GM Raising Prices – And Cutting Them, Too

June 24, 2008

General Motors customers have some good news, and some bad. The automaker plans to raise prices a whopping 3.5 percent - or an average of $1,000 per vehicle - on 2009 models. But there are also some good deals coming, according to Mark LaNeve, head of sales, service, and marketing, as GM struggles to clear out a bloated inventory of leftover ‘08s.

Most of those in-stock models will be offered, during a one-week clearance campaign, with a 72-month, 0 percent finance package. And customers who buy, rather than lease, will qualify for $500 rebates.

GM previously raised prices on its 2008 models twice, and then as now, the moves reflected the sharp run-up the industry has seen in the cost of raw materials, everything from steel for sheetmetal to the palladium used in catalytic converters. The industry giant isn't alone. Chrysler recently raised its own prices 2 percent, and other makers, including Toyota, have taken steps to at least pass on some of their rising production costs.

Industry observers question whether the new clearance deals will really empty out an inventory particularly bloated with unsold pickups and SUVs, and anticipate further offers before the model year wraps up.

Meanwhile, GM is taking steps to head off further inventory problems, especially on the truck side. By cutting line speeds or suspending production at seven of its North American plants, it hopes to take 170,000 vehicles out of the mix during the second half of 2008. But it also intends to add 47,000 of its more popular passenger cars and crossovers, reflecting the ongoing shift in the U.S. market, driven by record fuel prices.

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