WSJ - GM Raises Prices And Trims Incentives On 2005 Models

[Klaus]

GM Raises Prices
And Trims Incentives
On 2005 Models

By LEE HAWKINS JR.
Staff Reporter of THE WALL STREET JOURNAL
August 4, 2004; Page D1

In a move expected to ripple through the auto industry, General Motors Corp. said yesterday it is raising 2005 model prices across its brands by about 1%. In addition, the auto maker is expected to roll out a series of additional price increases as the year goes on.

GM has been a leader in the U.S. car market's price shootout since it launched 0% financing deals three years ago. But the latest pricing moves illustrate how the company has been giving consumers a price break with one hand -- and then taking some of it back with the other.

With the prospect of deflation diminished, the car makers are navigating a difficult course. It is still necessary to dangle sizable discounts to entice buyers, up to $4,500 for some GM SUVs. But at the same time, like many manufacturers, car makers are eager to begin raising prices again. By pushing through a series of small increases throughout the year, even if GM is forced to continue handing out big incentive checks, they are coming off a higher base price.

On some hot sellers, GM is raising prices well beyond 1%. The base price on the Cadillac CTS sedan, for example, will go up $1,050, or 3.4%, according to data from Edmunds.com, the car shopping Web site.

By contrast, Toyota Motor Corp. and other Japanese auto makers have tended to raise sticker prices less often and less aggressively, and in certain cases have added new equipment to vehicles and still kept prices flat. That strategy has helped Toyota gain market share again this year, even as GM and Ford Motor Co. lost share.

The price increases will inevitably force consumers to bargain harder at dealerships. Yesterday, GM announced incentives on most of its cars and trucks, but the deals aren't as rich for all consumers as they were last month. The company cut by about $500 the cash back to customers who choose not to finance their purchases through GM's financing arm, General Motors Acceptance Corp. Those customers will now get $3,500 back on most 2004 GM cars, compared to $4,000 last month. On most 2004 trucks and SUVs, GM trimmed the cash back for those customers to $4,500, compared with $5,000 last month.

But consumers who choose to finance a purchase or lease a vehicle through GMAC will receive bonus cash of between $500 and $1,500, depending on the region and model. Cash back of $1,000 will also be available on some 2005 models.

GM's opening round of 2005 model price hikes, first outlined in this week's Automotive News, follows a recent pattern among Detroit's Big Three. As cash rebates and discount financing have become standard equipment on most established model lines, U.S. auto makers have departed from their former pattern of raising base prices in the fall, and tweaking them perhaps once in the middle of the model year.

Now, the big U.S. auto makers continue to boost prices incrementally throughout the year. Total base price increases can amount to about 4% for the full year, although much of that gain is often offset by higher discounts.

A GM spokeswoman declined to elaborate on its pricing strategy, saying only that the company studied "a variety of factors, including our current business plan, consumer demand, and overall economic factors."

But some analysts say consumers can expect several more price bump-ups before the year is out. "This year they could do it four or five times, depending on the economy," says Jesse Toprak, director of pricing and market analysis at Edmunds.com. "It's done quietly, and most consumers don't realize it's going on."

Some other auto makers are planning more modest price increases. Toyota plans to raise the base price of a Camry LE sedan for 2005 by $100 to $19,145. That compares to average increases of about $270 for vehicles from Chevrolet, a GM brand, according to Edmunds.

"We have tried to avoid the trap of raising prices and using those increases to fuel incentives," said Jim Press, executive vice president of Toyota Motor Corp.'s U.S. sales arm. "It cheapens your image."

Auto makers increasingly are focused not on rebates but on "revenue per unit." Paul Ballew, GM's executive director for market and industry analysis, says the average paid by customers for a GM vehicle increased to more than $27,000 at the end of 2003, up 8.3% from 2000 levels, despite the intervening years of relentless discounting.

The 2005 Hummer H2, for instance, is priced at $50,950, compared to $49,385 in 2004. Early last year, strong demand allowed Hummer, a GM brand, to keep incentives and inventories low. But the gas-guzzling Hummer's fortunes changed as the year progressed and sales slowed.

Still, consumers continued to spend $2,000 to $3,000 beyond the sticker prices on accessories for the Hummer.

