'Car wars' -- Big 3 swing the price ax
An all-out price war is shaping up between Detroit's carmakers. "The [price cut] strategy already is set," asserts Arvid Jouppi, a Detroit-based analyst for Rooney, Pace Inc. in New York. "Only the tactics remain to be shaped."
Chrysler fired the first salvo two weeks ago when it held the 1981 price line on one-third of its '82-model cars.
ford then followed with more rebates. Now the question is: What will General Motors do -- since it already is trying to boost sales with cut-rate loans?
Behing the price-cutting strategy lies dismal news about car sales. For the first 10 days of October, sales fell 35 percent below year-ago levels. The hard-pressed domestic percent of capacity.
GM even now is planning its next move in the price scuffle. It is holding onto its strategy fo giving 13.8 percent loans for new-car buyers. But some of the program's appeal is waning as the prime rate edges downward from 20 percent to 18. Thus, to meet the public's persistent opposition to higher and higher car prices, GM is going ot have to do something soon.
"We have had 910 days of almost a contentious attitude between the manufacturers and the consumers," assserts Mr. Jouppi. "If we could take care of interest rates and inflation, the auto industry would start to move."
Indeed, Detroit is beginning to realize that if it cannot make money by jacking up prices and hanging more and more options on the cars -- and it obviously cannot at present -- it will have to amke it by higher volumes.
"It's a classic Harvard Business School approach," according to Jouppi. "If you can't make it with price, make it with volume."
All four domestic car companies now offer some kind of price come-on. Besides the GM interest-rate subsidy, Ford last week began offering $400 to $700 customer rebates on its subcompact and sporty models and American Motors added the Concord and Eagle to its list oa models that carry a 10 percent rebate to car buyers.
Chrysler, too, again has sweetened its offer to car shoppers. Besides holding the price line on some of its low-priced '82-models, it now has launched yet another price promotion that provides customer duscounts of $300 to $1,000 on some 1981 and '82 models ot spur sales. This is the fourth rebate by the company in the last year.
In the past 21 months Chrysler Corporation, still struggling to stay in business, has lopped off $500 a car through white-and blue-collar employee pay cuts. These, plus other slashes in overhead have saved the slowly reviving automaker $2 billion a year in operating costs.
"Big deal!" sniffed Lee A. Iacocca, president of the struggling auto company, at the media introduction of its 1982-model cars and light truck.
"What we need," he hammered, "is revenue."
The industry, of course, can be faulted for the sparse new-car offerings at the start of the '82-model year. Except for a few lower-volume exceptions, the domestic industry is short of impressive model changes. In other words, most of the cars are carryovers till some all-new cars hit the road later in the model year.
Ford Motor Company has launched an allnew, smaller Continental and expanded the Granada line to include a station wagon. Chrysler will field its new front-drive Chrysler LeBaron and Dodge 400, slightly larger versions of the K-car Aries and Reliant, on Oct. 29.
Yet it won't be till after the first of the year that GM will roll out ist redesigned, downsized A-body intermediates and revamped Chevrolet Camaro, and Pontiac Firebird.
Simply, the 1982 car launch is having a long-run engagement, stritching over much of the new-model year, a distinct departure from past new-model introductions.
But will the auto market turn up when the newer models reach the road?
Carmakers up to now are generally agreed that auto sales will reach an annual volume of around 10 million in 1982, up more than a million over 1981 but including 2 million or more imports.
Reflecting the uncertain outlook for 1982, however, Nissan US sales vice-president C. P. King cut back the company's forecast from about 10.2 million to 10 million at the introduction this week of the new Nissan-Datsun cars for 1982.
"I see no way to avoid a 10-million-car year because the market is so strongly there," says Jouppi.