GM may resume leasing in to recoup sales
General Motors Co., the reorganized automaker majority-owned by the U.S. government, said it expects to return to leasing in August to recapture sales lost when the practice was abandoned last year.
Decisions on the models to be covered and the size of a renewed leasing program haven't been reached, Pete Ternes, a GM spokesman, said today in an interview. He said GM plans to restart some leasing next month.
Leasing accounted for more than 25 percent of GM's U.S. sales in 2008's first half, before the company dropped the option in August as resale values fell. Providing the financing helps sales of more-expensive models such as Cadillacs, said Erich Merkle, an independent auto analyst.
"You want to make it as easy as possible to get to your end goal, which ultimately is the sale of a vehicle," said Merkle, who is based in Grand Rapids, Michigan. "Leasing is one of the avenues people have."
Mark LaNeve, vice president of U.S. sales, told analysts on July 1 that Detroit-based GM would like to reenter the leasing business "in the critical segments such as luxury."
LaNeve has said he believes GM lost sales as a result of not offering leasing, particularly with luxury autos and among buyers in the northeastern U.S. GM's U.S. deliveries tumbled 40 percent in this year's first half, a period in which the biggest U.S. automaker slid into a government-backed bankruptcy. The new GM left court protection on July 10.
GM's return to leasing probably won't ever reach the same levels as previously, Ternes said.
"We're looking at it very seriously, but it's not set yet," Ternes said. "We've got to look at what vehicles we would offer it on."
Declining values for used vehicles erodes automakers' pricing power for new autos and can force writedowns because the cars and trucks returned after lease terms are worth less than initially projected. GM posted a $15.5 billion second-quarter loss in 2008 in part because of the drop in resale prices.
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