AUTO PRESTIGE Conspicuous Consumption Is Waning

THE first real casualty of the current recession may well be the middle-priced automobile. For years it not only provided transportation for the middle class but was a firm steppingstone on the stratified pyramid of personal material progress. From a Ford, Chevrolet or Plymouth, the buyer progressed to a Pontiac, Buick, De Soto or Oldsmobile, all the while hoping for, and perhaps eventually achieving, a Chrysler, Lincoln or Cadillac.

But the steppingstone is no longer attractive-or necessary-to most Americans. Sales of middle-priced cars have declined from 37% of the market in 1955 to 29% last year-and their production decline this year has been phenomenal. Middle-priced car production so far in 1958 is down 51% from the same period last year, far more than other sections of the industry. Production of Oldsmobile has dropped 44%; Buick, which was once in third place, 40%; De Soto 77%; Mercury 64%; Pontiac 31%; Dodge 70%. Ford's middle-priced Edsel, brought onto the market last year, is a flop.

The decline in popularity of the middle-priced car parallels the decline in prestige buying, once one of the big forces behind U.S. auto sales. Americans have found many other sources of prestige and enjoyment, e.g., homes, boats, foreign travel, family vacations, summer houses in the country, etc. To the evidence that conspicuous consumption--as typified by the bigger auto--is waning in the U.S., Harvard Economist Sumner Slichter adds his voice: "Having stocked themselves up for the past ten years with cars, people have been shifting their expenditures to other things."

The real drop of the middle-priced car has been brought about by Detroit itself. Until the 19403, the low-priced three--Ford, Chevrolet and Plymouth --manufactured cheap, compact cars meant chiefly for transportation. As demand grew for wider and longer cars with more room and comfort, Detroit changed the once small cars into big ones. From 1938 to date, Chevrolet has grown two feet overall; Ford has grown four feet since 1928. Both are now bigger than the Pontiac, Packard or Oldsmobile of ten years ago.

The difference in quality and comfort between low-priced and high-priced cars narrowed. Cheaper cars picked up more horsepower (Chevrolet offers 280 h.p. today, about the same as the 1955 Cadillac). Once major mechanical improvements were the exclusive property of more expensive autos, e.g., Oldsmobile's automatic shift; now lower-priced models have all of them. Among the lower-priced cars, it is the highest-priced models that are doing best. Ford sales are down, but its Thunderbird and Fairlane are selling best--to many people who a few years ago would have bought a middle-priced car. Sales of Chevrolet are neck-and-neck with 1957, with the biggest sellers its most expensive models, including the Impala.

Prestige buying still helps the sale of small foreign cars. Foreign-car purchasers often give lower operating costs as the reason for buying. But Detroit surveys show that most foreign-car buyers have higher incomes than the national average, could afford to buy a bigger U.S. car. Says Ronald Saracco, sales manager of Manhattan's Fine Cars Inc.: "A sort of reverse appeal has now given more prestige to the small foreign car." While all U.S. car sales are down about 25% this year, sales of small foreign cars reached 200,000 last year, a gain of 110% over 1956, and they are expected to continue rising in 1958. Detroit automakers do not believe that there is a big U.S. market for small cars, consider their popularity a fad that is about at its peak. Some foreign-car dealers agree. Says Albert E. Birt, president of Manhattan's Hambro Automotive Corp., which sold 24,000 British cars in the U.S. last year: "The imported-car market might increase to 300,000, but I can't believe it will go beyond that."

Does the popularity of foreign cars, plus the upgrading of Ford, Chevrolet and Plymouth, leave an opening for a U.S.-made small car? Automakers say that the potential market would have to reach at least 500,000 before they would consider producing one. They have solid evidence that a small U.S. car would cost little less than present low-priced U.S. models, since the cost of labor, advertising and marketing would be the same. They also point out that the U.S. buyer can already buy a low-priced U.S. model with no accessories for only a little more than a foreign car.

For such reasons, the small-car boom worries Detroit less than the decline of the middle-priced car. Since its beginning, the U.S. auto industry has narrowed from more than 2,000 different automobiles to 17 makes turned out by five major companies that produce 96% of all cars sold in the U.S. In the future, many of the overlapping models produced by the big five may also disappear.

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