Auto production cuts likelier than incentives

If the United States slips into a recession next year, it could unfold very differently in Detroit than it did in 2001.

That time, automakers offered generous incentives to buyers in the wake of 9/11, rather than let demand fall and plants go idle. GM kicked off the no-interest loan craze with its Keep America Rolling campaign.

Incentives won't go away, but this time it appears that automakers are more likely to accept fewer sales at higher prices. Automakers are already choosing to cut production to meet reduced demand.

To be clear: No Detroit automaker is talking recession publicly, but on Monday, GM and Ford both announced lower production plans for the first quarter of 2008 — the lowest since at least the recession of 1991.

Analysts such as Brian Johnson of Lehman Brothers say the automakers appear to be going to a more traditional game plan to deal with the possibility of tough times.

"We believe that participants in the automotive economic cycle are likely to go back to the older recession playbook," Johnson said in a note to investors. Automakers "may not step up with incentives in 2008 and let demand and production fall — while ideally using the opportunity to further reduce structural costs." Detroit Free Press