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Last Updated: Wednesday, 24 May 2006, 11:02 GMT 12:02 UK
GM to top up drivers' fuel bills
General Motors showroom with customers mulling purchase
GM's previous attempts to lure customers have hurt its profits
Problem-hit carmaker General Motors has offered to subsidise petrol prices for drivers of its vehicles in California and Florida in order to boost sales.

The move comes after oil prices surged and US petrol costs hit record levels.

US average gasoline prices are close to $3 a gallon, prompting complaints from consumers and warnings it would lead to a spending slump.

GM plans to cap petrol prices at $1.99 (1.05) a gallon for buyers of certain 2006 and 2007 SUV and mid-size cars.

Attention grabbing

GM is looking at new ways of luring customers from Asian and domestic rivals after it said earlier this year that it would cut back on the amount of discounts and incentives it offered customers.

The problem with heavy discounting of vehicles is that eats into profits and dents the resale value of cars, analysts said.

They added that the gasoline offer could prove attractive.

"This incentive is likely to get the attention of many consumers," said auto market analyst Jesse Toprak.

GM said it would pay drivers the difference between the average price per gallon of premium fuel and the $1.99 for the miles they drove.

The company explained that a consumer in California who bought a 2007 Chevrolet Tahoe and drove it 1,000 miles a month would get a credit of approximately $103.75.

That compares with the $60 credit a earned by a driver from Florida who buys a 2006 Buick LaCrosse and drives the same distance, GM said.


Customers would get the money paid to a credit card that would be valid until the end of 2007 and would not have a limit on mileage.

However, one condition attached to the promotion is that drivers must sign up to GM's OnStar vehicle diagnostic service, which is free for the first year but will then be charged at $16.95.

Vehicles that qualify for the deal include the 2006 and 2007 Chevrolet Tahoe and Suburban, the GMC Yukon and Yukon XL and the Hummer H2 and H3.

The government's Energy Information Adminstration said on Wednesday that the average price of a petrol was $2.88 per gallon.

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