GM Cuts Prices on Mid-Size Sport Utility Vehicles To Fight Poor Sales

DETROIT John Porretto writing for the AP reported that in a move not typically seen this time of year, General Motors Corp. has slashed prices on its mid-size sport utility vehicles, which compete in one of the industry's toughest segments and saw sales slump dramatically last month.

GM, the world's largest automaker, has trimmed prices by $1,500 to $2,000 on the Chevrolet TrailBlazer, GMC Envoy and Buick Rainier -- vehicles that already carry $2,000 cash rebates.

It comes after a disappointing January in which GM's U.S. business rose 1 percent from a year ago and its light truck sales -- which include SUVs, pickups and minivans -- were flat. But Envoy sales were off 47.8 percent from January 2004, TrailBlazer sales off 41.9 percent and Rainier sales down 20.8 percent, according to the research firm Autodata Corp.

Spokeswoman Deborah Silverman said the decision was made after a routine review of how GM's vehicle pricing compared with competitors in all categories.

"When we looked at our mid-size utilities, we saw several competitive vehicles priced well below GM vehicles," Silverman said. "We made the adjustment to make sure we remain competitive."

Automakers don't normally reduce prices in the middle of a model year, and GM wouldn't provide specifics of the new pricing.

At the Chicago Auto Show earlier this month, GM North American President Gary Cowger specifically cited the mid-size SUV segment as one of the most competitive. Entries include the Honda Pilot, Toyota 4Runner and Dodge Durango.

David Cole, chairman of the Center for Automotive Research in Ann Arbor, said it's difficult to generalize carmakers' pricing structures and motives because each manufacturer has a variety of company-specific issues to contend with.

Honda Motor Co., for example, said last week its American arm planned to raise prices on most of its 2005 Honda and Acura vehicles by an average of $150, or roughly 0.6 percent on a sales-weighted basis. The reason: increased costs for materials such as steel and currency exchange rate factors.

Cole said GM's decision to cut prices -- albeit on only a few vehicles -- could be part of a larger strategy to "restructure a lot of dimensions of their business" in what many observers are predicting to be a challenging year.

Most forecasters say they expect a familiar U.S. sales trend in 2005: continued gains by Asian brands at the expense of Detroit's Big Three. In a briefing with Wall Street analysts last month, GM warned of lower profits this year, in part because of higher health care expenses and lower anticipated results at its finance arm.

Cole said GM is likely to do whatever it can to push for a fix to skyrocketing health care expenses -- which cost the company $5.2 billion in 2004 -- and use aggressive incentives to move aging vehicles such as full-size pickups.

"You can sell tough actions when you feel the company is at risk," Cole said. "I think GM has decided to bite the bullet this year."