Rebates will be back after war clouds recede: GM  ( March '19,2003, ET)

General Motors chairman, Jack Smith said that sales incentives would re-emerge as an effective tool in selling cars once the uncertainty over a possible war in Iraq is cleared away.

"The market is being impacted by the uncertainty over the war, so until that issue gets clarified and squared away, I think we will see a relatively weak market where it doesn't really matter what you do," Smith said.

"Once we see some finality to this situation in Iraq, we will see the market come back, and we expect that incentives will be important."

Despite offering heavy incentives in the US market, sales at GM fell 19% in February from the year-earlier month.

GM led the US industry in incentives for much of last year, a strategy that allowed it to increase profits and US market share even as it cut prices.

Incentives only work if they boost sales enough to cover the reduction in revenue per vehicle and many industry experts believe many of Detroit's deals no longer live up to that standard.

GM gave a pessimistic outlook for the second quarter earlier this month, announcing a 10% cut in production over the same period a year ago.

Rival Ford Motor has also said it would cut production due to larger-than-normal inventories and concerns about a war in Iraq. Smith said he expected any conflict in Iraq to be short-lived, in which case not much will change in the auto industry in the medium term.