Detroit Fine-Tunes Its Prices

Some raised, some lowered, but all with mileage in mind

Detroit's automen tooted last week that they intend to raise production in the first quarter by about 7.5% over the high levels of a year ago and that this should help keep the economy humming along. But while Americans are buying a lot of cars, they are also buying too many big, fuel-thirsty models, and the auto marketers are trying to swing sales toward smaller, more fuel-efficient vehicles.

So the auto companies are increasing prices for large, luxurious highway cruisers and holding them steady or reducing them for smaller cars. This week General Motors is raising prices an average of $137 on all its models except the sub-compact Chevette. Since Detroit traditionally plays follow-the-leader, Chrysler is raising prices an average $85 for all cars except the subcompact Omni and Horizon, and Ford is expected to post further increases.

Manufacturers are fine-tuning prices to help meet the federal Corporate Average Fuel Economy (or CAFE) standard of 19 m.p.g. for each company's entire line of cars in model year '79. The trick is to sell enough of the mini and subcompact models, averaging 28 to 30 m.p.g., to offset the heavier cars that get only 11 or 12 m.p.g.

GM started the price juggling early in December by posting increases of as much as $105 on bigger engines that are offered as options on many cars. Chrysler followed with more or less the same approach, boosting, for example, the price of optional, eight-cylinder engines on Newport and St. Regis models by $106.70, to $770.70.

Ford last month jacked up prices on all its big cars, including its fast-selling Thunderbirds (by $128) and behemoth Lincolns (by $267). To encourage small-car sales, Ford left intact the prices on its fuel-efficient but slow-selling Pintos and Bobcats.

Financially troubled American Motors took a different approach. The company lost an estimated $65 million on its conventional cars in 1978, and sales of all of its cars, except the Jeep, were down 30% in November from the same month a year ago. So A.M.C. has decided to woo customers to its new, small Spirit model with price reductions and freebie options, such as AM radios and whitewalls, that could save the buyer as much as $284 on the price of the car.

Executives at all the auto companies predict that they will meet or exceed the CAFE requirements for this year, although GM and Ford at present are about one-tenth of a mile per gallon off target. They argue, however, that it will be tough to meet future standards, starting from next year's 20 m.p.g. all the way up to the eventual 27.5 m.p.g. demanded by 1985. In this competition, GM will have an important advantage. Because it has more money and management depth, it can more easily meet the standards.

The stakes can be steep: for each one-tenth of a gallon that its fleet falls below the required 19 m.p.g. average, a company must pay a federal fine of $5 for every car it sells. Since GM sells around 5 million autos annually, a shortfall of one-tenth of a gallon could result in a fine of $25 million.

But the $25-to-$267 increases that have been tacked onto sticker prices of large cars and big engines should more than offset any fines that Washington may hand out. Thus, the cost of compliance with the new regulations--or the fines--ultimately will be picked up by the inflation-weary car buyer.

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