GM, Ford to Cut Prices on Some Models

General Motors Corp. and Ford Motor Co. said Monday that they would roll back sticker prices as much as 16% on some 2006 models in a bid to wean consumers from the heavy discounts that spurred record car and truck sales this summer.

GM and Ford hope to cut the need for sales incentives by getting closer to the actual prices at which dealers sell their vehicles.

As expected, GM also Monday ended its 2-month-old “employee discount” plan for the public while Ford extended its discount plan until Sept. 6.

A spokesman for Chrysler said Monday that the company would announce the continuation of its employee discount plan today, but was not changing its 2006 pricing.

U.S. carmakers have long been criticized for offering a bewildering array of discounts, rebates and other incentives to lure buyers.

In June, GM launched its employee discount plan, selling most models at the same price that GM employees pay. The discounts reduced the average price about $500, though some vehicle prices fell $10,000 when other incentives were included. GM’s sales rose 47% in June.

In July Ford and Chrysler offered their own discount campaigns.

Those programs helped domestic automakers trim inventories and score huge sales gains. GM said it sold close to 1.1 million vehicles in June and July, and Ford and Chrysler are expected to post record July sales when figures are released today.

Japanese automakers have been less dependent on incentives than their U.S. counterparts and none have offered an employee discount plan. Indeed, Toyota Motor Corp. has raised U.S. prices an average of 1.2% for its 2006 Toyota, Lexus and Scion brand models.

This summer’s employee discount plans gave GM, Ford and Chrysler “a short-term boost,” said Robert Barry, an analyst with Goldman, Sachs & Co. Without those discounts, “the Asian [automakers] will go back to gaining market share,” he said.

The sticker price changes, which have taken effect on early ’06 models, are expected to foreshadow a sales slowdown after the summer’s blistering pace.

“Anytime you pay a lower price it’s good for consumers,” said Wes Brown, an auto industry analyst with Iceology, a Los Angeles market research firm. “But the restructuring of base pricing won’t have near the level of impact for domestic manufacturers that the employee discounts had.”

The discounts also have pulled many buyers into the market sooner than they otherwise might have committed to a new car, and this could cause the sales pace to drop later this year and next year, analysts say.

Employee discount programs also have been criticized by some dealers who say the plans are eating into their profits. Other dealers, though, say the inventory reductions have helped profits by getting rid of cars and trucks they must finance until sold.

“It all washes, and it’s been a good program for us,” said Jan Waters, sales manager at Connell Chevrolet in Costa Mesa.

Overall, GM lost more than $2.2 billion in the first half of this year in its North American automotive operation as it trimmed production and boosted incentive spending to reduce inventories.

To help dealers continue selling while reducing its own incentive spending, GM said Monday that it planned to cut prices on 30 of its 2006 models. The sticker price reductions vary and include $645, or 3%, on the Pontiac G6; $1,835, or 9%, on the Chevrolet Malibu; and $2,455, or 16%, on the Saturn Ion.

Additionally, GM said it would add features, extend warranties or boost the value of more than 20 other ’06 models at no extra cost.

“It will put some sanity back into pricing in our business,” said Mark LaNeve, General Motors’ vice president for North American marketing.

“It’s not a program; it is what we are going to do in our business from now on.”

Ford responded by saying it would cut sticker prices on most 2006 Ford, Lincoln and Mercury models.

Ford’s rollbacks include $15 for a base model Ford Focus compact, which will start at $13,995 for the ’06 model and $4,040 for the top-of-the-line Mercury Monterey minivan, which will start at $29,325.

Ford also is cutting $80 from the 2006 price of its popular Mustang, and $2,100 from the price of a fully equipped Explorer sport utility vehicle. General Motors shares rose 4 cents Monday to $36.86. Ford shares ended the day up 11 cents at $10.85.

Shares of DaimlerChrysler, Chrysler’s parent company, rose to a 52-week high of $49.72, before closing at $49.37, up 95 cents, but that hike was largely on the news last week that controversial Chief Executive Juergen Schrempp would retire in December and be replaced by Chrysler boss Dieter Zetsche.

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Times wire services were used in compiling this report.