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Stair-stepping By Car Makers - An Overdone Ploy

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By Mac Gordon
The Auto Channel

A pricing practice that needs to be re-examined is 'stair-stepping,” and its being applied by automakers ad nauseam on new models in factory-suggested lists and in context with bonus contests and intensive programs.

'Stair-stepping' hasn't made it yet to the unabridged dictionary, but it should be added to the FTC's felony sheets.

Dealers used to open up their computers in the morning dreading the latest advisory on what to charge for base models or this week's bonus payments. Contests du jour were (and more often than not) still are nightmares for the staffers assigned to interpret the latest suggested list prices-effective at 6 am today and expiring at midnight tonight.

The process of price manipulation has become so firmly ingrained in the new-car relationship that it's a wonder that any new cars can be sold 'as is' or 'at invoice' or 'dread the inevitable' at all.

The complexity of stair-stepping's impact was fully illustrated in the New York Times March 3 in a story on Honda's factory list prices for the newly-released 2014 models of Honda Civic cars. The story underscored the pricing levels for each new Civic, detailed to the nth degree.

Five levels of Civics will be deployed, none of which exceeding $20,000. The iconic Civic has been reconstructed to resemble the pricier Accord but the fact that an entry-level model in the mid or low teens was absent from the spread sheet was not played up. Not by a long shot-or is it a short shot?

Honda is playing the game of stair-stepping in a crucial segment of the market, which is unless it sees the light and restores Civics priced in the mid-teens. It is signaling a high level of content for the snappy Fit subcompact, and keeping Accord in the upper bracket beginning at about $23,000. But it's skipping over any Civic coupe body styles, manual transmissions or high-priced Civics, so as not to hurt Accord sales..

Stair-stepping exercises of Honda's variety are not unusual, of course, but they serve their purpose of screwing rural dealers with low incentives.

2012 NADA chairman Bill Unterriner used his pulpit to berate automakers who 'stair-step' pricing lists and use them to mollify members of dealer groups in metro markets.

Who doesn't recall the day when a dealer was censured for breathing about pricing in a meeting or on an e-mail.

How does the factory max its benefits as a stair-stepper? By playing another game (kiss off!)

When will we see an Automotive News editorial lacerating stair-steppers?

What's FTC going to do about such flagrant double-dipping? Maybe go to triple-dipping or even worse!