Chrysler to Boost ’90 Car Prices by 5%
Chrysler Corp. tentatively plans to boost prices of its 1990 model cars by an average of 5%, the auto maker said Tuesday, blaming much of the rise on the cost of federally mandated passenger restraints such as air bags.
Price hikes outlined by the nation’s third-largest auto maker would boost the price of a Chrysler LeBaron coupe by 8.7% to $12,495 and of a subcompact Plymouth Horizon by 6.07% to $6,995, for example.
The federal government is requiring that all cars made in the United States after Sept. 1 have driver-side air bags or automatic seat belts as standard equipment.
Chrysler and Ford Motor Co. said they will install air bags on about 1 million cars each during the 1990 model year, and General Motors Corp. said it will have the devices on about half as many.
Lower Than Expected
Earlier this week, GM announced a tentative 3.4% increase in its 1990 car prices, nearly 1% of it blamed on air bags. Ford Division General Manager Thomas Wagner said earlier this month that his company would boost car prices about 4.8%.
Chrysler spokeswoman Karen Stewart said Tuesday that air bags will add about $450 to the price of each U.S.-made Chrysler car, although that’s less than the auto maker is spending on buying and installing the devices. She declined to say exactly how much the company is spending on air bags.
The rest of Chrysler’s price increase stems from economic reasons, including higher material and labor costs, she said.
Those figures are a bit lower than some analysts expected and may not include much padding for buyer incentives that can be factored into any car-buying deal.
There has been speculation that the Big Three are eager to get out of the incentive war they have been in since early April. Incentives have cost the companies hundreds of dollars a car in recent months, cutting directly into profits.
But a unilateral withdrawal from the rebate war may be tough, and consumers have grown accustomed to dealer offers of rebates and cut-rate financing.
“They’re filing for pretty big price increases,” said analyst David Healy of Drexel Burnham Lambert Inc. “But whether they will be real world or just on paper to be superseded with rebates is a good question.”
Healy said he may have the answer: “I think they will wait for about 15 minutes, see that (1990) sales are slow and come out with rebates.”
Firm retail prices will be announced during the next few weeks as the auto makers introduce their 1990 cars.
Although it is nearly certain that most 1990 cars will be more expensive than 1989’s, some analysts say the sticker shock could be worse.
“If you look at an air bag cost and assume it’s between $350 and $500,” said analyst Douglas Laughlin of Bear, Stearns & Co. of New York, “the price increases would not appear to be recovering the total costs of air bags and materials.”
