Despite sluggish sales, GM to raise prices
updated 6:51 p.m. ET, Mon., June. 23, 2008
DETROIT - General Motors Corp. told dealers Monday it plans to raise
prices on 2009 models by an average of 3.5 percent despite a tough
market that is forcing the automaker to cut production and discount its
Mark LaNeve, GM’s vice president of North American sales, said in
conference calls to dealers that the increases will allow GM to recover
only part of the rising cost of steel and other commodities and the cost
of safety and other features on the new models. The increases will
amount to about $1,000 per vehicle.
GM already had increased the prices of its 2008 model year vehicles
twice because of rising commodity costs, spokesman John McDonald said.
The move comes a little more than a week after Chrysler LLC announced a
2 percent increase in the price of its remaining 2008 vehicles.
GM also said Monday it will further cut SUV and truck production, and it
will run a sale June 24-30 to help clear out high inventories of 2008
pickups, sport utility vehicles and larger cars. The sale includes zero
percent financing for up to 72 months.
“We’re really just trying to spark the market at the end of the
quarter,” LaNeve said.
GM shares fell 88 cents, or 6.4 percent, to close at $12.91 after
plummeting to $12.75 earlier in the day. That was the lowest they’d
fallen since February 1982, when they hit $12.70 per share, according to
the University of Chicago’s Center for Research in Security Prices.
LaNeve said zero-percent deals are usually successful, but it’s unclear
if they’ll have any effect in such a weak market. U.S. auto sales were
down 8 percent through May due to the economy, low consumer confidence
and high gas prices, and LaNeve said sales have been soft in June.
Trucks and SUVs have seen the sharpest decline. Sales of the Chevrolet
Silverado large pickup were down 26 percent through May, while sales of
the Chevrolet Tahoe large SUV fell 30 percent. It takes dealers more
than 90 days to sell each of those vehicles in an industry where 60 days
is the average turn rate, according to J.D. Power and Associates’ Power
The decline has sparked an internal review of GM’s Hummer brand, which
is saddled with a gas-guzzling image. LaNeve said Monday that GM hired
Citibank to assist in that review, including weighing any potential bids
or licensing agreements.
“We believe Hummer is a strong global brand. It has value,” LaNeve said.
LaNeve wouldn’t say if any potential buyers have already come forward
and wouldn’t give a timeline for the company’s decision on Hummer, but
he did say GM wants to make a decision as quickly as possible.
GM said Monday it will cut shifts, reduce assembly line speeds and
temporarily idle seven factories because of declining consumer demand
for truck-based vehicles. The biggest cut will take place at the
company’s Janesville, Wis., factory that makes large SUVs. It will be
idled the weeks of July 14 and 21, plus it will be shut down another 10
weeks through the end of the year. Lee said the other affected plants
are in Oshawa, Ontario; Silao, Mexico; Arlington, Texas; Moraine, Ohio;
Fort Wayne, Ind.; and Shreveport, La.
“There is a large and vibrant truck market out there, it’s just a lot
smaller than it used to be,” LaNeve said.
Spokesman Chris Lee would not say how many fewer vehicles the company
will produce because of the cuts, saying the number is fluid.
To handle the shift of consumer demand going from trucks and SUVs to
cars and crossovers, GM announced that it will increase production at
plants in Kansas City, Kan., and Delta Township, Mich., that make
hot-selling models like crossover vehicles and the Chevrolet Malibu.
Workers who are furloughed because of the production cuts will get
unemployment benefits and supplemental pay from the company that equals
about 95 percent of their take-home pay, the company says.
The move comes on top of GM’s announcement earlier this month that it
will close four North American plants by 2010 because of poor truck and
SUV sales, costing 8,350 jobs.
Jeff Crippen, owner of Crippen Buick-Pontiac-GMC in suburban Lansing,
said the dual strategies of raising incentives and cutting production
are far better than past years when GM kept making vehicles even when
the demand wasn’t there.
“Doing both of those together will ultimately get the inventory in line
by increasing the sales and decreasing the additional vehicles coming to
the marketplace,” he said.
GM Offering 0% Financing to Move the Metal. Again.
GM has stated publicly and repeatedly that they're fully committed to
cutting back on incentives. Unfortunately, as the saying goes, what
they're doing shouts so loud we can't hear what they're saying.
Automotive News [sub] caught wind of a conference call between GM
dealers and Marketing Maven Mark LaNeve. GM's [non-PHEV] volte face
starts tomorrow, when the ailing automaker will offer 0 percent
financing for 72 months on "most Chevrolet and Buick-Pontiac-GMC
products." On a $30k rig, that’s about $8100 in savings versus a
standard 9 percent rate. If you're buying instead of leasing, The
General will add in another $500 in bonus cash (they have to clear the
lots before the 2009s start rolling in with their 3.5 percent price
increase). And yet, with so many lightly used trucks and SUVs on the
market– many with a great GM warranty– even this offer may not move the
needle. GM's facing disaster; some analysts reckon their sales could
tumble by 28 percent in June. Hence the fact that the special financing
will run until they sell something June 30. Or longer. Meanwhile, LaNeve
also revealed that his employer's hired Citibank to help it "complete
their study" on HUMMER and they're open to "all options" for the brand.
Except incentives? Go figure.