GM Signals It May Be Ready for Incentives Truce

Is the U.S. incentive war over?

No. But a de-escalation could be under way. General Motors CEO Rick Wagoner signaled as much in a speech in Chicago.

“There's been a massive obsession with incentives over the last few years,” he said. “But incentives need to be more strategic, and we need to be more creative with incentives to drive demand.”

Other industry executives had been saying that for months. It is different to hear it from Wagoner because no company has had a more “massive obsession” than GM.

Until now, GM brass have turned a deaf ear to criticism from competitors that incentives were cheapening automotive brands, eroding profits and just plain bad for the industry all around.

“Everybody else should feel free to do whatever they want,” Wagoner declared a year ago. “If they think it dilutes their brands to offer incentives, don't offer incentives. That's fine with us. (But) that's the way we're going to play the game.”

And you can't fault GM for that. Pushing volume and driving revenue remains critical for the world's biggest auto maker, which is stuck with too much capacity and crippling retiree pension and health-care costs that require constant cash flow to support.

Since 9/11, GM has been at the forefront of an incentive ramp-up that has seen cars and trucks leaving showrooms with $4,000 or more on the hood.

For a while the strategy worked. Lately, consumers seem more immune to the bait.

GM recently rolled back stickers $750-$2,000 on its midsize SUVs and fullsize pickups in an attempt to “right price” its products to compete more effectively, while simultaneously slowing the rebate merry-go-round.