Edmunds: GM Incentives Could Come Back

Edmunds: GM Incentives Could Come Back

General Motors' admission that it may have overcorrected in cutting discounts in January could result in the automaker bringing back incentives on select models, Edmunds.com's analysis suggests.

"GM will probably re-examine its incentive programs going forward, especially in the competitive segments where it doesn't have new products," says Edmunds.com analyst Jesse Toprak. "We do not expect to see incentives on GM's new full-size pickup trucks, but GM might raise incentives on midsize and large SUVS and certain car segments despite its value-pricing strategy."

GM reduced incentives to their lowest point since April 2002, according to Edmunds.com figures. GM spent 17% less in January per vehicle sold than it did in January 2006, in part, due to GM's value-pricing strategy but also because GM had more new models this January than last. Newer models naturally have less, if any, incentives.

"GM probably suffered because its prices were not competitive," says Toprak. "Chrysler, Ford and Toyota all increased incentive spending in January, which caused their products to fare better in price comparisons."

Still, Toyota had higher sales while Chrysler, Ford and GM had lower sales in January.

Though GM North America chief Troy Clarke told reporters over the weekend that GM may have "overcorrected" discounts in January, he emphasized GM intends to stay the course on cutting fleet sales, part of the reason January sales were lower. GM plans to cut fleet sales by at least 100,000 vehicles this year and another 100,000 vehicles next year. By 2008, GM's fleet sales should be at 270,000 vehicles annually from 2005 levels of 700,000.

Michelle Krebs:  is Editor-in-Chief of AutoObserver.com. Follow @AutoObserver on Twitter.