GM Moves to Rev Up Sales

The automaker cuts sticker prices on most of its models.
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General Motors

(GM) - Get Report

announced plans Tuesday to cut prices on most of its models in an effort to win back customers without using the promotional incentives that wreaked havoc on its profits last year.

GM said 57 of its 76 models will be eligible for price reductions averaging $1,300 and going as high as $3,000. The move, effective Wednesday, covers every Chevrolet, Buick and GMC model, as well as most Pontiac cars and trucks.

"This is a big step for us and arguably the biggest price repositioning in our history," said Mark LaNeve, GM's vice president of North America vehicle sales, service and marketing, in a statement. "This move is in line with our customers' desire for simple, compelling prices."

After a disastrous year in 2005, GM is attempting to revitalize its top line with discounts in order to stem the flow of its market share to foreign-based competitors such as

Toyota

(TM) - Get Report

and

Honda

(HMC) - Get Report

.

"This is a gutsy move by GM," says Burnham Securities analyst David Healy. "They've been put in a competitive disadvantage by having grossly inflated sticker prices offset by grossly inflated incentives. Particularly on the Internet, the competition's products looked a lot cheaper to customers doing price comparisons."

The danger, Healy says, is that GM customers trained to look for incentives might be disappointed.

"Hopefully, we'll see a corresponding reduction in incentives, so in the end, transaction prices should be about the same and margins won't suffer all that much," Healy says. "If sticker prices go down and incentives go up at the same time, that could be problematic."

At the North American International Auto Show taking place this week in Detroit, GM is introducing 19 new products that it expects will represent more than 1.5 million units in sales.

"Today's action allows us to talk more about the features and benefits of all of our vehicles and to spend less time talking about 'the deal,'" LaNeve said.

Shares of GM recently were down 25 cents, or 1.1%, to $22.16.