Monday, Dec. 18, 1950

"We Cannot Accept ..."

Only six weeks ago, Henry Ford II had promised that he would try to hold down the price of his cars. But last week, seeing a flood of price rises all around him, young Henry took his finger out of the hole in the dike. He boosted prices on the company's 1951 models an average of 5.5% (from $87.50 on the cheapest Ford to $185 on Lincoln Cosmopolitan convertibles). Same day, General Motors Corp. raised prices an average of almost 5% on its 1951 models. These were the first price boosts among the auto industry's Big Three in nearly two years. The reason, said both companies, was simply that their material and labor costs had scooted skyward.

No sooner was the news out than Economic Stabilizer Alan Valentine, a man still new to his job (see NATIONAL AFFAIRS), began a frenetic attempt to stabilize things. He fired off telegrams to G.M.'s President Charles E. Wilson and to Henry Ford II asking them to suspend all price increases until he could talk things over with them. G.M. and Ford sent back like replies: they would be glad to meet with Valentine, but the boosts would stick. Said Wilson: "We find it impractical to accede to your sudden request . . ." Said Ford, in an obvious reference to the recent boost in steel prices, which Valentine had ignored: "We cannot accept out of hand proposals which appear to discriminate . . ."

Both Ford and G.M. said that they had already committed thousands of cars to dealers at the new prices, and placed orders for supplies at higher prices. Furthermore, said Wilson, the price of G.M.'s materials had jumped anywhere from 7% in steel to 300% in rubber. Said he: only a day before Valentine's telegram went out, the Government itself had "raised the price of synthetic rubber, the production and distribution of which it completely controls . . . by 12% on one grade and 32% on another." (The Government's reason: higher raw material costs.)

This week, Chrysler Corp. boosted its wages and, if it followed the example of the others in such matters, it would probably boost its prices too when its new models come out next month. Although it had raised wages by $25 million only last September (TIME, Sept. 4), Chrysler handed out another $20 million a year to employees in a new union contract.

Autos were not the only items that were going up. In the past two weeks, reported the Bureau of Labor Statistics, retail food prices had jumped 2%, with fruits, vegetables and eggs (at a 30-year high) leading the way. Pig iron was up again, and so was scrap steel; half a dozen steel companies had followed U.S. Steel's lead and raised their prices by about 5%.

Actually, the furor over auto and steel prices was way out of proportion to their small effect on the cost of living. Retail food prices, which are far more important to consumers, had risen almost as much (4.3%) since Korea. But in the face of the politically potent farm bloc, no one in Washington was talking about removing farm price supports, which had helped food prices to rise.

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