DETROIT — General Motors wants to charge big prices for small cars.
At the press conference last week to announce new plans for cutbacks and cash-raising, GM executives said it would be easy — raise prices to match the growing demand for small and mid-sized cars and crossovers.
But that business model has pitfalls.
"That presumes there's no competition," says Doug Scott, senior vice president of consultant GfK Automotive in suburban Detroit. "The Ford Focus is out there now, and the Accord and Camry. It's going to take a marketing budget to tell people why they need to pay a little more for your car."
And GM is cutting its marketing budget by $1 billion, along with slashing its capital expenditures by $1.5 billion and holding its engineering costs at the present level for the next couple of years.
So GM faces a balancing act. With less development money, it must build small cars that command higher transaction prices. Then, with a lower ad budget, it must persuade American car buyers to choose its products.
As GM sales boss Mark LaNeve told Automotive News, "That's challenging, and it'll be even more challenging now."