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Auto price hikes could end buyer's market

The first in what stands to be a steady drumbeat of increases in the price of Japanese cars was announced Friday by market leader Toyota and its Lexus luxury-car division.

Toyota, in a move likely to be mimicked by other Japanese auto makers, said it is boosting prices an average of 3.2 percent or $432 per vehicle. Lexus slapped a 5 percent increase on all its cars.

Nissan, Japan's second largest automaker, has said it will raise prices, too.

Also announcing a price increase Friday was Saturn, the new small-car subsidiary of General Motors Corp.

But Saturn's prices remain well below its Japanese competitors.

The price increases come amid rising U.S.-Japanese trade tensions over U.S. inroads by Japanese cars, a continued increase in the value of the yen against the dollar and signs that the auto sales slump may be turning around.

The confluence of those events is expected to put upward pressure on prices of both imported and domestic cars, ending a prolonged period in which heavy discounting made it a buyer's market.

Already in recent weeks, the size of rebates offered by Detroit's Big Three has begun to decline on some car lines, though it has risen on others.

However, the Big Three will face strong pressure from supporters in Washington to resist the temptation to raise prices in lock-step with the Japanese in favor of using a price advantage to win back market share.

Many industry observers have been sharply critical of Detroit's behavior in the 1980s, contending that the U.S. automakers blew an opportunity to halt their loss of market share to Japan.

Rather than hold the line while Japan was boosting its prices, the domestic industry raised prices and squandered its record profits on diversification into other businesses, critics say.

A similar opportunity is presenting itself again, analysts say. But the U.S. industry is in dismal financial condition, having lost about $6-billion last year, and will be sorely tempted to do whatever it can to increase revenues.