Look for the climb in sticker prices to ease next fall

After a decade of steadily rising new-car prices, look for stickers to moderate when the 1983 models hit the road next fall.

The average new US car has more than doubled in price, to about $9,000, since 1972. Price boosts on the '82 models, which bowed last October, averaged about 5 percent. Chrysler Corporation was up 3.7 percent; American Motors, 3.8 percent; Ford, 4.8 percent; and General Motors, 6 percent.

Breaking from the practice of other recent years, Detroit's automakers haven't raised prices so far in the 1982-model year and are not likely to do so, given the dismally low rate of sales.

Although few analysts anticipate a price freeze on the '83s -- that might be too much to ask in view of Detroit's huge losses over the past two years -- increases could well be held to the 2 percent range.

Spread over a typical 36-month repayment schedule, a 2 percent boost would add only about $5 a month -- hardly big money in most household budgets. With ''sticker shock'' judged to be the chief deterrent to sales during the current slump, a modest increase could well trigger the industry's long-awaited rebound.

There are numerous reasons to conclude that price restraint will prevail when the '83s hit dealer showrooms. Most important are the wage and fringe-benefit concessions agreed to by the United Automobile Workers union in the recent emergency bargaining sessions before expiration of the UAW's contract, which had been scheduled for Sept. 16.

In its struggle for survival, Chrysler was forced by the federal Chrysler Loan Guarantee Board to work out major concessions with its suppliers, dealers, the UAW, and others to qualify for $1.5 billion in government-backed loans.

Between 1979 and 1981, the UAW gave up $1.07 billion in pay increases, cost-of-living-allowance payments, and other fringes. That comes out to about $ 500 a car.

GM and Ford hammered away at the UAW, demanding similar concessions to remain competitive with Chrysler.

Finally, in January, the UAW agreed to sit down with GM and work out a new contract, using a novel approach. Simply, any givebacks by the union would be passed along directly to car buyers in lower prices.

The early GM-UAW talks bogged down over other matters, including GM's future component-sourcing plans, so the union turned to Ford. In mid-February, negotiators struck a deal that provided job-security assurances for the union and reduced wage and fringe costs for Ford that are estimated to reduce its costs by about $1 billion a year - or roughly $200 a car.

Then it was time for GM and the UAW to return to the bargaining table, using the Ford settlement as their pattern and dropping the original ''pass-through'' proposal, under which all labor-cost savings would have reverted to buyers.

No one has put a cost-per-car number on GM's labor savings, but the package is estimated to be in the $3 billion-a-year range.

All of this means, of course, that Detroit's automakers will be producing cars at costs considerably below previous levels. To be sure, they hope to retain some of the savings to shore up depleted treasuries and bankroll future product programs.

That still may leave room to pass along a portion of the reduced costs to buyers in terms of only marginally higher stickers.

Beyond labor-cost reductions, automakers have asked suppliers to reduce their prices 2 percent, and most have complied. Assuming that the inflation rate continues to fall, further cuts in the prices of items Detroit buys can be expected. This, too, should have a major bearing on 1983 pricing policies.

Then there's the competition to consider. Although the US Bureau of Labor Statistics in mid-1981 indicated that the average price of imports passed that of domestically built cars for the first time -- $8,910 vs. $8,501 -- small Japanese cars in particular continue to be priced well under US cars in the lower end of the market, where first-time and lower-income buyers are forced to look.

To protect themselves in this key segment of the industry, Detroit's automakers must keep their smallest cars within range of the Japanese or face further erosion of buyer loyalty patterns.

Finally, there's that long-awaited recovery to consider.

Nearly all forecasters now see things improving in the fourth quarter, when the '83s reach the market. A sure way to nip that rebound in the bud would be to tack big price increases on the cars.

About these ads
Sponsored Content by LockerDome

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.




Save for later


Saved ( of items)

This item has been saved to read later from any device.
Access saved items through your user name at the top of the page.

View Saved Items


Failed to save

You reached the limit of 20 saved items.
Please visit following link to manage you saved items.

View Saved Items


Failed to save

You have already saved this item.

View Saved Items