AUTO INDUSTRY Are incentives ending? Not likely, some say

Analysts and car buyers alike expect incentives to be around for awhile.
SACRAMENTO BEE
SACRAMENTO, Calif. -- Domestic automakers are dropping hints that the current lavish incentives that cut deeply into their profits might fade away, but many outsiders are skeptical.
General Motors, Ford and Chrysler Group have made similar promises before, usually just before introducing a new round of incentive packages. By the close of 2003, they were still handing out, on average, about $4,000 per vehicle. Studies indicate that not only are U.S. consumers hooked on incentives, but they also now go auto shopping expecting increasingly generous price breaks.
Automakers have been hinting about pulling back on incentives for weeks.
At the recent North American International Auto Show in Detroit, GM Chairman-Chief Executive Richard Wagoner said an improved economy and increased demand "would suggest we'd see some easing of incentives."
Ford chief William Clay Ford Jr. suggested that reduced incentives would be a good thing for the industry and for the company that bears his name.
Skepticism
Yet despite automakers' grumbling that income-sapping incentives must go this year, virtually no one is buying it. Privately, some dealers say they think incentives will stick around all year. And an informal sampling of shoppers indicated that they, too, are not expecting incentives to dry up.
Len Brewster, a Detroit-based auto analyst, said domestic manufacturers have no one to blame but themselves for public skepticism.
"I'm afraid the Big Three have turned into that boy crying 'wolf,'" he said. "They've said 'we're going to stop this' so many times and then added or extended incentives that nobody is believing them anymore."
Consumer studies tend to back that up.
Bandon, Ore.-based CNW Marketing Research, which tracks the auto industry nationwide, has studied and kept statistics on buyer expectations dating back to 1995, when new-vehicle shoppers expected an average $1,127 in discounts off the manufacturer's suggested retail price. That expectation ballooned to $2,367 in 2000.
In 2001, when U.S. automakers introduced even more generous incentives, CNW reported consumer discount expectations at $3,321. By the fourth quarter of 2003, expectations hit an all-time high of $4,162.