When G.M. Speaks

A couple of years ago, Henry Ford II was asked about his company's plans for pricing upcoming models. "I haven't got the slightest idea," he replied. "We don't make prices here." What Ford meant was that to all intents and purposes, Detroit prices are set by General Motors, which has 53.3% of the market and is clearly the industry leader. Chrysler Corp. apparently has yet to learn the lesson that Henry Ford accepts as a fact of automobile life. Both in 1966 and 1967, Chrysler announced big price hikes, only to back down when G.M. came out with lesser increases. Last week it happened again. Only a few days after Chrysler listed price additions on '69 models that averaged $89 a car,

General Motors posted hikes averaging $52. Ford and American Motors Corp. followed G.M.--and Chrysler rolled back its prices.

The Mix of the Fix. G.M.'s announcement came with more flourish than usual. In previous years, under Chairman Frederic Donner, the company did little more than tack up the increase without explanation and let the customer take it or leave it. This time Donner's successor, Chairman James Roche, called a press conference to explain why G.M. had done what it did. Behind Roche's statement was an effort to stay right with Washington. Hardly had Chrysler announced its original increases than the Administration, in the person of Chairman Arthur Okun of the Council of Economic Advisers, denounced them as "manifestly excessive." Sensitive to such matters, Roche carefully conferred with Okun before revealing the price increases that G.M. had settled on. When he announced them last week, he was well prepared to back up his boosts.

His audience found it significant that

Roche appeared at his press conference with G.M. President Edward Cole, Vice Chairman George Russell and Executive Vice Presidents Richard Gerstenberg and Roger Kyes. The five men represent the only people in G.M. who really know how the company arrives at its best kept secret: price setting. The fix involves a computerish mix of prices paid for such outside supplies as tires, windshield wipers and seat belts; production schedules in 49 assembly plants around the world; and the profit that can be mined from expensive options.

Shouldering the Burden. At his press conference, Roche noted that G.M. and its competitors are facing steeply higher production costs. Wages have gone up at least 6% in one year, 63% in ten years. The cost of such materials as steel, copper and nickel have risen similarly. Up to now, Roche pointed out, the industry has absorbed much extra expense. A typical '69 four-door Chevrolet costs $302 more than a comparable '59 model, but the newer car has more safety features, as well as a more efficient engine.

The problem, Roche explained, is that G.M. can no longer afford to carry all the costs and absorb all the increase.

The company maintains that it has milked all the operating efficiencies it can out of new plants and technology. The upshot is that anyone who buys a '69 model will simply have to pay more. The increase averages out at about $1.70 a month on installment payments.

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