GM to increase prices on ‘09s
General Motors Corp. told dealers Monday that it planned to raise prices on 2009 models by an average of 3.5% despite a tough market that is forcing the automaker to cut production and discount its 2008 models.
Mark LaNeve, GM’s vice president of North American sales, said in conference calls to dealers that the increases would enable GM to recover only part of the rising cost of steel and other commodities and the cost of safety and other features on the new models. The increases would amount to about $1,000 per vehicle.
GM already had increased the prices of its 2008 model year vehicles twice because of rising commodity costs, spokesman John McDonald said. The move comes a little more than a week after Chrysler announced a 2% increase in the price of its remaining 2008 vehicles.
GM also said Monday that it would further cut production of sport utility vehicles and trucks, and that it would hold a sale today through Monday to help clear out high inventories of 2008 pickups, SUVs and larger cars. The sale includes no-interest financing for 72 months.
“We’re really just trying to spark the market at the end of the quarter,” LaNeve said.
GM shares fell 88 cents, or 6.4%, to $12.91 after dropping to $12.75 earlier in the day. That was the lowest they’d fallen since February 1982, when they hit $12.70, according to the University of Chicago’s Center for Research in Security Prices.
LaNeve said interest-free deals were usually successful, but it was unclear whether they would have any effect in such a weak market. U.S. auto sales were down 8% through May because of the economy, low consumer confidence and high gasoline prices, and LaNeve said June sales had been soft.
Trucks and SUVs have seen the sharpest decline. Sales of the Chevrolet Silverado large pickup were down 26% this year through May, while sales of the Chevrolet Tahoe large SUV fell 30%. It is taking dealers more than 90 days to sell each of those vehicles in an industry whose average turn rate is 60 days, according to J.D. Power and Associates’ Power Information Network.
The decline has sparked an internal review of GM’s Hummer brand, which is saddled with a gas-guzzling image. LaNeve said Monday that GM hired Citibank to assist in that review, including weighing any potential bids or licensing agreements.
“We believe Hummer is a strong global brand,” LaNeve said. “It has value.”
GM said Monday that it would cut shifts, reduce assembly line speeds and temporarily idle seven factories because of declining consumer demand for truck-based vehicles. The biggest cut will take place at the company’s Janesville, Wis., factory that makes large SUVs.
