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GM Trades No Interest for Cash

January 03, 2002|From Bloomberg News

DETROIT — General Motors Corp., the largest auto maker, is replacing its zero-interest loan sales campaign with an offer of a $2,002 discount on cars and trucks.

The company ran television advertisements with the cash offer on New Year's Day in the Chicago area. The ads included a tag line saying consumers will get a break on vehicles they "actually want to buy." That echoes comments that have been made by Vice Chairman Robert Lutz, who was hired by GM in August to improve the auto maker's designs.

The company's no-interest loan offer expired Wednesday, and GM declined to confirm details of the replacement program or say whether the Chicago ads will be rolled out nationwide.

"We'll come out with our plans tomorrow," said spokesman Jeff Roegner.

GM first offered no-interest loans after the Sept. 11 attacks, giving up profit it would receive from interest over the life of the loan to spur sales. An interest-free, 60-month loan would save a buyer between $4,000 and $7,000 in interest costs, dealers have estimated. The company's incentive costs rose from $2,335 a vehicle in August to $2,664 in October, Merrill Lynch analyst John Casesa estimated.

"It's one of the best years ever in sales but one of the worst for profit," said Lehman Bros. analyst Nick Lobaccaro.

Shares of Detroit-based GM rose 4 cents Wednesday to $48.64 on the New York Stock Exchange.

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