Reuters Story

By Jui Chakravorty

DETROIT, June 23 (Reuters) - General Motors Corp. <GM.N> plans to offer zero-percent financing on most of its 2006 models and financing as low as 2.9 percent on its 2007 line of sport utility vehicles, a GM dealer said on Friday.

The zero-percent financing offer would mark a deepening of a summer price war for U.S. automakers, which have been hurt by weak showroom traffic and slower sales of more profitable SUVs and trucks in the face of higher gas prices.

GM declined to comment, but the company, which typically briefs key dealers on its sales strategy in advance of any announcement, scheduled a news conference for Tuesday to discuss its third-quarter marketing efforts.

The GM dealer, who declined to be named, said the automaker would offer the zero-percent financing, available on loans of up to six years, from June 27 to July 5. The offer will exclude hot-selling vehicles such as the Pontiac Solstice and the Chevrolet Corvette, the dealer said.

GM may have felt forced into the move by Chrysler Group. GM's smaller rival, carrying a costly inventory of unsold vehicles, has been aggressively discounting in recent months, extending zero-percent financing and cash rebates.

In an escalation of that strategy, DaimlerChrysler AG's <DCXGn.DE> Chrysler unit on Thursday said it was considering offering deeply discounted employee-level pricing on its 2006 vehicles starting next month.

"With Chrysler's announcement, GM needs to do something to remain competitive," said Alex Rosten, an analyst at Edmunds.com. "But they want to stay away from heavy discounts and rebates."

TURNAROUND

GM, which lost $10.6 billion in 2005 and is in the middle of a sweeping turnaround effort, has said it planned to focus on a clearer pricing strategy that relied on lower sticker prices and avoided the big incentive programs that bolstered sales last year but were criticized as a "fire sale" tactic.

Investors have watched the big incentive programs with concern because they sacrifice profit margin for sales volume. They also hurt the resale value of cars, a key concern for consumers and a factor that affects the terms of lease deals.

But the GM dealer said the company also planned to offer financing of 2.9 percent to 3.9 percent on 2007 models of its newly redesigned line of sport-utility vehicles, called the GMT-900 series.

"This whole Chrysler thing has thrown a wrench into GM's strategy, especially as Ford is expected to match Chrysler's employee discount program," the GM dealer said.

A Ford Motor Co. <F.N> spokesman said the automaker had no current plans to offer employee discounts to consumers.

Dealers who have been briefed by Chrysler officials say the company's upcoming discount program will likely include employee discounts for all car buyers, a 30-day money-back guarantee on all vehicle purchases and an advertising campaign featuring Dieter Zetsche, chief executive of parent company DaimlerChrysler AG. <DCXGn.DE>

Rosten said that GM's strategy of offering incentives -- albeit smaller ones -- for its new SUVs was a good move, even though sales of the more fuel-efficient new models have been good to date.

"This is forward-thinking ... this (SUV) segment has experienced a downturn in sales for several years now," he said. "They just want to make sure they sell the inventory. The financing offers are very attractive."

(Additional reporting by Kevin Krolicki)

Even though GM started the whole employee pricing crap, its response should be: "Our vehicles are good enough to sell without such a discount. Come and see for yourself." with shots of the GMT-900 SUVs, Sky, Aura, Impala, G6 line, etc.

Even though GM started the whole employee pricing crap, its response should be:  "Our vehicles are good enough to sell without such a discount.  Come and see for yourself." with shots of the GMT-900 SUVs, Sky, Aura, Impala, G6 line, etc.

lol, if chevy came out with that much pride and walked over the competition on the TV... who knows kind of traffic that might bring to the dealerships..

I don't understand why dropping rates on the '07 900s are a response to Chrysler's strategy. Chrysler doesn't offer a single appealing SUV in that category. Furthermore, the 2006 Chrysler lineup is mostly junk. I'd rather pay interest on a LaCrosse than not pay it on some Sebring.

GM needs to use 0% APR wisely. If there's a glut of '06s, drop to 0% on those. Don't just 0-out everything.

0% for 72 months is far too long. By that time everyone will be bored of their car and be upside-down on their loan if they trade it in before they pay it off. Employee pricing would have been a better idea, at least on select vehicles.

0% for 72 months is far too long. By that time everyone will be bored of their car and be upside-down on their loan if they trade it in before they pay it off. Employee pricing would have been a better idea, at least on select vehicles.

thats the point... 0% for 72... they dont want the vehicle that long... so they will trade it in...