It’s scary in ‘Motor City’

Press, 11 July 1980, Page 13

It’s scary in ‘Motor City’

By

SIMON WINCHESTER,

“Observer,” London

America’s renowned •‘Motor City,” Detroit, is in trouble like never before. A disastrous slump in sales of new cars has knocked the stuffing out of the industry, and a thousand little-known supply firms are on the verge of bankruptcy.

“It’s getting pretty scary out there,” said a senior official of the United States Treasury Department. Statistics cannot reflect the scale of the problem, in the main because they change so rapidly. A monthago analysts predicted sales would be down by a quarter on last year; a fortnight ago someone else said they would be down 30 per cent. Last week a General Motors executive simply said: “We’re not forecasting any more. There’s no point. All we know is, it’s bad.”

Philip Caldwell, the chairman of Ford, blames “the sudden and severe shift to small car demand that began in 1979.” He apportions no blame to American car executives for their failure to predict this “sudden and severe shift.” The only target for the industry’s anger is the O.P.E.C. consortium, whose activities, Detroit leaders say, scared the American consumer away from the American car.

Whatever the precise reason for the shift, the effects are little short of catastrophic. There are 300,000 car

workers unemployed today. Nearly half-a-million more in ancillary industries have been laid off. Twelve of General Motors’ 18 assembly plants are working on short time.

Chrysler expects to lose $1.4 billion in 1980; Ford expects to lose hundreds of millions; General Motors’ figures are likely to be equally depressing. On average, the car makers are producing only 60 per cent of the cars they were making a year ago — and the prospect of those being sold is grim indeed.

Car dealers, characteristically the most gung-ho and optimistic of salesmen, are going broke. More than a thousand dealers have shut shop already this year, and a familiar sight on the outskirts of the American town is the great glass and brick monolith that once was a Chevrolet or a Pontiac or a Dodge dealer — empty, abandoned, with “For Rent” sticker's replacing the bunting. t Huge stocks of unsold cars are piling up in the makers’ parking lots. Behind those dealers brave enough to stay in business, the latest estimate is that there are 1,560,000 cars waiting to be sold — 83 production days’ worth. Selling them is a process that is going to tax the skills of the most accomplished of salesmen. The most popular scheme for getting rid of cars — even fairly small cars

whose petrol consumption is not terribly high — is for the manufacturer to offer a buyer money back once he’s bought the car. “One thousand dollar rebate,” the signs scream — adding that the money can be applied to your own payment if you plan to buy the car on credit, which most Americans do. So it is entirely possible for a person to walk into

a Ford dealership without a penny to his name and sign a deal on a new $lO,OOO Lincoln Continental. The economic logic of such an arrangement may evade close analysis, but it moves the cars out of the parking lots, and that, both the makers and the dealers say, is all they really care about.

The slump does not mean that all cars are selling badly. Far from it. A massive tidal wave of cheap, petrol-sipping Japanese imports is engulfing the country. Two million Japanese imports have already made it here this year, and more are expected'. Their appeal is summed up in the comparison between a Toyota selling for $4OOO and going 53 miles on a gallon of petrol, and a Chevrolet costing $7500 and consuming one gallon every 20 miles.

It does not take much mathematical prowess to see that a buyer could run two Toyotas and burn less fuel than one Chevy — and that demand for his car is going to keep the price up, depreciation down. It simply makes better sense to buy Japanese. The industry and the unions want tough tariff barriers to keep the Japanese imports away —

they already have a 27 per cent share of the American market, and import taxes are extraordinarily low. But the White House says it does not plan to tax the cars coming in, or limit imports. That would only harm United StatesJapanese relations, and it would not do the American industry much long-term good, either. Instead, a task force headed by the Transportation Secretary, Neal Goldschmidt, is expected to recommend that the President take an axe to the forest of regulations that, Detroit says, have crippled the industry: Clean air regulations, which mean Detroit cars have to be equipped with inefficient catalytic converters . . . safety regulations, which mean Detroit has had to retool more

frequently and fit heavier metal components to its cars . . . petrol consumption regulations, which Detroit battles to try to meet, but thinks will fail. All these may be swept away, or at least made less rigid.

There may be tax incentives, too, both for makers to buy the tools needed to make smaller cars, and for buyers who decide to purchase American-made cars.

Analysts predict that Detroit should be out of the woods in three years or so. After years of making juggernauts that conveyed image more effectively than they conveyed people, Motor City seems convinced, at last, that “small is beautiful.”

The new generation of “X-cars” and “world cars” will be released in 1983 and they, with new electronic fuel-saving devices and other sensible gadgets will restore Detroit, leaders of the industry predict. In fact, they say, by 1990 the city and the plants it controls will make 15 million cars a year, nearly twice as many as they did last year. What tricks the Japanese have up their sleeves no-one knows — and Detroit, in a sanguine mood despite its troubles, prefers not to imagine.

—Copyright, London Observer Service.