GM tries to make car buyers an offer they can't refuse
Is Detroit about to shake itself out of its four-year sales slump?
Automobile analysts agree that eventually it must. And most say they think General Motors' decision this week to freeze or reduce prices on more than half of its 1983 models - sure to be followed by other manufacturers - will at least lay the foundation for a modest recovery. The average price on 1983 models will be hiked only a modest 1.9 percent.
''General Motors is going for volume - that's to the good and I think it will work,'' observes Arvid Jouppi, an independent automobile analyst based in Detroit. ''I think GM read consumer intentions very clearly and concluded it could make money by reducing prices. . . . Consumers rebelled in June when GM tried to get more profit per car.''
Actually, the nation's leading automaker, with 60 percent of the domestic sales market, had tried almost everything else. It had hiked options prices and delivery charges in June and had tried everything from consumer rebates to reduced prices to dealers. But GM sales through July were still running 11 percent below those of 1981. The last good year for car sales was 1978.
Dealers had long assured manufacturers that prices were key. But most manufacturers tended to put the blame for poor sales on high interest rates.
''Automakers have long assumed that people aren't that sensitive to prices and that the need to replace their old cars would prevail,'' says one New York-based automobile economist. ''But the last year has shown them that buyers are willing to hold out.''
''We feel the main point of competition in the next couple of years is going to be price,'' notes Jeanette Garretty, head of industry analysis for Bank of America, who sees such issues as fuel economy and car safety as secondary. ''Just look at the TV ads now in big bold letters which are pushing bottom of the line, stripped-down models at around $5,000.''
Surely one fact that helped GM reach its decision was its own in-house cost cutting over the last year or two. The belt tightening makes possible higher net earnings on lower sales volume. Auto analysts say that GM's current price move might have actually been detrimental as recently as last year.
Dealers generally are pleased with GM's move.
''The dealers have been encouraging a price reduction for some time - we felt manufacturers were pricing themselves out of the market,'' says George Lyles, president of the National Automobile Dealers Association and owner of a North Carolina dealership. ''These reductions are definitely a step in the right direction. . . . For every dollar you take off you get one more person in the showroom.''
But some dealers are concerned that the lack of price difference between current and next year's models could make it hard for them to unload 1982 stock.
''Every year we've had a 6 percent price increase between the two working for us,'' says Fred Collins, executive vice-president of Sutliff Chevrolet in Harrisburg, Pa. ''This will help sell 1983 models, but we may have a problem disposing of 1982s.''
One difference in price between the two models is that the new pricing plan includes another hike in the average price of options such as tinted glass, which many consumers regard as standard equipment.
''These pricing moves are always hard to decipher,'' says one analyst. ''This is certainly a positive sign. But I think this is also to some degree . . . an attempt to razzle-dazzle consumers into thinking the manufacturer is trying to do everything he can to bring prices down.''
Most analysts say that prices alone will not spark the needed recovery in US auto sales. But Mike Luckey, senior automobile analyst with Merrill Lynch & Co., says he thinks GM's move, in concert with lower interest rates and the expiration of many All-Savers certificates in October, can help spur a minor upturn in car sales during this fall.