Softer, but Still No Slump

Yet tire kickers are kicking, gently, about less car for more money

For Detroit's automakers, success is measured by how many cars they sell in a year. The industry takes its pulse regularly, in ten-day intervals, by reporting deliveries of new vehicles by manufacturer and name plate. Those figures can be cause for smiles or scowls, but right now they seem to be causing neither to any great extent. True, new-car sales were down during the Jan. 1-10 period, v. the same period a year ago--the sixth consecutive decline. But neither Detroit's automen nor Wall Street analysts seem particularly worried. As Dick Barrett, a Cadillac dealer in Youngstown, Ohio says, "I don't see a big increase, but 1977 was a very good year, and without any increase we'll still have a good year."

General Motors' Chairman Thomas Murphy was still adhering last week to his hopeful forecast of 11.75 million cars to be sold in the U.S. this year. That would be handsomely above the 11.1 million units sold in 1977, and even ahead of the record 11.4 million cars sold in 1973. Most other auto executives' predictions are in Murphy's ballpark, though not quite so far up in the bleachers. Even industry analysts on Wall Street, who are generally less optimistic than the automen, see a good if not great year ahead, with sales well above 10 million vehicles.

The sales picture since the start of the 1978 model-year in September has been mixed, with buyers generally favoring Detroit's smaller offerings. GM's Chevette, introduced in 1975 as a response to soaring gasoline prices and mandated federal fuel economy standards, is now the industry's hottest seller; its sales have doubled in the past three months. Ford's Fairmont, a new '78 compact, and Mercury's Zephyr have replaced the Maverick and Mercury Comet. They have also been standouts, with sales jumping 300% over their predecessors'.

Chrysler started the model-year with only one new name plate and wound up 1977 with about 10% of the market, its lowest share since the early '60s. But the company has high hopes for its Omni compact, which made its debut last week. At a list of $3,706, the Omni is Detroit's first front-wheel-drive car with a transverse engine, and has earned Motor Trend magazine's "car of the year" award, which is usually a boost for sales.*

So far, buyers seem to be showing solid interest in the subcompact Omni and its nearly identical (except for trim) Horizon sibling. Chrysler hopes that brisk orders will make up for a turndown in sales for its compact Aspen and Volare models. At 30 m.p.g., the Omni and Horizon exceed federal fuel economy standards for 1985, thus putting Chrysler in a good position for taking direct aim at Japanese competition (Toyota, Datsun) and Volkswagen's Rabbit, which will begin rolling off a VW-built assembly line in Pennsylvania in April.

Also faring well, but not as well as expected, are Detroit's "scaled-down intermediates," mainly such mid-size GM cars as the Oldsmobile Cutlass, Pontiac Grand Prix, Buick Century and Chevrolet Monte Carlo. Lighter and more economical than their ancestors, the new middies' prices are causing some buyers to balk over what they see as getting less car for more money. That has put dealers on the spot. Says Detroit Ford Dealer Jim McDonald: "The customers feel that since a car is smaller, it's bound to have less in it. Our job is basically education--showing them that the cars have as much as before but are just better packaged." What GM in particular has done, complains Motor News Analysis, a trade newsletter, is produce "$7,000 sardine cans."

Result: the 36-month car loan is on the way out, with as many as 40% of buyers opting for 42-and 48-month loans. But prices are such that payments are still high. Laments a Detroit ad salesman: "I used to pay $131, and now it's $186 a month. That's a helluva jump, isn't it?"

The Big Four automakers went into January with plans for 13% production increases. So far they have actually produced only 2.5% more vehicles, or a total of 535,500 cars, than the previous January. Assembly lines for some name plates have been shut down briefly--one to two weeks--to allow demand to catch up to supplies. But Detroit is not nearly as weighted down with inventories as it was during the 1974-75 recession. As of last week, the industry had a 69-day supply of cars on hand, slightly above normal.

However the year's final sales tally turns out, 1978 models will be notable for other reasons. Detroit is now producing small, or at least smaller, en masse, instead of simply talking about it. The resulting products are leaner, tighter, more economical and technically sophisticated than any other crop of vehicles in the industry's history. Detroit's scale-down is already showing up in car-rental agencies. National calls a Pontiac Grand Prix a full-size car and charges accordingly, even though what the driver gets is a vehicle about as big as yesteryear's intermediate.

* Though not always a guarantee of success: the ill-fated Corvair, which a then little-known lawyer named Ralph Nader said was unsafe, also won the magazine's accolade in 1960.

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