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GM Boosts Sales Promotions

June 25, 2003

Looking to put the heat on competitors while thinning its bulging inventory of 2003 cars and trucks, General Motors Corp. is planning a

summer incentive assault that includes special holiday promotions and no-interest financing, according to the Detroit News.

And as part of special regional promotions, GM is expected to add another $500 to existing cash rebates beginning today, the News said.

"It's summer sell-down time," said John Middlebrook, GM vice president of advertising and marketing. "We've got lots of 03's to move out so we'll be pushing them."

GM's 2003 car and truck inventory stands at about 1.2 million vehicles, well above GM's target of 900,000 units, spokeswoman Julie Hamp said.

GM found itself in a similar spot last year, which sparked a summer-long promotion offering no-interest financing available for up to five years on most models. Middlebrook said the summer program would likely be similar, but would also feature special holiday promotions tied to the Fourth of July and Labor Day.

The company is also hoping sales will be stoked by the Federal Reserve Board, which is expected to lower key interest rates by a quarter percentage point on June 25, according to the News.

GM's pension is about $19 billion underfunded, and the nation's biggest carmaker has to sell vehicles as fast as possible to keep cash coming in to service the pension. That's why GM continues offering aggressive price discounts and cheap financing -- an average of $3,089 off each vehicle so far this year, according to AutoData Corp., the Washington Post reports.

Because GM is so big, the rest of the auto industry has little choice but to imitate its

discounts, even though U.S. carmakers can ill afford to cut prices, the Post said. The

result is a worsening threat to the auto industry's financial health, according to the Post.

With 2.5 pensioners for every active worker, GM said last week that it will take on $10 billion in debt to help close the pension gap. That

doesn't address current higher costs for running the plan, though, and GM's large showroom discounts won't change, according to the Post.

Paul Taylor, chief economist for the National Automobile Dealers Association (NADA), said demographics will ease the companies' burdens in five or six years. But even before that

happens, Taylor said, vehicle prices must rise to help automakers improve profits and stay competitive, according to the Post.

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