Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: THURSDAY, April 28, 1994                   TAG: 9404280204
SECTION: BUSINESS                    PAGE: B-8   EDITION: METRO 
SOURCE: By TERRIL JONES Associated Press
DATELINE: PARIS                                LENGTH: Medium

WHAT A DEAL: GOVERNMENTS OFFER REBATES ON NEW CARS

It's unheard of in the United States, but European governments are giving a boost to flagging car sales by paying people to trade in their clunkers.

Starting in February, French Prime Minister Edouard Balladur offered $870 for any car at least 10 years old and in running condition.

In mid-April, Spain joined in, offering a $725 discount on car licensing fees for cars of similar age.

Industry watchers say the offers appear successful and probably will be adopted by other European neighbors.

``Looking at the sales figures [in France], we're up 14 percent in March,'' said Jean-Claude Mosconi, spokesman for General Motors France.

``Of 177,000 orders we've had, about140,000 were because of the rebate,'' Jacques Calvet, president of Peugeot-Citroen, said last week.

Pessimists had forecast a bleak year for the European car market, which fell 15 percent last year. Most prognosticators saw perhaps a 1 percent recovery this year.

The French rebates have succeeded so far partly because manufacturers in France have added further discounts of $870 to $1,230.

``So you're looking at up to 12,000 francs [$2,100] credit for an old car,'' Mosconi said.

About 2 million cars in France are more than 10 years old. If only 10 percent of them were turned in for new cars, it would mean 200,000 more new autos sold.

That could make French car sales grow this year to 1.9 million from last year's 1.7 million cars.

The Spanish auto market fell 24 percent last year to 740,000. ``If this plan comes through, you could be looking at 900,000 units this year,'' said Arthur Maher, London-based automotive analyst for the forecasting firm DRI-McGraw Hill.

Mosconi acknowledged that the French rebate program, known as the Balladur Plan, is ``unthinkable for Americans. It's a very European tradition.''

Maher notes that ``over the last 30 years, European governments have been very active in manipulating policies for the sake of their car markets.''

In 1992, Britain abolished a 10 percent special car purchase tax, helping Britain's car industry grow 12 percent last year.

Italy, whose car market crashed 20.4 percent in 1993, may well follow its neighbors' lead, analysts said.

The rebates do have drawbacks.

The rush in sales has been concentrated in small cars, where the discounts make the most difference. Small cars generally bring lower profits.

Matching the rebates is also costing manufacturers heavily, and Peugeot will end its discounts on April 30, said Peugeot spokesman Hugues Dufour.

Uncertainty also has arisen over whether the market can sustain sales after the rebates expire. They're valid for six months in Spain and through next spring in France.