Price Cuts

Philander Wallace was getting lonely. He bought a waterfront town house on the pier at Belt's Landing in Fells Point in April 1991, then waited and waited -- he and his wife were the only people in the whole development -- while the original developers went broke, and Maryland National Bank took over the $24 million community.Mr. Wallace is lonely no more. The development team that bought the project from Maryland National last month announced the details of drastic price cuts yesterday at the 102-unit community.

Vanessa Johnson was content watching favorite shows on her 36-inch "regular" television, but her husband was pining to see the Ravens on a much more impressive high-definition, flat-screen model. And though Johnson might have ignored his wish not so long ago, heavy discounting this season allowed them to buy a 58-inch Samsung model for about $2,000. "The price is down considerably for that size," Johnson said recently while making a final layaway payment for the television at Sears in White Marsh.

Seeking to avert a potentially crippling strike at its largest supplier, General Motors Corp. gave bankrupt Delphi Corp. a temporary price break yesterday, and Delphi extended its deadline for reaching wage concessions with its unions. Delphi had warned it would ask a bankruptcy judge to void its labor contracts Dec. 16 unless unions agreed to substantial pay and benefits cuts. Yesterday, the Troy, Mich., company said it would delay the filing at least five weeks, to Jan. 20. GM bought $15.4 billion in parts last year from Delphi, which filed for Chapter 11 bankruptcy protection Oct. 8. The two companies had agreed that GM would pay less this year for the same parts as part of its continuing relationship.

MOSCOW - Fuel delivery to four European countries fell below normal yesterday as Russia's state gas monopoly withheld natural gas from neighboring Ukraine for the third consecutive day. Ukraine warned that its gas pipeline system could experience "serious disruptions" if a worsening price dispute isn't settled in 10 to 15 days, threatening shortfalls across Europe in the heart of winter. Flows of gas to Poland, Romania, Hungary and Bulgaria, all of which depend on pipelines that cross Ukraine, decreased yesterday, officials said.

Forget the critics, labor unions, activists and politicians who have tried to stir up trouble for Wal-Mart Stores Inc. The company's latest problems come from a far more serious quarter: consumers. Despite hundreds of price cuts to lure early-bird Christmas shoppers, November was Wal-Mart's worst month in a decade, with sales dipping below last year's levels. And December isn't expected to be much better. "The good old days are over," said Mark Husson, an analyst with HSBC Securities in New York.

NEW YORK (AP) -- IBM cut prices on many of its personal computers yesterday, following reductions on other models last month. The cuts are part of an industry trend that is prompted by the recession and increasing competition.Analysts say the price reductions by IBM and other PC manufacturers are hurting profit margins at computer makers and computer retail stores alike. But they signal an opportune time for computer buyers.Personal computer prices typically drop by 15 percent to 20 percent a year even without a soft market due to the continual decline in the cost of computer components, said Rick Martin of Prudential Securities Inc.What is notable about the recent price cuts is they have not always coincided with new-product announcements, as is usually the case.

CD prices started to inch down last week, hovering around $10 for a new release at many stores, putting music at a similar price point on the entertainment meter as a movie ticket or a takeout pizza. The lower prices were the advance guard of wholesale price cuts announced early last month by the world's largest record company, Universal Music Group. As they have in the past, the mass merchandisers -- Wal-Mart, Best Buy and Circuit City -- went even further, advertising select CDs at prices below what Universal was charging them.

MINNEAPOLIS -- General Mills Inc. raised the price of its breakfast cereals an average of 2.6 percent yesterday, saying the company needs to adjust for inflation and possibly signaling the end of a costly price war.General Mills, maker of Cheerios, Wheaties, Trix and other popular cereals, has seen its costs rise "on everything across the board," from wages to material costs, spokesman David Dix said. The price increase is effective immediately.Food companies, reacting to consumer complaints, started to slash prices on breakfast cereals more than a year ago. Cereal company earnings have since been squeezed, with General Mills last week reporting a 12 percent decline in fiscal fourth-quarter earnings, more than expected.

Blue Cross and Blue Shield of Maryland announced yesterday it will cut its rates by 7 percent to 15 percent for most of its 1.4 million customers, sparking predictions of a price war among the state's health insurers and delighting employers across the state.Blue Cross spokesman Michael Streissguth said that reductions in the insurer's administrative expenses, as well as the increasing popularity of its lower-cost health maintenance organization would enable it to cut its premiums starting Nov. 1.L "The goal is to bring more people into Blue Cross," he said.

A "downward spiral" in personal computer prices that began early in the year might signal a new pattern of price cuts involving the top U.S. computer makers, analysts say.Leading PC manufacturers, however, say the price cuts are business as usual, prompted by predictable softening of prices they pay for components, and by efforts to cut inventory of older machines sitting in warehouses.While the current price cutting is driven by those factors, it differs from the past, analysts say, because of more frequent cuts by Compaq and, recently, aggressive price slashing by IBM Corp.

