GM lifts prices on some vehicles
General Motors Corp. has raised the list prices on about a third of its 2007 car and truck models in the U.S. because of rising costs of raw materials, potentially undermining a strategy to lure buyers with reduced prices instead of rebates.
The 0.5% average increase took effect Monday, GM spokesman John McDonald said, with the hikes ranging from $60 to $425.
Models such as the redesigned Chevrolet Silverado pickup and new Saturn Aura sedan are excluded, he said.
GM, the world’s biggest automaker, cut prices on 80% of its models in January as part of a plan to improve comparisons with vehicles sold by Toyota Motor Corp. and other rivals.
“The biggest component of this is steel,” McDonald said Wednesday. “We have been cutting our structural costs dramatically this year. Steel is one we simply can’t control. This will get back some of our costs but not all.”
Fritz Henderson, chief financial officer of the Detroit-based automaker, said Oct. 25 that GM’s restructuring was being challenged by rising costs for materials and freight. In addition, costs for additional features in cars and trucks were offsetting increased revenue from new models.
The drag on GM earnings from factors such as the cost of materials, the so-called contribution margin, has been $100 million in each of the last two quarters, according to presentations by Henderson in July and last month.
GM is closing plants and shedding workers in response to losses that totaled $10.6 billion last year. Its U.S. sales have fallen 9.4% this year through October.
Prices for U.S. steel sheet, the most common material used in making vehicles, have risen 12% in the last year to $600 a ton, according to data from Purchasing Magazine. GM Chief Executive Rick Wagoner said this year that the company had abandoned a goal of reducing 2006 spending on materials by $1 billion.
The increases in sticker prices vary by vehicle style and engine type, McDonald said. They involve 239, or 35%, of the 681 variations of GM’s 80 models of Chevrolet, Buick, Saturn and other brands, he said.
A majority of the increases are in the range of $100 to $140 for models such as the Chevrolet Colorado pickup and mid-size cars such as the Chevrolet Malibu, McDonald said. The Pontiac G5 sedan and new sport utility vehicles such as the Saturn Outlook and Hummer H3 won’t be affected, he said.
The pricing will be reflected on GM’s consumer vehicle pricing website, McDonald said.
GM shares rose 8 cents to $34.70. The stock has risen 79% this year.
