General Motors Corp. , already bracing for a tough 2005 because of flagging truck sales, is now showing signs of trouble selling two of the new cars it had been expecting to pick up the slack this year. The company in the last week or so has increased incentives on the Pontiac G 6 and the Buick LaCrosse as a result of sluggish sales, and has prepared to scale back production at the factory that assembles the G 6. GM recently told workers at its plant in Orion, Mich. , that it is reducing the number of cars it wants produced each hour and delaying the start of a second shift of production until after the company’s annual plant shutdown in July. The company had planned to start the second shift in the spring.
Paul Ballew, GM’s executive director of market and industry analysis, said production is ramping up slowly at the plant because not all versions of the G 6 are in the market yet, such as a model with a four-cylinder engine. ‘We don’t get the coupes until the summer, and we don’t get the convertible until after that,’ he said. ‘We ” ve been delayed in bringing some of the the new versions of the G 6 out.’ Mr. Ballew said G 6 sales are ‘pretty good’ but acknowledged they are ‘not off the charts.’ GM expects to sell about 6, 000 G 6 s this month, up from about 4, 000 last month, he said.
The slow start of the G 6 and LaCrosse sales comes at a difficult point for GM, the world’s largest car maker. In 2004, GM lost market share and was forced to cut production as Japanese rivals such as Toyota Motor Corp. and Nissan Motor Co. posted substantially higher sales of mainstream cars. At the same time, luxury-car makers such as BMW AG are expanding further into mid price segments that GM once dominated. In January, GM said 2005 earnings would fall by about a third to between $4 and $5 a share, as a result of a $1 billion increase in health-care costs, a substantial loss in Europe and lower profit at its financing arm.
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It is also suffering from an aging line of pickup trucks and big sports-utility vehicles, such as the Chevy Suburban and GMC Yukon, that normally generate substantial profit. These sales are falling as GM prepares to launch new versions in 2006. The LaCrosse and especially the G 6 were supposed to help smooth the ride in the meantime. The design direction for both vehicles was heavily influenced by GM’s vice chairman and product chief, Bob Lutz, who has promised that eye-catching styling would pull new customers to GM brands.
GM has promoted the G 6 heavily in TV commercials and got a boost last fall when it was featured on the Oprah Winfrey show. Ms. Winfrey surprised her audience by giving each member a G 6, about 100 cars in all, a publicity coup that generated reams of coverage on TV, and in newspapers and magazines. But few GM dealers had the vehicle on their lots at that time, and complained they were unable to capitalize on the short-term interest at their lots on the weekend following the Oprah Winfrey segment. Now, inventories of the G 6 and LaCrosse are piling up at dealerships. The company currently has a 123-day supply of the G 6 — about double the normal amount.
It has enough La Crosses in inventory to last about 122 days at the current selling rate. ‘It’s a real competitive segment. We still feel that the G 6 sedan has been a successful launch, and it is being well received in the marketplace,’ said Chris Lee, a GM spokesman. To boost sales, GM beefed up both general and regional incentives this month on the G 6 and the LaCrosse. It is now offering between $1, 500 and $2, 000 in rebates, depending on the region, or low-interest financing such as 0% interest rates on 36-month loans.
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Buyers in all regions who trade in cars from competing manufacturers can receive another $1, 000. GM also has given dealers coupons allowing them to cut the prices on the G 6 or LaCrosse by up to an additional $1, 000, said Mark McCready, director of strategy and marketing analysis for Carsdirect. com. GM is offering the richest incentives in the Southeast region, where a consumer could get as much as $4, 000 in cash incentives. GM’s finance arm, GMAC, also relaxed its credit-tier system in the Southeast, meaning consumers with slightly lower credit scores can qualify for a better annual percentage rate than they normally would. ‘I think GM is certainly concerned, heading into the spring, with the sales of the both vehicles, especially considering the day’s supply they have on both vehicles,’ Mr.
McCready said. ‘They must be disappointed with the sales on these two vehicles to a certain extent.’.