Automakers Hold The Line On Prices For 1998 Models

Chrysler Corp. completed the Big Three’s U-turn on prices Wednesday, announcing the average cost of its 1998 cars and trucks will be slightly lower than this year’s models.

Ford Motor Co. and General Motors Corp. announced earlier that they would avoid significant price increases, which have long been a fall tradition.

This is the first time Detroit has held down new model-year prices since the mid-1950s, said industry sales analyst Art Spinella of CNW Marketing Research in Bandon, Ore. This year, faced with tougher competition from foreign automakers and a softening market for cars, the Big Three had no choice.

“The industry would like to justify this by saying they have cut costs, become more efficient and learned to manage their business so they can share some of the savings with consumers,” said analyst Maryann Keller of Furman Selz Inc. in New York. “But the reality is the market determines price.

“The market has been saying for at least the last 12 months that it will not tolerate a price increase.”

Chrysler said its suggested prices will average 0.6 percent lower than comparably equipped ‘97 models. Prices for cars will average 1.3 percent lower, while light truck prices will decline an average of 0.4 percent. Destination charges will remain unchanged.

The averages are sales-weighted and the comparisons are with end-of-the-model-year ‘97 prices. They do not include new or redesigned models that will be launched later in the ‘98 model year: the Dodge Intrepid and Chrysler Concorde sedans, the Dodge Durango sport utility vehicle, and the Dodge Ram Van and Wagon.

Prices for the 1998 Dodge Viper, a high-performance sports car, and Plymouth Prowler, a retro hot rod that’s just arriving in dealerships as a ‘97 model, also were excluded from the averages and will be announced later.

“This pricing reflects the realities of a competitive marketplace,” said James P. Holden, vice president of sales and marketing. “We limited model year price increases to 2 percent or less in 1995, 1996 and 1997. This year, on average, we’ve more than held the line.”

Earlier this month, Ford said its ‘98 prices would remain flat on average. GM announced in June that its prices would increase an average of 1.3 percent - its lowest increase in more than a decade.

The start of the end of big price increases began a few years ago when foreign luxury carmakers Mercedes-Benz and Lexus began holding the line or cutting prices of redesigned models, Spinella said.

“Once you start at the top, it puts pressure on all the way down the line,” he said.

Late last year, Toyota announced it would sell its redesigned 1997 Camry sedan for less than the ‘96; this year, it is in position to take the title of best-selling car in the United States away from the Ford Taurus.

Nissan has said its top seller, the Altima, also will be priced less for 1998.

Such pressure has forced GM, Ford and Chrysler to offer an expanding array of rebates and other incentives to maintain their sales this year, but U.S. sales by foreign automakers have still increased sharply.

Chrysler said some models will have lower prices, while others will rise slightly. In some cases, the price increases include standard equipment that previously was optional.

For example, the entry-level Dodge and Plymouth Neon Highline will be priced at $13,455 with typically ordered options; a comparably equipped ‘97 model was $13,770. The base Jeep Wrangler SE sport utility vehicle will list at $14,090, up $320 from the comparably equipped ‘97 model.

Spinella said he expects the industry to continue holding the line on prices until the average household income catches up. The average selling price of a new car last year was a record $21,750, according to the National Automobile Dealers Association.

“You have to let incomes catch up to the price of a vehicle,” he said. “And that doesn’t happen in one year.”