GM chairman touts 0 percent financing

Friday, Nov. 30, 2001 | 10:33 a.m.

General Motors says there are about 38 million traffic accidents resulting in about 13 million vehicles going to 50,000 U.S. body repair shops to be fixed each year.

General Motors Corp.'s zero-percent financing strategy is leading the automaker to strong sales this year, despite a recession and shattered consumer confidence following the Sept. 11 terrorist attacks.

And, while critics say GM, Ford and Chrysler may have made gains this year at the expense of potential sales in the future, GM Chairman John F. Smith Jr. said the "Keep America Rolling" campaign was a necessary step at the right time.

Smith was scheduled to address automotive repair industry professionals at the four-day International Autobody Congress & Exposition at the Las Vegas Convention Center today. The event was expected to draw about 35,000 people to a trade show and conference that ends Sunday.

The Sun received an advance copy of Smith's remarks.

"It had a major impact on dealer morale, showroom traffic and sales," Smith said of the unprecedented finance program offered on every 2001 and 2002 model year GM car, truck and sports utility vehicle sold in the United States.

"After dropping 35 percent from Sept. 11-19, our car sales were actually up 11 percent during the rest of the month," Smith said. "October set a record and November sales are also up substantially from last year although final numbers won't be in until next week."

Smith said total industry vehicle sales will be around 17 million this year -- the third-best year ever -- and about 15.5 million units next year.

"The best news has been the strong and prompt monetary and fiscal stimulus," Smith said. "The Fed has cut interest rates to their lowest point in more than 30 years and the administration and Congress have already approved an additional $60 billion in federal spending, with a proposal for further stimulus of $50 billion through tax cuts now pending approval."

GM launched the zero-percent strategy after the terrorist attacks and Ford Motor Co. and Chrysler Corp. quickly matched the deal. The offers originally were to end at the end of October, but the companies have extended them twice.

Now, GM plans to offer the deal through Jan. 2 and Ford, through Jan. 14. Chrysler, which has applied the offer to all Chrysler, Dodge and Jeep vehicles except Chrysler's PT Cruiser and Prowler models, the Dodge Viper, the Jeep Liberty and all Chrysler and Dodge minivans, has extended its offer through Jan. 8.

Financial analysts also were told Thursday that GM will this year will become the market leader in trucks, pickups and sport utility vehicles for the first time since 1994. Paul Ballew, GM's general director for market and industry analysis, said trucks would account for 60 percent of GM's retail vehicle deliveries in November.

But not everyone is convinced that the jump-start the zero-percent financing promotion created is healthy for the industry. Some analysts are convinced that the companies cost themselves millions in lost profits and stolen future sales from next year. Autodata, a technical journal that follows the automotive industry, said Chrysler spent an average of $2,682 per vehicle on incentives last month.

Some analysts say GM, which captured more market share from the deals following the terrorist attacks, will increase production next year and extend cheap financing again. The company said it would announce its production plans in a conference call Monday and Ford said it already plans more production.

The Associated Press reported that Jurgen Schrempp, chairman of DaimlerChrysler AG, said it would be difficult for the automakers to get out of the financing deals and that Chrysler would reduce its offer once profit margins improve.

"History will tell whether in those very difficult moments here in this country -- from a purely business bottom-line point of view -- (the financing deal) might not have been the proper approach," Schrempp said in an address to the U.S. Chamber of Commerce Thursday.

Smith, in his Las Vegas speech today, also told the auto repair professionals that changing technology is going to make their jobs more demanding.

"In a nutshell, (the) trend is changing technology, specifically changing technology in diagnostics, repairability, parts inventory management and distribution," he said. "Many of these changing technologies will require additional training and different equipment in your shops, for example, dual-stage air bags, side-impact sensors, sensing and diagnostic modules, hydroformed components, acoustic and structural forms and computerized estimating and service information.

"It all adds up to a faster, simpler and yet more sophisticated and demanding way of doing the job than in the past."

Smith said that because only half of GM's dealerships have body shops, independent operators are important to the company's parts and repair divisions, GM Parts, Goodwrench and AC Delco.

He said his company has helped the repair industry by developing an Internet-driven parts ordering system and by providing a series of education initiatives that will keep mechanics apprised of the latest technology and repair techniques as well as to interest students to pursue careers in the auto repair trade.

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