How crass can a major corporation get? I suppose each of us has a favorite example. But I challenge you to top General Motors' decision to raise the prices of its 1986 cars -- now piling up in showrooms all over the country -- by an average of 2.9 percent effective April 14.
Why this second price boost in six months? I asked the chief GM press spokesman in Washington, who read to me from a GM press release: "This price increase reflects the partial recovery of higher labor and other manufacturing costs, as well as the impact of major capital spending and other programs."
I then asked to talk to GM chief economist Marina von Newmann Whitman, or any of the other top GM economists, who might explain the logic of raising prices when a product isn't selling. Dutifully, the Washington PR man checked with his superiors, then informed me that all top officials in New York and Detroit had refused to talk to me "on that subject. We're just going to stand on the press release."
But the press-release gobbledygook doesn't fool anyone, including frustrated GM dealers. GM raised prices because Japanese car makers, responding to the sharp boost in the exchange rate of the yen, have boosted prices since December as much as 15 percent. And instead of taking advantage of that fact to keep their own prices as low as possible -- and grabbing back some of the market share lost to the Japanese -- the managers at GM figured they could skim another $400 a car from potential buyers.
The "strategy," according to the propaganda fed confidentially to willing listeners, is to follow the 2.9 percent increase with discount financing of the kind that boosted sales last year. Presumably, that will enable the company to maintain its short-term profit margins.
A major Oldsmobile sales manager in the area (who discreetly withholds his name) snapped: "This thing might kick the legs out from under us. A prospective customer reads in your paper that GM has raised prices, but maybe there will be a better financing deal later. Does he buy now or wait? That creates a confusion that I think is pretty dangerous.
"I think it would have been an opportune time, considering the inventories we have, to take advantage of the fact that the yen/dollar exchange rate is turning in our favor, and do a price rollback."
The Japanese car dealers, of course, welcome the gift: anything that narrows the price differential between their cars and American-built cars takes some of the sting out of the appreciation of the yen.
Paula Stern, who chairs the International Trade Commission, agrees with the Olds dealer's analysis. By "a concern to make profits fast, instead of going for the long horizon, as do the Japanese," she suggested, American companies will continue to lose out, quotas or no quotas.
Concentration on the short-term profit statement, Stern noted, has also been evidenced in American companies' rush to buy components overseas. Now that the dollar is coming down, that rush is robbing them of flexibility in the manufacturing proc "What may be good for General Motors may not be good for the auto industry, or for America's future as a manufacturing giant," she said.
Actually, the latest bonehead move is nothing new for GM. After quotas were imposed on Japanese cars in 1981, the Japanese companies (with extra help from their dealers) squeezed American consumers as hard as possible in a period of artificial scarcity. It would have been a golden opportunity for American companies to take business away from the Japanese. Instead, GM and the others followed the price of Japanese cars up, fattening their profits and ability to pay huge salaries and bonuses to p executives.
They never used the quota period for its presumed purpose -- to catch up with and compete with the Japanese. As Maryann Keller, a securities specialist on cars, told The Wall Street Journal: "GM's price increase just makes it easier for the Japanese. GM hasn't been able to sell a car without incentives (discounts on financing charges). They seem completely out of touch with reality."
GM deserves to see customers walk out of dealer showrooms into waiting Japanese hands: when it chooses to take profits instead of market share, it doesn't deserve any better.