GM to Raise Prices Only 1.6% in a Bid for Market Share : Autos: The ’93 model increases are much lower than those of rivals Ford and Chrysler.

General Motors Corp. said Thursday that it will raise prices on its 1993 model cars an average of 1.6%, an increase significantly lower than the price hikes announced by Ford Motor Co. and Chrysler Corp.

Analysts applauded the move as a sign that the world’s largest auto maker is focusing on maintaining its market share and long-term financial health rather than seeking short-term profit after a disastrous 1991.

“It’s extremely encouraging to me that General Motors, given all the financial pressure that they’re under, has been able to implement a realistic, market-driven pricing strategy,” said Susan Jacobs, president of an auto forecasting firm in Little Falls, N.J. “I think it will make them a much stronger competitor next year.”

As Japanese auto makers raise their U.S. car prices to compensate for the rising cost of capital and soft sales in their home market, many auto industry observers have questioned whether Detroit would seize the opportunity to regain market share lost to Japan during the last decade.

So far, the verdict has been mixed. Earlier this month, Ford announced price hikes of 2.9% on its 1993 models. Chrysler followed with a 2.6% increase. Japanese auto makers raised prices on 1992 models an average of 2.8% this year, and are expected to announce average increases of about 3% on next year’s models.

Industry analysts have criticized Ford and Chrysler’s 1993 pricing as unrealistic considering the slow economy and sluggish auto sales. They have predicted that both will be forced to lower the list prices through heavy discounting.

The Big Three have used cash rebates and other discounting strategies so frequently that car buyers have come to take discounts of up to $1,500 for granted. That has made it difficult for Detroit to set lower prices and stick to them.

Michael Grimaldi, GM’s director of finance for marketing in North American Operations, said GM is holding the line on price increases in an effort to wean customers off incentives. “If we could, we would like not to have incentives,” Grimaldi told the Associated Press.

An exception to the rebates has been GM’s Saturn, which has stuck with its one-price strategy with great success.

Given the addiction to rebates, Ford and Chrysler will likely lower their prices in order to compete with GM, but the No. 1 auto maker will have an initial advantage. Jacobs expects that edge to translate into nearly a full point of market gain for the auto maker next year.

Despite GM’s modest overall price hike, the car maker actually announced steep jumps on several of its best-selling models. But prices for some models stacking up in dealer showrooms will decline.

For example, GM said prices for its popular Pontiac Grand Am will start at $12,524, an increase of $625, or 5%, from the 1992 models. The base price for the less popular Chevrolet Cavalier, however, will slip 4.3% to $8,520. Like Ford and Chrysler, GM has also added equipment--such as anti-lock brakes--that was previously optional to the standard package on several of its vehicles, thus boosting their base prices.

Still, GM dealers said, the company’s modest price increases should help boost sales.

“Clearly, a price increase of any kind isn’t to our advantage at the retail level,” said Tom Sherman, general manager of Buena Park Pontiac in Buena Park, Calif. “But, at 1.6%, that’s lower than the rate of inflation. With the imports up 4% to 6%, they’re looking pretty pricey in comparison.”

GM, which posted a record $4.5-billion loss last year, has been under intense pressure to turn a profit in its troubled North American automotive operations in 1992. Chairman Robert C. Stempel said in May that the company would pursue “profit first,” even if it came at the expense of market share. Some feared that the need to show immediate improvement would lead to short-term strategies that would backfire over the long haul.

But whether driven by a stumbling recovery or a plan to regain market share while it has a chance, GM’s pricing strategy appears to do the opposite.

Says Jacobs: “Pushing prices higher doesn’t get you profits. People have to buy your cars for you to earn any profits.”