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GM to cut prices on most models

The company wants to avoid special incentives by offering prices $1,300 lower on average.

Associated Press
Published January 11, 2006

DETROIT - General Motors Corp. said Tuesday it is lowering sticker prices on three-quarters of its U.S. vehicles, a move meant to wean buyers off incentives and take aim at competitors that have been sapping its market share.

"You can buy another product, this is a free country. But if you do you're paying more than you need to," GM chairman and chief executive Rick Wagoner said at the North American International Auto Show.

Mark LaNeve, vice president of sales and marketing for the world's biggest automaker, said the program will lower the manufacturer's suggested retail price, or MSRP, by as much as $2,500 on some vehicles, but the average decrease will be $1,300.

"We want it to be crystal clear that with or without incentives you're getting a great price," LaNeve said.

GM is lowering prices on all 2006 and 2007 Chevrolet, Buick and GMC vehicles and most Pontiac vehicles, LaNeve said. Saab, Saturn and Hummer will be excluded because GM feels they're priced appropriately.

The deal covers 57 of GM's 76 models. When the new pricing is combined with another price cut GM took on 2006 models last fall, 66 vehicles - or 90 percent of GM's U.S. volume - have been repriced.

LaNeve said GM thinks it will make money despite the markdowns because it has new products coming to market and it will be spending less per vehicle on incentives, which have sometimes topped $4,000 per vehicle.

"Bottom line, we think this is the right thing to do for our business," LaNeve said. GM's U.S. sales dropped 5 percent in 2005, which contributed to a loss of nearly $4-billion in the first nine months of the year.

There is some danger GM could lower prices and vehicles won't sell. But Wagoner and LaNeve said they don't expect that to happen.

"We're going to have to be a little patient. We're going to be talking about the great values that are out there every day, and we think that by focusing more on the products we're going to get more people in the showrooms," Wagoner said.

GM has been trying to get away from the expensive incentives it launched after the Sept. 11 attacks. Last summer's employee-pricing plan led to big short-term sales gains, but sales plummeted when the deals ended. Incentives cheapen brand image and hurt resale values.

Wagoner said incentives aren't going away, but GM plans to use them sparingly.

"Our dealers have told us that we spend too much of our ad money . . . on what is the right incentive program," Wagoner said. "They say, "You guys don't have to do that. You've got very competitive cars and trucks. Let's spend more money talking about them.' "

GM said the new pricing will make it easier for consumers to compare GM vehicles with competitors on the Internet, where two-thirds of car shoppers do research. High incentive spending had made it more difficult for consumers to figure out the price of a vehicle.

Some competitors were upbeat about the announcement.

"We think it's always a good move when the customer focuses on the product and not the deal," George Murphy, senior vice president of global brand marketing at DaimlerChrysler AG's Chrysler Group, said. "Quite frankly, the U.S. market's gotten a little bit out of control selling the rebates and not the products."

John Rogin, who owns GM dealerships in Michigan and Ohio, said he talked to 15 dealers Tuesday and all were pleased. Rogin said the announcement should take the focus off GM's financial performance.

"There is a financial loss to dealers because our margins will be reduced. However, we firmly believe our sales volume will increase due to the new pricing structure," Rogin said.

LaNeve also said the company will be introducing aggressive ads inviting buyers to compare their vehicles with any others on the market. GM has been struggling for years to overcome negative perceptions about vehicle quality.

PRICING EXAMPLES Some examples of GM's new prices, according to Chevrolet general manager Ed Peper:

CHEVROLET IMPALA LS: Now $20,990, down from $21,990.

CHEVROLET SILVERADO REGULAR CAB PICKUP: Now $16,990, down from $19,265.


[Last modified January 11, 2006, 00:40:10]

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