Like an addict that can't kick the habit, the Big Three have once again returned to offering incentives.
The recent round of discounts started in November in an attempt to unload 2006 models. The new incentives cut $2500 to $4225 from most models, according to Reuters. The discounting led new vehicle prices to drop 0.7% in November, the largest drop in almost a year, according to a Labor Department report.
General Motors Corp., Ford Motor Co., and DaimlerChrysler have been trying to roll back incentives since the beginning of the 2006 model year. All three manufacturers introduced many 2006 models with lower sticker prices than the 2005 models they replaced. Consequently, the new round of incentives and the lower starting point mean the Big Three will make less money on every vehicle sold. In turn worsening the financial crisis the companies face — especially at Chrysler and Ford, which relied on heavier discounts than GM.
Rather than ramping up production of 2007 models, the automakers all announced plans to produce fewer vehicles through the first quarter. The cutbacks could finally propel Japan's Toyota Motor Co. ahead of GM as the world's largest automaker in the New Year, according to Bloomberg. In 2003, Toyota raced past Ford to take second place. As painful as ceding the top spot to Toyota may be in the New Year, it will feel like a mosquito bite compared to the potentially bloody negotiations Ford and GM will enter into with the UAW later this year, according to a feature in the December 18th issue of The Deal news magazine.
However, there was some good news for U.S. automakers. Advertising Age ranked two of Chrysler's marketing campaigns at the top of its year-end top 10 lists. The first of note was a Jeep Wrangler billboard series featuring Jeeps as bugs crawling up the side of buildings (seen below). The other ad to receive kudos was a commercial for the new Dodge Caliber compact car (seen above), which was the most watched commercial of 2006 on AdAge.com. Interestingly, the commercial, which features a fairy converting a building and other New York landmarks into giant whimsical toys, was decried as being homophobic because at the end, the fairy turns a tough guy into a preppy. The outcry may have limited the lifespan of the commercial. Hopefully, the problems at DaimlerChrysler won't lead to a similarly limited lifespan of the company. —Matthew Wurtzel
See story about incentives from Reuters
See story about Toyota from Bloomberg
See story about U.S. automakers from The Deal
See commercial for Dodge Caliber from YouTube
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