Ailing U.S. automakers General Motors Corp (GM) and Ford Motor Co (F) on Tuesday announced new rounds of incentives, including payment protection on vehicle loans for job losers, to boost customer confidence and jump-start vehicle sales.
Detroit, Michigan-based GM, the largest U.S. automaker, unveiled its GM Total Confidence plan, whereby customers can get payment protection for the first 24 months of ownership. GM will provide payment protection on vehicle loans or leases of up to nine payments of $500 a month for customers who lose jobs for economic reasons. The offer is available for vehicles purchased April 1 through April 30.
Dearborn, Michigan-based Ford launched its new Ford Advantage Plan, under which Ford will provide 12 months of payment protection of up to $700 per month on every new Ford, Lincoln or Mercury vehicle in case the customer loses his job The offer is valid for purchases from Tuesday through June 1.
The offers, which are in addition to zero-percent financing, come at a time when U.S. auto sales are at their lowest levels in at least 27 years under the pressure of tight credit and weak consumer confidence.
Several other automakers have also come out with attractive incentives to lure U.S. customers to boost their sales. U.S. consumer confidence hit a record low in February, but showed a modest rebound in the month of March.
Chrysler LLC started offering 0% financing, rebates, employee pricing and discounts of up to $6,000 in January. This was a plan initiated to clear out dealers' inventories and boost sales, which has hardly helped the struggling automaker.
South Korea's Hyundai Motor Co. also had launched a scheme in January that allows customers to return vehicles within the first year of the purchase in case the customer is unable to pay due to a job loss or disability.
GM and Chrysler LLC, which are pushed to the brink of bankruptcy amid dwindling sales, higher operating costs and huge debts, are surviving on $17.4 billion of government loans and have requested for $21.6 billion more. Ford has not sought any government funding to survive.
President Barack Obama said Monday the restructuring plans offered by GM and Chrysler do not go far enough to warrant additional government assistance and asked the two automakers to accelerate their survival efforts to access more funding or else face bankruptcy. GM was given 60 days to come up with a new restructuring plan in order to receive more federal aid, while Chrysler was given 30 days to complete a merger with Italy's Fiat because it was not considered viable as a stand-alone company.
Meanwhile, GM's new CEO Fritz Henderson said Tuesday that more of the automaker's plants could close as part of the company's effort to meet new, tougher requirements for government aid. That's in addition to the five plants the company said it would shut down when it submitted a restructuring plan to the government last month.
Speaking at his first news conference as CEO, Henderson also said if agreements can't be reached with the unions, bondholders and other parties, a decision on bankruptcy would be made in consolation with the Obama auto task force.
Henderson took over as GM CEO Monday, replacing Rick Wagoner who resigned at the request of the Obama administration.
GM shares are currently trading at $2.32, down 38 or 14.07%, while Ford shares are currently trading at $2.71, down 5 cents or 1.81%.
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