The auto industry's price wars will hit new highs in the weeks to come, with each of Detroit's Big Three launching aggressive new incentive programs covering virtually every model they make, discounts on some slow-selling products topping $10,000.
Following weeks of internal debate, Ford Motor Co. and DaimlerChrysler AG's Chrysler Group moved to match the steep discounts offered by General Motors Corp. after it announced it would renew its "Employee Discounts for Everyone" program. A key reason: In June, GM's campaign generated a staggering 46 percent increase in year-over-year volume, sending the struggling automaker's sales soaring to their highest levels since 1986.
Industry incentives have steadily grown in recent months, as domestic manufacturers struggle to reverse declining market share and clear bulging inventories. But even foreign imports have had to expand programs in a bid to remain competitive.
These are "absolutely" great deals for consumers, said automotive analyst Joe Phillippi, of AutoTrends Consulting, in Short Hills, N.J. "For anyone thinking about buying in the next 12 months, with these kinds of deals, they'll be likely to move now."
GM kicked off the latest market battle in June, after watching its sales slide during the first five months of the year.
With TV and print ads blaring, "You pay what we pay," GM consolidated various national and regional incentives into a single campaign. With the exception of the popular Chevrolet Corvette sports car, retail customers would pay the same price as employees.
"You have to give GM credit for the simplicity of their package," said Chrysler vice president Jason Vines. "They sure moved some metal."
For the month, GM's market share nipped 33 percent, a level it hadn't achieved in more than a decade. Perhaps more important, the program lured in the sort of import-oriented car buyers GM normally doesn't see.
Under the renewed campaign, GM has added the Pontiac GTO and all of its medium-duty trucks to the list of products excluded from employee discounts. But buyers who reap a special Midwest rebate can get a 34 percent discount, or about $10,500, off a Chevrolet Silverado 1500 full-size pickup.
Such a huge incentive last month slashed into sales of the Ford F-Series, America's best-selling pickup, leading observers to speculate Ford had no choice but to follow GM's lead. Like its rival, Ford will exclude the Ford GT, Mustang, Escape Hybrid and Lincoln Mark LT. Buyers will save as much as $8,000 on the Ford Explorer, and $9,000 on the Lincoln Navigator, a luxury SUV.
Chrysler has been hinting for weeks it would weigh in if GM extended its discounts. But with the Employee Pricing Plus program, "we top that by offering employee prices plus cash back," said Joe Eberhardt, group vice president for sales and marketing.
Like its competitors, Chrysler excludes some of its best-selling models, including 2005 Chrysler 300, Dodge Magnum, all 2006 models, Dodge Sprinter van, Dodge Viper, Jeep Liberty Diesel and all SRT models.
On average, GM incentives jumped about $450 per vehicle last month. According to the research firm, Autodata, the typical GM vehicle carried a $4,458 giveback. Chrysler incentives ran $3,975 and Ford's $3,855, but analysts such as Mr. Phillippi expect those numbers will jump significantly under the new deals.
Consumers need to be cautious. While prices tumble on most Big Three products, buyers may pay more for a few others, such as the Ford Taurus, where incentives are actually lower.
Foreign brands are unlikely to mimic the employee discount programs. Nonetheless, they have been ramping up their own incentives in recent months. Incentives total $1,090 for the average Toyota, and $3,391 for Mitsubishi.
Analysts expect the Big Three to score some big gains in market share this month.
The big concern is the long-term "payback." If potential customers move up their purchases, there could be fewer buyers later in the year, warns Phillippi.
His other concern: American motorists have come to expect they can buy Big Three products at fire sale prices. The typical Toyota was purchased for $26,514 last year, versus $20,659 for GM, according Harbour and Associates.
"Now that they're down to selling their products close to cost, I don't know how [the Big Three] will ever get back to rational pricing," laments Phillippi.