So you've all but given up on the idea of going on vacation this summer. Higher food and energy costs have drained your budget, gas is a fortune, and those credit card balances are already big enough. And forget flying to Europe, where the weakening dollar has made Americans feel like the poor relations. In fact, forget flying period; fares are rising, security lines are growing and airlines keep tacking fees on everything from extra bags to extra legroom. The stress of it all is enough to keep anyone home.

Shares of Under Armour slid more than 10 percent yesterday after the Baltimore sports apparel company said plans to get rid of excess merchandise by reducing prices at its outlet stores would force it to lower year-end earnings and gross margins. The company said it expected year-end income from operations of $103.5 million to $104.5 million, down from its previous estimate of $108.5 million to $110.5 million. Gross margins are expected to fall 30 basis points to 50 percent. Under Armour had previously expected gross margin improvements of 40 to 50 basis points.

The competitive nature of today's world may be intimidating to the small business owner. If a competitor cuts prices or offers other incentives, you may feel tempted to do the same in order to keep your customers, even if it puts the stability of your business at risk. Though cost is important, it is but one component of a larger attribute. If your business provides value through service, responsiveness and going the "extra mile," your customers will respond with loyalty, regardless of what your competition does.

Squeezed by the sharp downturn in the housing market, one of the nation's largest homebuilders has sold the bulk of a luxury townhouse development in Baltimore's Federal Hill to a local developer who immediately cut prices about 20 percent. Lennar Corp. sold 22 homes in the 26-unit Federal Place development off Key Highway to Terra Nova Ventures. Lennar, largely a suburban builder, has no other projects in the city. The sale closed Nov. 29. Although terms of the sale were not disclosed, Terra Nova principal David F. Tufaro said the deal allowed the new owner to set prices it felt were more in tune with the current market.

Giant Food's price-cutting strategy is slowly helping to attract shoppers faced with a growing array of grocery choices, and the program would be expanded by the end of the year, the chain's parent company said yesterday. But the results haven't shown up yet in net income or same-store sales, partly because product prices have been cut and because Giant has not yet embarked on a planned remodeling or replacement of 100 stores, said executives of Royal Ahold NV, Giant's Dutch owner. Giant, the dominant chain in the Baltimore-Washington region, is ahead of schedule in reducing prices across three-quarters of its merchandise and getting positive feedback from customers based on information tracked by customer loyalty cards.

SAN FRANCISCO -- In June, they were calling it the God Phone. Yesterday, it was the Chump Phone. People who had rushed to buy the Apple iPhone over the past two months suddenly and embarrassingly found they had overpaid for the year's most coveted gadget by $200. Apple, based in Cupertino, Calif., has made few missteps over the past decade, but it angered many of its most loyal customers by sharply dropping the price of its iPhone to $400 from $600 only two months after it went on sale.

DETROIT -- Conceding that value pricing hasn't worked, General Motors Corp. said yesterday that it will lower sticker prices on 57 of its 76 models - 80 percent of its lineup - by an average of $1,300, effective today. Mark LaNeve, vice president of sales and marketing, said he's counting on the price cuts to increase sales - and silence critics. The pricing plan, detailed at the auto show in Detroit, also is aimed at making GM pricing competitive against Japanese vehicles. GM's rivals said it was too soon to say how they might respond.

BATTLE CREEK, Mich. -- Kellogg Co. was in a jam. Sales of its cereals were already slowing as consumers switched to alternatives such as bagels and granola bars. Then its rivals started slashing prices.That left the world's biggest cereal maker little choice but to follow suit, and hope the lower prices would lure back customers.It's not working. Kellogg's portion of the breakfast cereal market continues to shrink to historic lows.To make matters worse, gains by No. 2 General Mills Inc. threaten to topple Kellogg's dominance over the industry it invented a century ago.The price cuts have taken a toll on Kellogg's earnings, which have dropped three straight quarters and aren't expected to improve until after the first quarter.

Sales at Giant Food declined yet again in the fourth quarter of last year, but the grocer's parent company said that it has seen positive results from a price reduction program it recently implemented at the supermarket chain. Dutch food company Royal Ahold NV, which owns Giant, also said plans to sell Columbia-based U.S. Foodservice, the food distributor it also owns, are on track for later this year. "It's good to be a seller when there is a lot of interest," Ahold President and CEO Anders Moberg said in a conference call with analysts yesterday.

Forget the critics, labor unions, activists and politicians who have tried to stir up trouble for Wal-Mart Stores Inc. The company's latest problems come from a far more serious quarter: consumers. Despite hundreds of price cuts to lure early-bird Christmas shoppers, November was Wal-Mart's worst month in a decade, with sales dipping below last year's levels. And December isn't expected to be much better. "The good old days are over," said Mark Husson, an analyst with HSBC Securities in New York.