Auto Exec Predicts Jump in Car Prices

Yesterday, GM chief financial officer Fritz Henderson warned that car prices could soon jump significantly due to the rising cost of materials, regulatory fees and … (wait for it) … industry restructuring. 

Henderson said that because of all the union buyouts and shuttering of plants — which the U.S. auto industry said it needed to do to stay competitive and lean — costs would rise because the industry doesn’t have the same manufacturing capacity it once did. He also blamed new technology as a reason for increased costs.

We’re simply stunned that an executive would publicly say that these forces would cause a spike in prices for consumers, in stark opposition to most of the moves domestic automakers have made in recent years to save money. For one, GM has already begun utilizing its global R&D strengths to bring in better new cars to the U.S., like the Saturn Vue and upcoming Pontiac G8. That should lower its R&D costs overall. Ford is looking to do the same with future U.S. products. 

Technology? Any gadget-lover will tell you prices of high-tech gear are plummeting. Maybe GM should stop charging $2,000 for an optional navigation system when you can pick up a top-of-the-line portable unit at Best Buy for just $500. 

And let’s not forget the millions automakers are now saving on manpower with new union concessions and massive buyouts. Why aren’t those reduced legacy costs per vehicle moving on to the consumer, or at least offsetting the technology costs that Henderson foresees for things like standard stability control and side airbags?

Even if there are valid financial reasons behind Henderson’s comments, in the end, the remarks sound like they’re intended to scare consumers. Are they trying to scare them into buying new cars now, before the prices jump? If so, fear is not a very good motivator. Good cars are the best way to get people to open their pocketbooks. GM seems to have been learning this lesson; why not sell that idea to consumers instead?

GM Exec: Car Prices Could Jump (USA Today)

Comments

corporate greed

[Dan]

Whatever. The consumer doesn't care why the prices are higher, all the care about is what the price is. GM raises prices, their competitors don't, they lose sales. The market is great that way.

[ziggy]

They raise the price and then offer incentives and rebates to get them off the lot. Doesn't make a whole lot of sense. Just give us your rock bottom price to begin with and you'd probably sell a lot more.

[J]

Hope that's a joke when saying the new Saturn Vue is a great vehicle. That thing is way OVERWEIGHT!

[Troy in Ft Walton Beach]

Will this only affect Domestic vehicles? I plan to buy a car in the next couple of years but, may just hold on to the one I have for a little while longer. By then, I may be able to afford something that gets better MPG anyway.

[Used Cars]

who cares! I don't even prepare myself buying GM cars. . . As long as I have my Toyota Camry!