It looked like things were getting better for the US car industry, but then along came higher fuel prices and the housing slump. Those UAW deals don’t look like such a big advantage now.
GM (GM) is launching a "Red Tag" sale. Under the program customers can get 60 months of zero percent financing on some 2007 models and discounts on some of the new 2008s.
In a note picked up by The Wall Street Journal GM says the annual Red Tag Event "is another example of GM using appropriate strategic and tactical incentive offers."
Wall St. will almost certainly pick up on the fact that this will hurt GM’s earnings in North America and make the fourth quarter a good deal tougher.
The alternative is to let inventory build up, some of it on dealer lots. And, GM is not prepared to offer much larger discounts at the end of the year to eat through that inventory.
Unless it has to.
Douglas A. McIntyre
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