General Motors Corp.'s decision to limit price increases on its 1983 cars could start a price war among U.S. automakers. But GM's two largest competitors, Ford Motor Co. and Chrysler Corp., said yesterday they will hold their fire until they can determine if their rival has wounded itself with its latest pricing action.
GM, the largest domestic car producer, announced Tuesday that it is reducing or freezing at 1982 levels the base list prices on more than half of its 1983 passenger cars.
Dealers, who have been pressing U.S. automakers to hold down 1983 prices, cheered GM's announcement and speculated that the nation's second-largest automaker, and Chrysler, the third largest, would have to follow GM's lead to remain competitive. But Ford and Chrysler spokesmen yesterday said their companies have no intention of responding to GM at the moment.
"We're not all that surprised by GM's action, and we're not doing anything about it, as yet," said Chrysler spokesman Baron Bates. Chrysler won't announce its new pricing policy until October, "when we begin introducing our new cars," he added.
"Ford is not responding to GM at this point," a Ford spokesman said.
Fourth-ranked American Motors Corp. already has announced the price range for its main 1983 product, the Alliance--a small front-wheel-drive car that will sell for $5,995 to $7,470 (Some heavily dressed models could cost $10,000).
GM's price reductions and freezes primarily will affect 1983 models that are recasts of 1982 cars still clogging GM showrooms across the nation. The sticker-price reductions of $250 to $1,500 will affect Chevrolet Celebrities and Cavaliers, Pontiac 6000s and 2000s, Buick Centuries and Skyhawks, Oldsmobile Cierras, and Cadillac Cimarrons and Sevilles. The larger cuts, of course, will apply to the most expensive models.
GM said its "substantial pricing action is being taken to promote an early recovery in auto sales, while holding down inflation." But auto dealers' representatives say GM simply is admitting that the prices on its cars were too high in the first place--which is the kind of potential public relations goof that GM's competitors at Chrysler and Ford hope to avoid in introducing their 1983 lines.
"We've been maintaining all along that the prices of domestic cars are too high," said Frank McCarthy, executive vice president of the National Automobile Dealers Association. "We've been urging all of the manufacturers for more than two years to hold down the price increases on new cars. As a matter of fact, we've even asked them to roll back their prices," McCarthy said.
McCarthy said failure to keep the lid on prices in 1982 helped car companies to develop larger-than-normal inventories on that year's models. For example, last month, GM had 183 days' supply of its small J cars and enough midsize A cars to last 185 days. (A 60-day supply is considered normal.)
As a result, GM has been forced to extend and expand its so-called dealer incentives--payments to dealers--to get rid of the leftover supplies of 1982s.
And that brings up another problem, according to McCarthy. "If the dealers don't get rid of the 1982s, they won't be able to buy any 1983s from the manufacturers," he said.