Car buyers getting bad case of sticker shock

In this story:

• Car prices up about $570 last year
• GM's Smith says prices fair and stable
• Related Links

January 14, 1997
Web posted at: 12:00 a.m. EST

From Correspondent Ed Garsten

DETROIT (CNN) -- There is much to admire amidst the glitter and chrome that is the North American Auto Show, but the stickers glued to the windows of the cars on display are not among them.

"Some cost as much as a house," marvels one of the people attending the show.

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Not quite, although the point is well-taken. The average price of a car or truck is $20,000, and climbing.

"Where they get the chance, they will raise prices," says John McElroy, editor of Automotive Industries. "Where there are hot vehicles out there right now, especially sport utility vehicles, we're going to see price increases, not price decreases."

Car prices up about $570 last year

How much?

According to Automotive News, the Big Three American automakers -- General Motors, Ford and Chrysler -- have hiked prices an average of $570 in the past year, while the Japanese automakers have raised stickers only $102 dollars.

"There's no question that with the recent weakening of the yen, Japanese automakers have taken advantage of that in their pricing," McElroy says.

When American automakers shook hands on a new labor contract, one hope was that it would lead to lower prices. That's because the pact allowed the automakers to hold down costs by using outside suppliers.

But will it result in lower prices?

Frankly, no, said Ford CEO Alex Trotman.

"How we set the prices is what the customers are prepared to pay, what the competitors are doing, how excellent is our product and how much capacity is out there," Trotman says.

GM's Smith says prices fair and stable

But Chrysler's president, Robert Eaton, said the new deal could help stabilize prices.

"There's no doubt there is some form of an affordabilty issue out there and therefore we recognize it as critical for us to keep our costs as low as possible so we can do the same for prices," he says.

And GM chairman Jack Smith contends prices are already fair and stable.

"Prices have really not gone up at all when you adjust for additional equipment and features that go into the car," Smith says.

Predictions are that in 1997 U.S. automakers will sell about 15.5 million vehicles. To sell all those cars and trucks, the automakers will have to hold the line on pricing and once again offer incentives.

And while driving a hard bargain for the best price is certainly the best way to drive away satisfied, for many customers it's the monthly payment, not the bottom line, that is on their minds.

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• New air bag rules proposed to ease impact - December 30, 1996
• Automakers reach concensus on air bag improvements - November 15, 1996

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• Chrysler Corporation
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• KIA Motors

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