The world's biggest automaker will cut prices on 30 of its 2006 models.
August 1, 2005; Posted: 3:10 p.m. EDT (1910 GMT)


The Cadillac DTS will cost almost $5,000 less than the DeVille it replaces as GM tries to move to lower prices rather than large cash-back offers to attract buyers.

NEW YORK (CNN/Money) - General Motors announced it would cut prices on about 40 percent of its models in the 2006 model year in an effort to move the company away from using costly cash-back offers and other incentives to attract buyers.

The new pricing strategy announced Monday is dubbed "Total Value Promise," and it will cut the list price of the models affected by between 3 percent and 16 percent.

For example, GM cut just over $3,000, or almost 10 percent, from the manufacturer's list price for the 2006 Chevrolet Silverado Crew pickup compared to the 2005 list pricing for the truck. That puts the pricing of the 2006 model at $27,990.

GM is also cutting the price of some of the smaller, cheaper car models that have been losing the competitve race with Japanese alternatives. The 2006 Saturn Ion will cost almost $12,490, or about 16 percent less than the list price for the 2005 version.

The lower pricing will include some new models. The Cadillac DTS will cost about $41,990 for its least expensive model, or about $4,800 less than the DeVille it replaces with the 2006 model year.

The company also announced it would make the StabiliTrak safety feature standard on most retail GM vehicles by 2010. It will also offer a year of OnStar communication service on 34 models and a four-year, 50,000 mile warranty on eight Buick and Hummer models.

Overall. GM said the new lower pricing will be available on 30 of its 76 2006 models. The company said additional standard options or improved warranties will be available on another 20 of the 2006 models that do not have the new pricing.

Difficult habit to kick
GM officials acknowledged indirectly that they were losing sales by having higher list prices and large cash-back offers to compete with the lower-cost vehicles from overseas automakers, because many consumers start the car buying process by comparing only list prices.

"When we are on consumers' shopping lists, we like our chances," said Mark LaNeve, GM vice president, North America Vehicle Sales, Service and Marketing.

Still, some experts said it will be difficult to convince would-be customers to buy a new GM vehicle without an attractive incentive such as cash back or low-interest financing.

"I think it's a hard drug to get the consumers off of frankly," said Jack Nerad, executive market analyst for Kelley Blue Book, the auto pricing tracker. "We've certainly seen that in our surveys. Many consumers have become very dependent on incentives to motivate them to get up off the couch and into showrooms."

While Japanese automakers such as Honda and Toyota have seen strong sales increases without the use of incentives, the buyer of GM and other domestic brands -- Ford Motor Co. and Chrysler Group -- is trained to look for the cash-back or other incentive to buy those models, he said.

"I think it's going to be difficult to get consumers to believe that somewhere down the line, there won't be incentives on these GM vehicles," he added.

In fact, even some of the GM vehicles that saw price cuts Monday already have up to $1,000 cash back or low-interest financing available for the 2006 models, said Jesse Toprak, senior. analyst with Edmunds.com, an online service used by car buyers. They include the Pontiac G-6, the Chevrolet Impala and the Pontiac Grand Prix.

"They basically want to lower the sticker price closer to transaction price and lower the incentive, but not get rid of it altogether," said Toprak. "Whenever there are large rebates, it has impact on perception, on customer attitudes and an impact on resale value."

GM has been an industry leader in incentive offers. They include the zero-interest financing that it used in September 2001 to spur sales in the wake of the terrorist attack earlier that month.

The latest idea, ending Monday, is the employee pricing plan, which offered the general public 2005 models at the same below-list price deal offered to GM employees. The offer spurred strong sales increases for GM in June and July.

GM spokeswoman Deborah Silverman would not give details of the new offer that will be used to clear out the remaining 2005 models, saying details would be released Tuesday.

--------------------