Ford and GM up car prices in UK

American car makers Ford and General Motors said today they planned to hike UK vehicle prices despite falling sales as they struggle to combat the impact of the weak pound.

Ford said its prices would go up by an average 4.7% across all their ranges from today and warned of further hikes unless sterling firmed against the euro.

Meanwhile GM’s brand Vauxhall said it would also increase vehicle costs this month, although no details were yet available on the scale of the rises.

The news comes just a week after UK business secretary Peter Mandelson outlined a package of Government support for the embattled UK car industry potentially worth up to £2.3bn (€2.5bn).

Howard Wheeldon, of BGC Partners, said: “With fields and car parks right across the country piled high with unsold cars, it may come as something of a surprise to hear that both Ford and GM are planning to raise the price of all cars they sell in the UK.

“Of course, announcing a price rise is one thing but putting it into effect quite another. From a customer perspective, there has probably never been a better time to buy a car.”

Ford said the UK car industry had been subject to “severe economic pressures” by the pound’s deterioration against the euro as costs incurred in production and materials in Europe rocketed as the exchange rate became less favourable to sterling.

The pound’s slide against the single currency has been swift, falling from around €1.34 at the beginning of 2008 to an all time low of 1.05 at the end of the year.

A Ford spokesman said: “For businesses manufacturing within the euro zone, or otherwise exposed to the euro appreciation, this will inevitably result in price rises.

“We are reacting to what’s really an industry concern with the value of sterling plummeting against the euro.

“With so many of our costs being in euros and the pound having gone down so dramatically we have to redress the balance.”

Under the new pricing scheme, the price of a new Ford Fiesta will increase by an average of £724 (€802), or 4.7%, to a minimum of £9,195 (€10,187).

A spokesman for Vauxhall said: “We have to increase our prices. It is essential, it is not desirable, but it is essential.”

He said offers such as zero financing and low requirements for deposits would still attract customers.

Both firms have seen sales plummet in the UK as the worsening economy caused demand for new cars to dry up.

The UK car market as a whole experienced a 21.2% drop in like-for-like sales in December and Vauxhall said its like-for-like sales fell 5.93% in the month.

Ford said the second half of 2008 had been “challenging”, with sales down 7.6%, compared to an average industry decline of 11.3%.

A number of UK car plants have cut production and jobs because of the huge slump in sales caused by the recession, which has also had a knock-on effect on supplier firms.

Thousands of Honda workers have begun a four-month sabbatical today as the company stages one of the longest breaks in production in Britain’s industrial history.

Mr Wheeldon said it is likely that some car-makers that do not produce cars in Britain will follow Ford and GM’s price rises.

He said the move indicates a general trend of rising import costs that could hit the UK’s already battered finances.