GM launches 'red tag' incentive program

updated 5:33 p.m. ET Nov. 14, 2005

DETROIT - Hoping to boost sales, General Motors Corp. on Monday announced a new discount program of “Red Tag” prices that could knock from several hundred dollars to more than $4,440 off the list price of some of its 2005 and 2006 model cars and light trucks through Jan. 3.

The announcement comes as the world’s largest automaker has been running up billion-dollar losses and reporting a declining North American market share.

Under the new incentives, dealers will post fixed maximum prices on most models of the Buick, Chevrolet, GMC and Pontiac nameplates, GM said in a statement.

The GM announcement can be expected to trigger a new round of price cuts across the car industry, even by Asian producers that have been gaining market share at the expense of the U.S. Big Three, said analyst Noriaki Hirakata of Morgan Stanley in Tokyo.

“Japanese — they hate incentives, but they will have to respond,” Hirakata said. “Generally, the selling price of light trucks will be under pressure.”

GM reported a net loss of $1.6 billion in the third quarter, compared with net income of $315 million a year ago, as its North American division continued to suffer from high health care costs and falling sales of sport utility vehicles.

The automaker’s North American market share fell to 25.6 percent in the third quarter from 28.5 percent a year ago. Through the first nine months of this year, GM’s market share was 26.1 percent, down from 27 percent in 2004.

GM’s U.S. sales fell about 23 percent in October from a year earlier, while they fell about 11 percent industrywide.

The new round of incentives “combines the best features of the recent ‘GM Employee Discount for Everyone’ program and last December’s ‘Red Tag’ program,” GM said in a statement.

GM said the red tag prices are “consistent across the country,” exclusive of taxes, title costs and dealer fees.

As examples of the new prices for 2006 models, the tag price for the GMC Envoy two-wheel drive SLE 3SA sport utility vehicle would be $4,442 below its previous sticker price, GM said on its Web site.

Among cars, the tag price of the Buick LaCrosse CX car would drop $3,019, while that for the base-model Pontiac Vibe car would fall $692 from the sticker price.

The automaker said it was launching a nationwide advertising campaign on network television, on radio, in print and in other media to promote the incentives.

The company announced other incentives for its Cadillac, Saturn, Saab and Hummer nameplates. It said Cadillac, Saturn and Saab will offer $500 rebates, while Hummer will have special pricing for a rear entertainment system.

GM shares have been trading at 13-year lows. Rating agencies have downgraded its debt, and it has had a shrinking U.S. market share.

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