[Klaus]

GM Raises Prices
And Trims Incentives
On 2005 Models

By LEE HAWKINS JR.
Staff Reporter of THE WALL STREET JOURNAL
August 4, 2004; Page D1

In a move expected to ripple through the auto industry, General Motors Corp. said yesterday it is raising 2005 model prices across its brands by about 1%. In addition, the auto maker is expected to roll out a series of additional price increases as the year goes on.

GM has been a leader in the U.S. car market's price shootout since it launched 0% financing deals three years ago. But the latest pricing moves illustrate how the company has been giving consumers a price break with one hand -- and then taking some of it back with the other.

With the prospect of deflation diminished, the car makers are navigating a difficult course. It is still necessary to dangle sizable discounts to entice buyers, up to $4,500 for some GM SUVs. But at the same time, like many manufacturers, car makers are eager to begin raising prices again. By pushing through a series of small increases throughout the year, even if GM is forced to continue handing out big incentive checks, they are coming off a higher base price.

On some hot sellers, GM is raising prices well beyond 1%. The base price on the Cadillac CTS sedan, for example, will go up $1,050, or 3.4%, according to data from Edmunds.com, the car shopping Web site.

By contrast, Toyota Motor Corp. and other Japanese auto makers have tended to raise sticker prices less often and less aggressively, and in certain cases have added new equipment to vehicles and still kept prices flat. That strategy has helped Toyota gain market share again this year, even as GM and Ford Motor Co. lost share.

The price increases will inevitably force consumers to bargain harder at dealerships. Yesterday, GM announced incentives on most of its cars and trucks, but the deals aren't as rich for all consumers as they were last month. The company cut by about $500 the cash back to customers who choose not to finance their purchases through GM's financing arm, General Motors Acceptance Corp. Those customers will now get $3,500 back on most 2004 GM cars, compared to $4,000 last month. On most 2004 trucks and SUVs, GM trimmed the cash back for those customers to $4,500, compared with $5,000 last month.

But consumers who choose to finance a purchase or lease a vehicle through GMAC will receive bonus cash of between $500 and $1,500, depending on the region and model. Cash back of $1,000 will also be available on some 2005 models.

GM's opening round of 2005 model price hikes, first outlined in this week's Automotive News, follows a recent pattern among Detroit's Big Three. As cash rebates and discount financing have become standard equipment on most established model lines, U.S. auto makers have departed from their former pattern of raising base prices in the fall, and tweaking them perhaps once in the middle of the model year.

Now, the big U.S. auto makers continue to boost prices incrementally throughout the year. Total base price increases can amount to about 4% for the full year, although much of that gain is often offset by higher discounts.

A GM spokeswoman declined to elaborate on its pricing strategy, saying only that the company studied "a variety of factors, including our current business plan, consumer demand, and overall economic factors."

But some analysts say consumers can expect several more price bump-ups before the year is out. "This year they could do it four or five times, depending on the economy," says Jesse Toprak, director of pricing and market analysis at Edmunds.com. "It's done quietly, and most consumers don't realize it's going on."

Some other auto makers are planning more modest price increases. Toyota plans to raise the base price of a Camry LE sedan for 2005 by $100 to $19,145. That compares to average increases of about $270 for vehicles from Chevrolet, a GM brand, according to Edmunds.

"We have tried to avoid the trap of raising prices and using those increases to fuel incentives," said Jim Press, executive vice president of Toyota Motor Corp.'s U.S. sales arm. "It cheapens your image."

Auto makers increasingly are focused not on rebates but on "revenue per unit." Paul Ballew, GM's executive director for market and industry analysis, says the average paid by customers for a GM vehicle increased to more than $27,000 at the end of 2003, up 8.3% from 2000 levels, despite the intervening years of relentless discounting.

The 2005 Hummer H2, for instance, is priced at $50,950, compared to $49,385 in 2004. Early last year, strong demand allowed Hummer, a GM brand, to keep incentives and inventories low. But the gas-guzzling Hummer's fortunes changed as the year progressed and sales slowed.

Still, consumers continued to spend $2,000 to $3,000 beyond the sticker prices on accessories for the Hummer.

