europe as well.

GM made headlines last month when it announced it would cut up to 12,000 jobs in Europe in the next two years in an effort to cut its losses in the region, which has been hit by fierce price competition and has high labor costs.

"With losses since 1999 and no reasonable indication that market or economic conditions will improve substantially in the coming years, we have no other choice than to take tough steps to ensure our long-term success," Fritz Henderson, chairman of GM Europe, said in a statement.

The company says plants in Germany and Sweden need to increase productivity and improve quality or they risk being shuttered.

If GM goes ahead with the planned cutbacks, it could face a bill in the hundreds of millions of dollars to pay for European-style severance packages. -GP