Detroit Takes Aim At Imports American Automakers Set Stage For All-Out Incentive War

Japanese automakers’ renewed competitiveness in the U.S. market is drawing a response from Detroit and raising the potential for an all-out incentive war by spring.

Stung by surging sales of Japanese cars in January and February, Chrysler Corp. began offering dealers new incentives this week to get its cars moving off the lots faster.

Dealers and analysts predict there will be more incentives in the next few months, as the market for cars and even minivans and some sport utility vehicles becomes more crowded and competitive.

Chrysler’s car sales fell 7 percent in February compared with the same month a year ago. It was not alone among the Big Three: General Motors Corp.’s car sales dropped 10 percent, while Ford Motor Co. posted an 8.5 percent decline.

Asian automakers, meanwhile, had a 15 percent increase in car sales.

Japanese dealerships increasingly are luring buyers with an array of redesigned models and attractive prices. Overall, Japanese car prices increased less than those of the Big Three for 1997 models.

The redesigned ‘97 Toyota Camry, for example, can be bought in some cases for less than a similarly equipped ‘96 version. Its sales were up 36 percent last month from a year ago.

The Japanese are benefiting in part from the weakening of the Japanese currency, the yen, against a strong dollar. More significantly, when the yen was strong, Japan’s automakers went on a drastic cost-cutting spree. That work is yielding big benefits today.

“The Japanese are going to be very aggressive, increasingly so as the year goes on,” said analyst Nick Lobaccaro of Bear, Stearns & Co. “That’s going to require a response.”

Chrysler officials declined to comment on their latest incentives. But dealers said the amounts vary, and are tied to each dealership’s past performance and its ability to exceed certain quotas.

At River Oaks Chrysler-Plymouth-Jeep-Eagle in Houston, for example, Chrysler is offering the dealership $200 for every car it sells in March after the first 30, and $300 for each car sold after the first 45.

If River Oaks sells more than 60 cars, Chrysler will give $400 back for every car it sells - including the first 60, General Manager Alan Helfman said Thursday.

Other dealers are getting as much as $600 back for each car sold. The incentives are in addition to customer rebates of $500 to $1,500 that have been in effect for months.

By tying the temporary incentives to quotas, Chrysler hopes to “whip their dealers into a frenzy” while not forcing the company to take a big financial hit, Lobaccaro said.

“There’s a sense of urgency they’ve instilled into this,” he said. “That tells me they’re going to get a big bang for the buck, but they’re going to have to do something similar on an ongoing basis.”

Helfman complained that it will be virtually impossible for him to sell 60 cars this month, even though March traditionally is the start of the big spring selling season.

Last month, his Chrysler-Plymouth dealership sold about 100 units, but about 60 were minivans, which are not included in the new incentives. In the first week of March, car sales were just as dismal.

GM has had the fewest incentives and does not plan any major changes, spokesman Dean Rotondo said. GM is coming out with 14 new models this year that it believes will be priced competitively.

“We will keep our eye on what’s happening … but we’re not going to have any kind of across-the-board support,” Rotondo said.

Ford spokeswoman Joy Wolfe said her company has no plans to respond to Chrysler’s latest move - for now.

“We think we have some pretty attractive incentives out there right now, so we’ll see what happens,” she said. “If things happen in the market that indicate we need to make some adjustments, I’m sure we will.”

Incentives are nothing new. In fact, they have increased steadily over the past year.

Last month, factory and dealer incentives averaged $2,700 a car, up from $2,175 in February 1996, said Art Spinella of CNW Marketing Research, which surveys dealers and tracks sales.