[Klaus]

GM Raises Prices
And Trims Incentives
On 2005 Models

By LEE HAWKINS JR.
Staff Reporter of THE WALL STREET JOURNAL
August 4, 2004; Page D1

In a move expected to ripple through the auto industry, General Motors Corp. said yesterday it is raising 2005 model prices across its brands by about 1%. In addition, the auto maker is expected to roll out a series of additional price increases as the year goes on.

GM has been a leader in the U.S. car market's price shootout since it launched 0% financing deals three years ago. But the latest pricing moves illustrate how the company has been giving consumers a price break with one hand -- and then taking some of it back with the other.

With the prospect of deflation diminished, the car makers are navigating a difficult course. It is still necessary to dangle sizable discounts to entice buyers, up to $4,500 for some GM SUVs. But at the same time, like many manufacturers, car makers are eager to begin raising prices again. By pushing through a series of small increases throughout the year, even if GM is forced to continue handing out big incentive checks, they are coming off a higher base price.

On some hot sellers, GM is raising prices well beyond 1%. The base price on the Cadillac CTS sedan, for example, will go up $1,050, or 3.4%, according to data from Edmunds.com, the car shopping Web site.

By contrast, Toyota Motor Corp. and other Japanese auto makers have tended to raise sticker prices less often and less aggressively, and in certain cases have added new equipment to vehicles and still kept prices flat. That strategy has helped Toyota gain market share again this year, even as GM and Ford Motor Co. lost share.

The price increases will inevitably force consumers to bargain harder at dealerships. Yesterday, GM announced incentives on most of its cars and trucks, but the deals aren't as rich for all consumers as they were last month. The company cut by about $500 the cash back to customers who choose not to finance their purchases through GM's financing arm, General Motors Acceptance Corp. Those customers will now get $3,500 back on most 2004 GM cars, compared to $4,000 last month. On most 2004 trucks and SUVs, GM trimmed the cash back for those customers to $4,500, compared with $5,000 last month.

But consumers who choose to finance a purchase or lease a vehicle through GMAC will receive bonus cash of between $500 and $1,500, depending on the region and model. Cash back of $1,000 will also be available on some 2005 models.

GM's opening round of 2005 model price hikes, first outlined in this week's Automotive News, follows a recent pattern among Detroit's Big Three. As cash rebates and discount financing have become standard equipment on most established model lines, U.S. auto makers have departed from their former pattern of raising base prices in the fall, and tweaking them perhaps once in the middle of the model year.

Now, the big U.S. auto makers continue to boost prices incrementally throughout the year. Total base price increases can amount to about 4% for the full year, although much of that gain is often offset by higher discounts.

A GM spokeswoman declined to elaborate on its pricing strategy, saying only that the company studied "a variety of factors, including our current business plan, consumer demand, and overall economic factors."

But some analysts say consumers can expect several more price bump-ups before the year is out. "This year they could do it four or five times, depending on the economy," says Jesse Toprak, director of pricing and market analysis at Edmunds.com. "It's done quietly, and most consumers don't realize it's going on."

Some other auto makers are planning more modest price increases. Toyota plans to raise the base price of a Camry LE sedan for 2005 by $100 to $19,145. That compares to average increases of about $270 for vehicles from Chevrolet, a GM brand, according to Edmunds.

"We have tried to avoid the trap of raising prices and using those increases to fuel incentives," said Jim Press, executive vice president of Toyota Motor Corp.'s U.S. sales arm. "It cheapens your image."

Auto makers increasingly are focused not on rebates but on "revenue per unit." Paul Ballew, GM's executive director for market and industry analysis, says the average paid by customers for a GM vehicle increased to more than $27,000 at the end of 2003, up 8.3% from 2000 levels, despite the intervening years of relentless discounting.

The 2005 Hummer H2, for instance, is priced at $50,950, compared to $49,385 in 2004. Early last year, strong demand allowed Hummer, a GM brand, to keep incentives and inventories low. But the gas-guzzling Hummer's fortunes changed as the year progressed and sales slowed.

Still, consumers continued to spend $2,000 to $3,000 beyond the sticker prices on accessories for the Hummer.