GM will stay the course on reducing incentives

General Motors Corp will not budge from its strategy of reducing rebates and other incentives just because it saw a steep sales drop in January, a top executive said on Saturday.

GM's sales were off 16.6 percent compared with January 2006, but the company will continue its efforts to raise transaction prices and car resale values, said Troy Clarke, GM's North American president.

"We are nowhere near saying that the strategy isn't the right strategy, because we think we have ample evidence to indicate that it is," Clarke said on the floor of the National Automobile Dealers Association convention in Las Vegas.

For the past year or so, GM has lowered sticker prices and tried to scale back incentives and low-profit sales to rental car companies. GM said last week that it had reduced incentives by US$500 per vehicle in January compared with the same month last year, and by US$600 per vehicle compared with December. Clarke said that does not mean GM will not use incentives to boost areas of the market or regions in the United States where sales are slow.

Last month, small cars were slow sellers, as were mid-sized sports utility vehicles, he said. Small car sales were especially slow in the Northeast. GM may change its rental car strategy as resale values recover or if certain types of sales become more profitable, Clarke said.

Some rental car sales, in which the cars are taken for eventual purchase by the rental companies, can be profitable, he said. "There could be a day out there when that whole market returns to a level of profitability."

Clarke said GM sold 75,000 fewer rental cars last year than in 2005, and it plans to reduce that number by another 100,000 this year. Competitors have raised incentives on some of their vehicles, making it harder for GM to stick to its strategy without losing sales. But Clarke said GM will stay the course. "It won't force us off the strategy. Sometimes you've got to react tactically, obviously," added Clark.