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GM second-guesses big sales incentive reversal

The car maker also announces it will reduce its cut-rate fleet sales to car rental agencies by another 100,000 vehicles.


LAS VEGAS (Reuters) -- General Motors Corp plans to reduce sales to car rental agencies by an additional 100,000 units in 2008, capping a three-year effort to cut back on such cut-rate sales, the automaker's North American chief said on Friday.

Separately, GM (Charts) North America President Troy Clarke said he was concerned the No. 1 U.S. automaker had "over-corrected" by throttling back too hard on sales incentives in January in light of the month's 16 percent drop in overall sales.

"I wish we had done a little better on retail sales," he told reporters on the sidelines of an automotive conference sponsored by J.D. Power.

He added: "We knew we had tightened it down ... My concern is that maybe we over-corrected a little bit (on incentives) and we need to make some adjustments."

Clarke said he was particularly watching to make sure that GM's incentive levels on small cars and small sport utility vehicles kept that product line-up competitive. "We really tried to dial it in tight," he said.

GM had said last month that it planned to cut its daily rental sales by 120,000 units this year after a reduction of about 77,000 units in 2006, but Clarke's comments were the first indication that it planned to reduce such sales even further next year.

Clarke said the planned cuts would take GM's annual rental-related sales below 700,000 unit by the end of 2008 from over 1 million before the effort began.

He said the shift in strategy was needed to protect the value of GM cars such as the Pontiac G6, which had been sold heavily to fleet operators.

"Our used cars coming back from rental fleets were competing with our new cars," Clarke said.

GM is betting that it can return to profitability in North America by shunning cut-rate fleet sales, which analysts say allowed it to keep costly assembly plants running but chipped away at the value of its brands.

The automaker has also been reducing its sales incentives in a parallel bid intended to showcase the improvement in its product line up and focus consumers on performance over price.

GM cut its sales incentives by 17 percent in January compared with a year earlier, the largest decline among major automakers, automotive tracking services Edmunds.com said.

Sales incentives are widely tracked as an indication of the relative profitability of various automakers and the pressure that they face to move inventory.

Ford (Charts) which recently lost its number 2 sales position in the U.S. to Toyota (Charts) came under fire from its second largest dealer at the conference. Group 1 Automotive (Charts) complained that the company wasn't doing enough to protect the lead Ford's market-leading pickup, the F-150.

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