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Sources say GM will offer 0% for 6 years

In what's shaping up to be another round of summer incentive wars, General Motors Corp. is planning to roll out a zero-percent, 6-year financing program for most 2006 models as soon as next week, according to dealers and industry sources.

GM has been diligently holding down its incentives, cutting them by more than 30% from 2005. But in the process, it has been losing market share. Such a program would appear to be a capitulation to hefty discounts offered by other Detroit-area automakers.

The possible program comes on the heels of Chrysler Group executives confirming Thursday that they plan to launch a new incentive program around July 1. Chrysler Group executives would not detail the program but said they were considering employee pricing, in which customers get the same prices as company workers.

Earlier this month, Ford Motor Co. launched a program to provide no-interest loans and $1,000 gas cards to buyers of most 2006 Ford-brand vehicles.

The new round of discounts is on the way as GM, Ford and the Chrysler Group try to keep sales from sliding, particularly in their SUV lineup, and clear out inventories of 2006 models, analysts said.

"It's clear that General Motors, Ford and Chrysler have to do something," said Mark McCready, director of pricing strategy and market analysis for CarsDirect.com, a Los Angeles-based car-buying and research site.

Automakers have rolled out a host of incentive programs in the past five years, starting in late 2001 with GM's "Keep America Rolling" no-interest-loan program. Last summer, the incentive of choice became employee pricing. GM started its program first but was followed closely by Ford and the Chrysler Group.

The programs helped pump up sales, but some analysts criticized the incentives for eating into profits, pulling ahead sales and creating an environment in which customers expect major discounts.

GM would not confirm whether it would be offering a zero-percent, 72-month program, but several dealers and industry sources said they expected the program to be announced next week.

Chrysler Group Chief Executive Officer Tom LaSorda said Thursday at a news media event in Chelsea that the Chrysler Group is mulling options for an incentive program that would be announced June 30 or July 1. Employee pricing is an option, but plans have not been finalized, he said.

The Chrysler Group is looking at the impact of last year's employee-price incentive, he said. Sales dropped in the fall, after automakers stopped employee pricing, but the Chrysler Group still made a $1.8-billion operating profit, unlike GM and Ford, where North America operations lost money.

"We're studying that," LaSorda said.

DaimlerChrysler AG Chairman Dieter Zetsche, former head of the Chrysler Group, will be featured in ads touting the employee-pricing program as well as a new 30-day money-back guarantee, according to Advertising Age. Commercials were shot last week, the publication said.

Ford would not discuss how it plans to respond to the possible GM and Chrysler incentives.

"Isn't everyone responding to us?" asked Ford spokesman Jim Cain. "We introduced a pretty powerful message into the marketplace: zero-percent financing and free gas for the rest of the year. ... We're going to work to keep our own momentum going. We've got our own strategy."

Dealers had mixed reaction to the new incentive programs.

Jim Arrigo, owner of Arrigo Dodge Chrysler Jeep in West Palm Beach, Fla., said sales at his dealership were about the same as last year, but he knew some Chrysler Group dealers were worried about inventories.

A new incentive program could help move cars and trucks, said Arrigo, who added that he would rather have too much inventory than not enough.

"At least we have some ammunition to work with," he said.

But talks about incentives concerned other dealers.

Carl Galeana, president of the Galeana Automotive Group, which holds Dodge, Pontiac and Saturn franchises in Florida and Michigan, said he was bothered that Chrysler was discussing the potential of the employee-pricing sale now -- more than a week before June sales wrap up.

He was trying to book a strong month of sales, he said, but now he's worried that customers will just wait until July to buy a vehicle with a different deal.

"I think it's ridiculous," said Galeana, whose company owns Van Dyke Dodge in Warren. "I just don't think it's a good idea to announce a program before it starts. It muddies the water."

What's more, Galeana doesn't think another summer of employee-discount prices will help anybody in the industry, even if it gives sales a temporary boost.

"I don't like it -- I don't like it at all," he said. "It's not a good business proposition."

GM, Galeana said, is "still paying for it."

Like it or not, GM, Ford and the Chrysler Group are left with little choice but to roll out new programs, said George Magliano, director of automotive research for the Americas, at Global Insight Inc., based in for Lexington, Mass.

They'll have to continue finding new incentives to sell vehicles until they improve their lineups, he said.

"The only way they're going to get away from it is if they get enough new product into the system that people really like," Magliano said. "It's not there yet."

Hmm, 6 years interest free.

If you do Zero down then you will have the "interest free" bright side of being upside down on a loan for about 5 years.

Scott