Holding the Price Line

"A lot of manufacturers would rather go out of business than cut prices." So said an Atlanta department store manager last week, and his words echoed throughout the U.S. business community. Contrary to all the old economic laws, prices have held remarkably steady in the face of the recession; in some cases, they have actually risen.

Instead of cutting prices, many a manufacturer is pushing cheaper lines or stripped-down models to give customers the impression of lower prices. One reason for the lack of price cuts is that manufacturers' labor costs have continued to rise while productivity has lagged behind. Another reason is that manufacturers have held down inventories so well that there has been little "distress selling" to bring pressure for cuts.

The big exceptions are autos and appliances. Despite the drastic production cutbacks in cars, customers are still buying new models for as little as $100 more than the cost to the dealer. In the appliance industry, said one General Electric man, the markdowns are so extreme that "you can now buy a refrigerator, washer, dishwasher for fewer actual dollars than you could ten years ago--and that's including inflation." There has been some trimming in other areas. Retailers with excess stocks of room air-conditioners cut prices on older models as much as 25% ; Sears, Roebuck and Co. cut its power tools as much as 30%; cotton mills chopped 5% from their prices; and Firestone Tire & Rubber Co. reduced prices on their major line of tube-type tires 3% to 10%.

But in general, producers have been as chary as retailers of cutting prices. What cutting they have done has usually been in the form of special discounts or temporary reductions. On the other hand, some industries that a few months ago talked loudly about raising prices have suddenly turned mum. The aluminum makers, who once discussed a boost as of Aug. i, when they must automatically raise wages, last week said they had not made up their minds what to do. At week's end, steelmakers still could not decide about their prices. One small steel firm knew what it had to do. The Alan Wood Steel Co. of Conshohocken, Pa., which had announced price increases averaging $6 a ton in the belief that big companies were ready to do so, rescinded its increase "to stay competitive."

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