Wednesday, May 24, 2006

GM Offers Gas-Price Cap for SUV Buyers

GM Offers Gas-Price Cap for SUV Buyers

Wednesday May 24, 2006 3:46 AM

AP Photo NYET820


AP Auto Writer

DETROIT (AP) - Aiming to capitalize on consumer angst about the high cost of gasoline, General Motors Corp. on Tuesday said it would cap pump prices at $1.99 for customers in California and Florida who buy certain vehicles by July 5.

One hitch to the promotion is that customers must also agree to enroll in the OnStar vehicle diagnostic service, which is free for the first year but after that will cost $16.95 a month. The other is that many of the eligible vehicles are serious gas guzzlers.

The offer is good for 2006 and 2007 model year vehicles. In California, eligible vehicles are the Chevrolet Tahoe and Suburban sport utility vehicles and Impala and Monte Carlo sedans; the GMC Yukon and Yukon XL SUVs; the Hummer H2 and H3 SUVs; the Cadillac SRX SUV; and the Pontiac Grand Prix and Buick LaCrosse sedans. In Florida, eligible vehicles are the Impala, Monte Carlo, Grand Prix and LaCrosse.

Customers must buy or lease an eligible vehicle between May 25 and July 5 and enroll in the OnStar diagnostic service, which automatically runs checks on the vehicle and sends e-mail notices to owners each month.

Each month for one year, GM will give drivers a credit on a prepaid card based on their estimated fuel usage. Fuel usage will be calculated by the miles they drive, as recorded by OnStar, and the vehicle's fuel economy rating.

GM will credit drivers the difference between the average price per gallon in their state and the $1.99 cap. The credits can be used through December 2007. Consumers wouldn't get any credits if gas prices fall below $1.99.

GM said a California resident who buys a 2007 Chevrolet Tahoe and drives 1,000 miles per month would get an estimated $103.75 monthly credit, based on the current average premium fuel price of $3.65 per gallon, GM said. A Florida resident who drives a 2006 Buick LaCrosse about 1,000 miles per month would get an estimated monthly credit of $60 based on the current premium fuel price of $3.19.

GM spokeswoman Deborah Silverman said GM picked California and Florida in part because the company wants to increase sales in those states. Silverman said GM will see how successful the program is before deciding whether to expand it to other states.

GM's newly redesigned full-size SUVs like the Tahoe have been big sellers this spring despite rising gas prices. In the first four months of this year, Tahoe sales were up 36 percent. The rebate could help older, slower-selling SUVs like the Hummer H2, which saw sales fall 19 percent in the same period.

GM's car sales were down 12 percent through April. While some cars have bucked that trend - Pontiac Grand Prix sales were up 24 percent - the rebate could help stragglers like the Buick LaCrosse, which saw sales fall 21 percent.

After years of watching customers focus on their deals instead of their vehicles, GM has been cutting back on incentive spending in favor of lower overall pricing. In April, the company lowered per-vehicle incentives by 26 percent to $2,836, the biggest drop of any U.S. automaker.

Silverman said the new program isn't straying from GM's strategy. The automaker has always said it would continue to use targeted incentives to focus on particular vehicles or regions, she said.

GM shares rose 4 cents to close at $24.48 on the New York Stock Exchange.


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