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GM, Ford to Make Payments for Buyers Who Lose Jobs
Hyundai Got Boost After Starting Similar Program in January

By Sholnn Freeman
Washington Post Staff Writer
Wednesday, April 1, 2009

Auto companies, desperate to recharge a dismal U.S. sales year, are trying to lure customers with an offer to cover car payments for buyers who lose their jobs.

General Motors and Ford Motor unveiled job-loss protection plans yesterday, following the success of a similar program at Hyundai. GM said it will make nine car payments of $500 each for customers who lose jobs. Ford is offering payments of up to $700 for 12 months.

U.S. automobile sales are barely running above an annualized pace of 9 million this year. By comparison, car companies in recent years have sold 16 million to 17 million vehicles. Analysts say the sharp drop suggests that Americans have grown so reluctant to buy new cars that they are even holding back on replacing vehicles that have been in accidents or no longer run.

Automakers are scheduled to release U.S. monthly sales results for March today. Jim Farley, Ford's marketing chief, yesterday described March as an "awful" sales month. Weak results could add more urgency to industry and government efforts to find new ways to get people to buy cars and trucks.

On Monday, President Obama called for stepped-up government support for auto buyers. He announced a government plan to back the warranties of GM and Chrysler vehicles, in a bid to reassure consumers who fear that the companies might file for bankruptcy. He also said he supported proposals that provided "generous" tax credits to owners who turn in older models for fuel-efficient new cars.

Such programs are dubbed "cash for clunkers." A similar offer has helped lift auto sales in Germany in the past year, but such initiatives have so far stalled in Congress. Lawmakers are working on compromise legislation to merge competing proposals from Rep. Betty Sutton (D-Ohio) and Sen. Dianne Feinstein (D-Calif.).

Hyundai launched the first auto-industry unemployment payment plan for customers in January. The plan has helped the carmaker build market share and increase showroom traffic, according to John Krafcik, Hyundai Motor America's chief executive. He said the company came up with the idea late last year after trying sales incentives to reach buyers.

"There was a remarkable set of incentives, but sales were cratering," Krafcik said. "Our observation was that there is a primal fear out there over jobs."

Jesse Toprak, senior analyst at Edmunds.com, said Hyundai is benefiting from its overall brand image of value.

"Brands that resonate with value tend to do better in economic uncertain times," he said. "If you need to get a car, you probably don't want to spend an extraordinary amount."

Greg Lewis, sales manager at Fitzgerald Lakeforest Auto Mall in Gaithersburg, said a few customers have asked about the Hyundai plan. But he said the initiative isn't driving sales. Most customers are interested instead in Hyundai's improved Consumer Report quality scores, extended warranty coverage, and cash and financing discounts. Hyundai is offering as much as $4,200 in cash rebates on certain models.

In its new plan, Ford will cover payments for up to 12 months on any new Ford, Lincoln or Mercury vehicle for customers who buy by June 1 and lose jobs in 2009. The GM plan is available for customers who buy any of its vehicles except Saab by April 30.

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