GM CFO: U.S. auto prices could rise significantly

Automakers have less capacity, so there’s less pressure to offer discounts.

DETROIT (AP) — U.S. automobile prices could rise significantly in the near future because of industry restructuring and rising raw material and regulatory costs, General Motors Corp.’s chief financial officer said Tuesday.

Fritz Henderson said the industry has less manufacturing capacity than in the past and therefore less pressure to sell vehicles cheaply just to move inventory.

It also faces higher raw materials costs, rising technology costs and increased costs from fuel economy and other government regulations, he said.

While the U.S. market still is competitive, “you could potentially see a significant change from what we’ve seen in the last eight or 10 years,” Henderson said during a speech to the Automotive Press Association in Detroit.

Henderson said he didn’t know when prices might start to rise, but he sees pressures because costs already have gone up and automakers are spending a great deal on new technology. GM also has reduced its sales to low-profit fleet buyers such as rental car companies, he said.

“You’re going to see a lot of costs in the car today that’s already happened, whether its steel or raw materials or precious metals, and then you combine the technology on top of it, and I think you’re going to see pressure,” he said. “The question is when does it manifest itself in the market? I don’t know,” he said.

In December, GM raised its prices an average of 1.5 percent due mainly to higher raw material costs, especially nonferrous metals, steel and oil.

The company also has seen increases in its transaction prices, which are running much closer to sticker prices than in the past. Henderson said higher-income customers are buying vehicles with more features. The average sale price for a 2008 Cadillac CTS sedan, for example, is $37,000, up from $29,000 for the same model last year, he said.

Henderson also said that GM is predicting a slower U.S. economy for 2008, but no recession, because several sectors of the economy are performing well. U.S. exports are growing, and policy makers have taken steps to reduce interest rates and plan an economic stimulus package, he said.

“The real economy is actually much healthier than the financial markets,” he said.

The durable goods sector also is performing well, although he sees the housing slowdown as a drag on the economy for at least another year.

“When you stack it all up, we think that there are more risks than there are upsides, for sure,” Henderson said. “We just don’t see the recession. We see slow growth.”