Insightful analysis and commentary for the US and global equity investor
Contributors: Douglas McIntyre Jon C. Ogg

Previous Posts

Thursday, November 09, 2006

GM Fakes A Price Hike (GM)(TM)(F)

GM says that it will raise prices on some of its models due to rising costs. Somehow the reason does not seem to ring true. Although component parts, like plastic, are more expensive, GM is a company that is taking $9 billion a year out of its costs in North America. It would seem that a little increase in plastic would be offset by such a large number.

But, perhaps GM can have its little fiction. It pricing problems are much worse.

According to a study released today by Edmund's, the online car buying company, a smart shopper can get up to 30% off the price of a pick-up or SUV now. Just as one example, the GMC Sierra is availabe at 23% below its sticker price. Since Ford and Toyota are also offering discounts on their SUV and pick-up trucks, the market is going to be even more competitive.

Some industries do not give the consumer any chance to negotiate price. Gasoline sales are a good example. But, other industries, including cars, are built around a sales experience where the customer can bargain for a better deal.

Raise the price 1% and then lower 25% when the customer shows up.

Nice marketing technique.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

Powered by Blogger